Compiled by Kenneth Lim, The Business Times
DBS GROUP HOLDINGS | REDUCE
FEB 17 CLOSE: S$18.60
TARGET PRICE: S$16.73
Phillip Securities Research, Feb 17
Management's guidance for 2017 loans and income growth is mid-single digit. Therefore, we have revised our total income growth estimate from 2 per cent to 5 per cent.
Management also provided guidance that the total allowance in 2017 would be similar to 2016, excluding provisions for Swiber.
Based on the total allowance guidance and the divestment gains from the sale of the PwC Building, we estimate net profit growth to be more than 10 per cent.
However, we still think that a mid-single digit income growth may not be sufficient to secure growth of shareholder returns if non-performing loans escalates more than expected.
Downgrade to a lower target price of S$16.73 (previously S$16.85).
DBS GROUP HOLDINGS | HOLD
TARGET PRICE: S$18.13
Maybank Kim Eng Research, Feb 17
DBS' FY16 core profit after tax and minority interests was in line with our expectations. FY16 pre-provision profits grew 10 per cent year on year, which also underlies its ability to grow revenues and cut costs amid worsening asset quality.
We raise FY17-18 earnings estimates by 10-11 per cent to reflect mainly a higher loan growth assumption of 4 per cent. The challenge would be maintaining/growing market share amid rising competition.
Our target price is raised about 16 per cent to S$18.13 based on about 1.0 time FY17 estimated price-to-book value.
SINGAPORE TECHNOLOGIES ENGINEERING | BUY
FEB 17 CLOSE: S$3.62
TARGET PRICE: S$3.70
UOB Kay Hian, Feb 17
Singapore Technologies Engineering (STE) is not just relevant in the new-economy space but is an enabler of the same.
STE is enhancing its core capabilities. STE could also benefit if the US reduces its corporate tax rate. About 22 per cent of its revenue comes from the US. Its risk profile is substantially lower than other engineering companies, given that working capital requirements are funded via advance payments as well as a recurring backlog of defence contracts.
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