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Singapore Press Holdings

2QFY8/19: anchored by property


■ 1H19 core PATMI of S$85m (-25% yoy) deemed a slight miss on media weakness and absence of investment income. Maintain Hold.

■ Recurring property income grew by 23.2% yoy in 2Q19, with more to come.

■ Neutral on digital transformation and aged care expansion, till further clarity.


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ESR-REIT: Forecasts in Flux


Since our initiation on 14 Dec 2018, ESR-REIT has posted total returns of 9.76%, vs. the Straits Times Index’s 7.41%. ESR-REIT continues to trade at a discount to industrial REITs that also have large industrial portfolios, but this has narrowed significantly since our initiation. We note that Hyflux Membrane is one of ESR-REIT’s top 10 tenants, accounting for ~3.5% of the total rental income for Dec 2018 and ~7.2% of distributable income for 4Q18. In recent months, exposure to this tenant has become a concern given Hyflux’s filing for bankruptcy protection. While we note various mitigating factors for ESR-REIT, we update our property forecasts to account for a potential Hyflux Membrane rental default. After adjustments, our fair value drops from S$0.575 to S$0.55. Looking ahead, we look forward to a bottoming in industrial rents in the latter half of 2019 but keep an eye on the risk of equity financing. Given the unit price rally since our last update, we downgrade ESR-REIT from Buy to HOLD.


Frasers Property Ltd


We’ve Only Just Begun

Maintain BUY; raised TP to S$2.30 from S$1.98

We maintain our BUY rating on Frasers Property Ltd (FPL) and raised our TP to S$2.30 from S$1.98, due to its limited exposure to Singapore residential property and its strong recurring income profile as a landlord in the commercial space. FPL’s valuation remains attractive at 0.7x P/NAV and its dividend yield is the highest among developers at 5%.


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Higher Lending Yields To Widen 1Q19 NIM


 Still a BUY with higher SGD29.60 TP from SGD28.80, based on 2020F P/BV of 1.43x, giving 10% upside plus 4% FY19F yield. We believe our long-term ROE assumption of 13.5% (vs 2018’s 12.2%) is achievable given greater NIM expansion in 1H19 on top of digitisation-driven cost efficiencies. We spoke with DBS’ management – key takeaways are highlighted in this report.


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