Daily Morning Note – 14 February 2019


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U.S. stocks gained for a fourth straight session as optimism over trade negotiations outweighed concerns about a potential new law that could curb company share buybacks. The Dow Jones Industrial Average climbed 117.51 points to 25,543.27 as Walgreens Boots Alliance and 3M outperformed. Energy stocks got a boost from higher oil prices.

Optimism over trade negotiations countered some of the jitters that Senator Marco Rubio triggered when he announced a bill to tax buybacks on equal footing with dividends. In trade war news, President Donald Trump said talks to resolve the U.S. trade war with China are making good progress. “I think it’s going along very well,” Trump told reporters in the Oval Office on Wednesday.


SATS Ltd – Underlying growth remains intact

Recommendation: Accumulate (Maintained), Analyst: Richard Leow

Last Close Price: $4.98, Target Price: $5.47

– Revenue was within expectation

– PATMI came in +9.5% higher than we forecast, due to one-off gain of $5.8mn from disposal
of JV, DFASS-SATS; PATMI would have been in line without the one-off gain

– Maintain ACCUMULATE; unchanged target price of $5.47

ComfortDelGro Corp Ltd – Powered by Public Transport Services

Recommendation: Accumulate (Downgraded), Analyst: Richard Leow

Last Close Price: $2.30, Target Price: $2.72 (previously $2.69)

– Revenue and PATMI were within our expectation

– 6.15 cents final dividend proposed (2H17: 6.05 cents)

– FY18 10.5 cents total dividend (75% payout), higher than FY17 10.4 cents (77% payout)

– Downgrade to ACCUMULATE due to recent price appreciation since out last report; slightly
higher target price of S$2.72 (previously $2.69)

Health Management International – Sights set for the long haul

Recommendation: BUY (Maintained), Analyst: Tin Min Ying

Last Done price: S$0.535, Target Price: S$0.770

– 1H19 EBITDA and Core PATMI were below our expectations due to the drag in Starmed’s
gestation costs.

– Excluding the impact from StarMed, 1Q19 EBITDA and core PATMI expanded by 4.9% YoY
and 15.5% YoY.

– Revenue rose 10.9% YoY, boosted by the higher patient load (+6.8% YoY) and higher
outpatient bill size (+4.8% YoY).

– An interim dividend of RM1.0 cents declared (1H18: RM1.0 cents).

– New investment of an initial S$4.2mn for a 28% stake in a chain of 16 primary care clinics in
Singapore to expand its healthcare network in Singapore.

– Maintain BUY with an unchanged DCF-derived TP of S$0.77.

US Strategy – Earnings Preview

Analyst: Edmund Xue

– We expect upside earnings surprise on the following 4 companies:

– Cisco’s transformation from networking to a software company will open up new revenue
streams. As cloud spending remains vibrant, Cisco will be well-positioned to provide
advisory services for new and existing customers that embrace the cloud.

– Nvidia’s lower revenue guidance indicates that it is not spared from a slowing China market
and digestion of data centre purchases. However, revenue will pick up as more games
utilise its RTX technology and it capitalises on its deep learning technology to grow in other

– Although Square faces intense competition from Fiserv’s acquisition of First Data
Corporation, there is still strong revenue and EBITDA margin expansion as it increases its
services and expands into online commerce.

– Online grocery will be a key revenue driver for Walmart as it expands its operations in China.


The steep trade tariffs President Donald Trump imposed last year brought an additional US$9 billion into the government’s coffers from October to December but the deficit was still 42 per cent higher than the prior year, the US Treasury reported Wednesday.

AUSGROUP announced the retirement of Stuart Kenny as non-executive board chairman and the relinquishment of Eng Chiaw Koon as managing director.

The US$73.29 million proposed investment that the beleaguered EMAS Offshore is looking forward to has been called off.

After over 20 years at the helm of Frasers Hospitality, Choe Peng Sum, 58, will retire on Friday as chief executive.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR

Clients of Phillip Securities can keep updated with Country Strategy and Singapore Sector Reports by logging into: www.poems.com.sg > STOCKS > Research

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