SINGAPORE BANKING | OVERWEIGHT
UOB Kay Hian, Nov 1
LOAN growth for domestic lending picked up from 5.1 per cent year on year (yoy) in August to 6.2 per cent yoy in September.
Growth in low-cost savings and demand deposits was healthy at 7.8 per cent and 4.5 per cent yoy respectively.
Growth in foreign currency loans was also robust at 10.3 per cent yoy. Interest rates should be marching higher again as the US Federal Reserve is widely expected to hike Fed funds rate by another 25 basis points next month. Our top pick is OCBC Bank, followed by DBS Bank.
SEMBCORP MARINE | BUY
TARGET PRICE: $2.26
NOV 1 CLOSE: $2.01
OCBC Investment Research, Nov 1
SEMBCORP Marine's (SMM) Q3 17 revenue fell 64.3 per cent yoy to $316.9 million while bottom line improved from a net loss of $21.8 million in Q3 16 to a net profit of $2.7 million in Q3 17.
Results were within expectations. The group continues to receive active inquiries for projects relating to floaters, production platforms, gas solutions and specialised shipbuilding.
SMM is also in advanced discussions with several prospective customers relating to its Gravifloat technology and is hopeful that initial orders will materialise in the foreseeable year. Meanwhile, it has also received the US$500 million (S$680 million) payment from Borr Drilling.
We roll our valuations to FY18 and increase our price-to-book ratio from 1.6 times to 1.8 times, taking into account a gradually improving operating environment for the broader industry. As such, our fair value estimate rises from $1.98 to $2.26.
CACHE LOGISTICS TRUST | HOLD
TARGET PRICE: $0.83
NOV 1 CLOSE: $0.84
DBS Group Research, Nov 1
CACHE announced that together with Schenker, C&P and C&P Holdings, it has amicably resolved their dispute in relation to Schenker's lease at 51, Alps Avenue.
Following the resolution and with the approval of JTC Corporation, Schenker has entered into a new lease agreement whereby Schenker will lease 100 per cent of the property for a period of 46 months commencing from yesterday until Aug 31, 2021.
As part of the agreement, Cache will receive a lump-sum payment of $8.2 million. This relevant sum represents a top-up to market rent during the holding agreement from Sept 1, 2016, to end October 2017, new lease from Nov 1, 2017, to end August 2021, and to pay other associated costs.
The uncertainty over the Schenker lease has been an overhang over Cache's share price, resulting in Cache's trading at an elevated yield. Thus, we believe the market will react positively to this new development given that the overhang has now been removed.
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