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Investor’s Corner
Investors' Corner | 16 January 2009
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By: Clement Kan
Articles (1) Profile

DBS Group Hldgs
Price – $8.42 Target – $11.90

DBS’ lower-risk loan book and its heavily capitalized capital ratios should position it well, as we enter into a period where investors increasingly differentiate between banks based on asset quality performance. DBS is clearly best placed to withstand pressure on its capital ratios from an asset quality downturn with the group now heavily capitalized after the $4b rights issue, and with a lower risk loan book versus peers from less exposure to SMEs and emerging Asia. Investors in DBS can enjoy near-term earnings certainty leading up to the 4Q08 reporting season, given DBS’s trading update on 22 December 2008. We also see as positive the affirmation of a lower risk organic growth strategy and the ‘stamp of approval’ given on the CDS and investment security portfolio, given DBS’ statement that there will not be any large writedowns despite the credit market turmoil in 4Q08. Key downside risks are weaker loan growth and asset quality as a result of a worse-than-expected global economic slowdown. BUY. – Deutsche Bank (12 Jan)

Keppel Corp
Price – $4.92 Target – $4.53

Keppel Corporation (Keppel) provided an update on the three contracts under review in a press release issued last Friday. Two of the contracts, namely Scorpion Offshore’s semi-submersible (Semi TBN), and Lewek’s Multi-Functional Support Vessel (MFSV), would be cancelled on mutually accepted terms, while the third contract with Seadrill on the newbuilding of two jack-up rigs (West Callisto and West Juno), would proceed with payment schedules renegotiated. The cancellations totalled US$455.4m, of which 22% would have been recognized in FY09, 38% in FY10 and the remainder in FY11. This would reduce our FY09’s and FY10’s revenue forecasts by 1.5% and 2.4%, as well as our FY09’s and FY10’s net profit estimates by 1.6% and 2.6%, respectively. We are maintaining our Neutral recommendation and target price, based on sum-of the-parts valuation of 2x P/B FY10 in the face of slowing order momentum and peaked earnings for KOM. Our target price of $2 for Keppel Land, 10x P/E valuation for Infrastructure and market values for Keppel’s listed entities. Maintain NEUTRAL. – DMG & Partners (12 Jan)

Price – $2.52 Target – $3.03

For 2009, we believe safety lies in market dominance, competitive leadership and balance-sheet quality rather than just dividend yield. This drives our choice of SingTel as preferred pick vs the yield plays i.e StarHub and M1. SingTel is trading at comparable PE multiples to StarHub & M1; we see better relative value given strong long-term prospects in S’pore as well as upside from SingTel Associates. Increased focus on cost management by SingTel, the dominant price-setter, sets the stage for stabilization of margins in 2009E. We expect EBITDA margins for Singapore telcos to remain stable YoY at ~36%. The NBN OpCo bids have been submitted and a decision is expected in 1Q09. Potential loss of the OpCo bid could be negative for SingTel due to emergence of new competition in the wholesaling business. Winning OpCo could delay margin pressure; also there may be cushion from OpCo subsidy & NetCo revenues. Slower top-line growth and stabilizing competition will likely be the key theme for upcoming Oct-Dec results. BUY. – Merrill Lynch (12 Jan)

Singapore Press Hldgs
Price – $3.02 Target – $3.50

Singapore Press Hldgs (SPH) reported 1Q09 revenue of $340.2m (+9%YoY), with property revenue more than offsetting declines in advertising. Losses on investments, however, were significant, causing net profit to fall to $73.0m (-34.8%YoY) (recurring earnings, however, were +1.0% higher YoY). Newspaper and magazine revenue contracted to $249.4m (-4.6%YoY) as the
effects of the slowing Singapore economy affected advertising, while properrty revenue were $81m (+86.3% YoY; -8.9% QoQ). Booked on a percentage of completion basis, sky@eleven revenue were a surprisingly weak $50.7m (+215%YoY; -15% QoQ); while Paragon revenue were up $2.7m and it continues to be nearly 100% occupied. Our Buy thesis is premised on sky@eleven securing the FY09 dividend; however, with losses from investments affecting net profit, the amount of the dividend is at risk. We maintain BUY, but trim our TP to $3.50 on our lowered profit outlook. – Citigroup (12 Jan)

DBS Group Hldgs  25.510 -0.05 -0.20%   
Business: [FY18 Total Income] Institutional banking (43.7%), consumer banking/wealth management (42.9%), treasury markets and others (13.4%).

Insight: Apr-19, 1Q19 net profit rose 9% to a record $1.7b.... Read More
Singtel  3.200 -0.01 -0.31%   
Business: Asia's leading communications group. [FY19 Turnover] Mobile Comm (31.1%), Data & Internet (19.2%), Infocomm Technology (17.5%), Sale of Eqmt (16.5%), Digital Biz (7.2%), Fixed Voice (5.2%), Pay-TV (2.1%), Leasing (0.8%), others (0.4%).

Insight: May-19, FY19 operating revenue remained flat at $1... Read More
Keppel Corp  6.260 +0.04 +0.64%   
Business: [FY18 Turnover] Infrastructure (44.1%), offshore & marine (O&M) (31.4%), property (22.5%), investments (2%).

Insight: Apr-19, 1Q19 revenue rose 4.1% underpinned by high... Read More
Singapore Press Hldgs  2.060 +0.01 +0.49%   
Business: Co is S'pore's main newspaper & magazines publisher that also has investment in properties. [FY18 Turnover] Media (66.7%), property (24.7%), others (8.6%).

Insight: Apr-19, 1H19 operating revenue fell 3% to $477.6m ... Read More

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