Compiled by Andrea Soh
DBS BANK | HOLD
TARGET PRICE: $22.40
SEPT 5 CLOSE: $20.69
OCBC Research, Sept 5
DBS announced it has secured approval from the Reserve Bank of India to convert its Indian franchise into a wholly owned unit. DBS intends to open about 75 to 90 branches in India in the coming years.
We expect this move to be long-term positive for DBS as it strengthens its presence in this market. Indian banks such as State Bank of India and HDFC Bank have seen significant jump in market capitalisation in the past few years.
For example, HDFC's market capitalisation grew by a compound annual growth rate (CAGR) of 27 per cent from FY2014 to FY2017, while its net income grew from 87.4 billion rupees (S$1.84b) in FY2014 to 152.5b rupees in FY2017, or a CAGR of 20 per cent.
DBS' share price has fallen from a recent high of $22.25. We mentioned in our last report to accumulate at $21 or lower and the current price weakness presents a good opportunity to re-enter this stock.
MANULIFE US REIT | BUY
TARGET PRICE: US$0.98
SEPT 5 CLOSE: US$0.945
RHB Research, Sept 5
Manulife US Reit announced its second acquisition, 10 Exchange Place in New Jersey from its sponsor.
The freehold Class A property is well located, with prominent frontage along the Hudson river waterfront and offers excellent connectivity to New York City.
Its pro-forma (FY2016) net property income yield of 5.7 per cent has upside potential from rental growth as average rents are well below market.
The acquisition further diversifies its portfolio both geographically and in terms of tenant mix. Funding would be via rights issue and debt.
UOB Kay Hian, Sept 5
Our alpha picks had a mixed performance in August. Tianjin was a standout performer, rising 13 per cent month on month (m-o-m) in August, whereas Memtech was disappointing as the stock declined 5 per cent m-o-m.
We keep our faith in Memtech as we expect near-term earnings momentum to remain intact with a potential dividend surprise when Q4 2017 results are released. SATS was flat whereas Thai Beverage declined 2.6 per cent m-o-m compared to the FSSTI's 1.6 per cent m-o-m decline in August.
We include Cityneon and Wing Tai in our alpha picks list and remove ISDN in view of market volatility.
Cityneon looks attractive given its inexpensive valuation, at FY18F PE of 10 times compared to peers' 15 times, and its recent acquisition of Jurassic Park Exhibitions at five times earnings is accretive.
Wing Tai is an attractive developer with low gearing and trading at a steep discount of 39 per cent to our revalued net asset value estimate of $3.48.
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