Compiled by Angela Tan
SINGPOST | BUY
TARGET PRICE: $1.61
FEB 5 CLOSE: $1.43
DBS Group Research, Feb 5
We upgraded Singapore Post to "Buy" as we think its postal segment's margin decline may have bottomed out and its e-commerce segment's turnaround, which offsets pressures at the logistics segment, is in place.
We now have a more positive view over the long-term growth outlook for it. We believe that SingPost, being the dominant player locally with low cost of capital, is well positioned to establish market leadership in Singapore's fragmented e-commerce logistics sector (about 20 per cent market share in parcels). Our earnings estimates are above consensus currently.
In the near term, any turnaround at SingPost's e-commerce and logistics segments would be a major catalyst for its share price.
In the medium term, we believe potential divestment of SPC mall could be a catalyst.
SINGTEL | ACCUMULATE
TARGET PRICE: NIL
FEB 5 CLOSE: $3.48
KGI Securities, Feb 5
Singtel's share price has declined 13 per cent from its 52-week high of about $4. Singtel has also underperformed the Straits Times Index by 5 per cent year to date.Its share price is testing a key five-year support. We believe share price at current levels can be supported by its 5.2 per cent/5.6 per cent consensus dividend yield for FY19/20 forecast.
It typically pays between 60 per cent and 75 per cent of its core net profit as ordinary dividends, which has translated to 16.8 cents for FY14/15 and 17.5 cents for FY15-17.
The selldown offers an attractive opportunity to accumulate Singtel given its forward dividend yields of 5.3 per cent/5.6 per cent for FY19/20F. It is due to report its Q3 2018 earnings on Thursday.
SIAEC | BUY
TARGET PRICE: $3.70
FEB 5 CLOSE: $3.33
OCBC Investment, Feb 5
SIA Engineering Company's (SIAEC) 9MFY18 exceeded our expectations as core Patmi (profit after tax and minority interests) grew 2.9 per cent year on year to $128.2 million and met 85 per cent of our FY18 forecast.
The growth was driven mainly by a 22 per cent growth in share of profits of associates and joint ventures (JVs), as revenue grew only 1.2 per cent year on year to $818.5 million.
Looking ahead, we expect the core business to stay muted in the near term as the industry continues to undergo a structural change with a shift towards an increase in lower margin needs for the new aircraft/engine models.
However, we expect earnings to be lifted by the improving engine MRO (maintenace, repair and overhaul) segment (mainly contributions from associates and JVs).
We expect growth from engine MRO to support earnings in the near to medium term.
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