Oversea-Chinese Banking Corp (OCBC SP)
Expect Wider 1H19 NIM, But Valuation Fair
Maintain NEUTRAL with higher SGD12.20 TP (from SGD10.96), based on 2020F P/BV of 1.12x, giving 4% upside plus 4% yield. We assumed a long-term ROE of 12% (vs 2018’s 11.5%). This would be driven in the short term by sequential NIM expansion and in the next 2-3 years by digitisationdriven expense management. We spoke with OCBC recently – key takeaways are appended below. Prefer UOB and DBS.
1Q19F preview: a market-driven rebound
■ Three trends in SG bank sector: 1) funding pressure less intense qoq, 2) 10- 50 bp mortgage repricing since Jan 2019, 3) M&As supporting loan growth.
■ Trading and wealth management income likely rebounded (10-36%) towards the levels seen in 2Q18/3Q18, particularly for DBS and OCBC.
■ We estimate UOB achieved the highest yoy income growth (+6.7%), DBS led in NIM expansion (+2bp) and OCBC’s trading income rebounded strongly.
|PHILLIP SECURITIES||DBS VICKERS|
China’s propensity towards luxury goods
SINGAPORE |REAL ESTATE| SITE VISIT NOTE
We were in China to visit two out of four of Sasseur REIT’s (Sasseur) outlet malls, Chongqing mall and Hefei mall, in March 2019, during their annual Spring sale. Sasseur’s outlet malls not only offer large discounts on branded goods targeted at the middle class, brand-conscious consumer, but also incorporate numerous activities and entertainment programmes to engage different age group. Unique to Sasseur is its revenue model which is based on an Entrusted Management Agreement (EMA) guaranteeing a minimum revenue level.
Mapletree Industrial Trust (MINT SP): BUY
Well-timed acquisitions drive earnings to new record
• 4QFY19 DPU of 3.08Scts in line with expectations
• Occupancy rates improving on the back of Manager’s defensive strategy
• Development of data-center at 7 Tai Seng to drive earnings in the medium term
• Comfortable gearing level to undertake acquisitions
Check out our compilation of Target Prices