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Investors’ Corner (United Overseas Bank, CDL Hospitality Trusts, KrisEnergy, City Developments)
Investors' Corner | 02 July 2015
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By: Joey Ho
Articles (30) Profile

United Overseas Bank
Price – $23.11
Target – $25.50

We believe the market may have overlooked the lack of United Overseas Bank’s (UOB) fee income differentiation and Greater China presence. We believe over time, regionalisation beyond ASEAN would need to improve to prompt a re-rating for the bank. In addition, a stronger traction in non-interest income away from loan-related activities could add a re-rating sentiment. We note that its regional corporate banking strategy has gained traction, though in a different manner from its peers which have largely tapped on trade finance. Although Indonesia and Thailand economies remain vulnerable in the short term, UOB maintains its position to grow its regional franchise. UOB continues to participate selectively in growth segments in Malaysia. The bulk of its net interest margin upside had already been accounted for in 1Q15, and as such further upside in coming quarters could be muted. Loan growth is guided at 5 to 10% for FY15 while credit costs are expected to remain higher than peers. Maintain HOLD. DBS Vickers (29 Jun)

CDL Hospitality Trusts
Price – $1.62
Target – $1.89

In April, visitor arrival weakness within the top 5 markets came from Indonesia, Australia and Malaysia, while China and India posted y-o-y growth of 21.5% and 5.6% respectively. These trends coincided with the strength of the respective currencies, re-emphasising our belief that currency volatility remains a key risk for FY15. For hotels, revenue per available room was weak across the board, though occupancy largely held up by easing 1.5% y-o-y. Average daily rate for mid-tier and economy-tiered hotels continued to be hit by heavy competition. Singapore’s government announced that from Jun-15, it will extend the validity of multiple journey visas issued to Chinese nationals to up to 10 years, removing the hassle of reapplying for a visa each trip. In our view, this will attract high net worth tourists with strong spending power, while promoting Singapore as a mono-destination. For 2H15, we remain positive on the outlook of both tourism and hospitality industries given the upcoming school holidays in China, recent SEA games, longer length of stay and more upcoming events. Apart from these, CDL Hospitality Trusts remains our top pick for its growth in distribution per unit from its recent purchases. Rate ADD. CIMB Securities (26 Jun)

Price – $0.46
Target – $0.55

KrisEnergy recently announced an underwritten rights issue, planning to raise $165.6m, with a 42 rights shares per 100 existing share ratio issuance. Keppel Corporation is fully participating and is the backstop underwriter. The rights issue is aimed at reducing the total debt-to-equity ratio by enlarging the equity base of the company. It ensures that the 2015 capital programme is adequately funded and increases ability to source debt for growth opportunities. With a positive near-term production story of 2 Thai oil fields in 2H15, our sum-of-the-parts discounted cash flow valuation moves to $0.55 per share from $0.75 per share.
Maintain OUTPERFORM. Credit Suisse (26 Jun)

City Developments
Price – $9.78
Target – $10.20

City Developments (CDL) is more susceptible to a credit withdrawal cycle in Singapore given its leading presence in the residential sector. While we think it is premature to call a rebound in the sector with sales likely to remain below trend for the next 12 to 18 months, we see early signs of activity returning to the market. Residential sales volumes have likely bottomed, while prices have held up for CDL projects such as Coco Palms and Jewel @ Buangkok achieving 5 to 10% above government-sponsored enterprise (GSe). CDL’s $2.8b South Beach development is progressing well with 88% committed with office rents of about $10 per square foot, slightly ahead of GSe. In addition, home prices are 6% off the peak and the pace of decline remains modest and in a seemingly acceptable range, suggesting that policy measures are unlikely to ease until 1Q16. Upgrade to NEUTRAL. Goldman Sachs (25 Jun)

Equipped with a bachelor in banking and finance, Joey covers the finance, technology and healthcare industry in Singapore.

Please click here for more information about this author.

United Overseas Bank  26.850 +0.05 +0.19%   
Business: [FY18 Turnover] Group retail (43.3%), group wholesale (43.2%), global markets & investment management (5.1%), others (8.4%).

Insight: May-19, 1Q19 total income rose 7.8% to $2.4b due t... Read More
CDL Hospitality Trusts  1.630 -0.020 -1.21%   
Business: A stapled group comprising CDL Hospitality REIT and CDL Hospitality Business Trust.

Insight: Apr-19, 1Q19 gross revenue and NPI dropped 10.6% a... Read More
KrisEnergy  0.037 +0.001 +2.78%   
Business: An independent upstream Co focused on the exploration, devt, & pdtn of O&G in SEA. [FY18 Turnover] Crude oil (90%), gas (10%).

Insight: Feb-19, FY18 revenue rose 2.9% boosted by higher a... Read More
City Developments  9.480 +0.03 +0.32%   
Business: Co is an international property & hotel conglomerate. [FY18 Turnover] Property development (48.4%), hotel operations (39.8%), rental properties (8.5%), others (3.3%).

Insight: May-19, 1Q19 decreased 29.5% to $746.2m compared t... Read More

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