Daily Morning Note – 24 February 2020



The deadly coronavirus epidemic could put an already fragile global economic recovery at risk, the IMF warned on Sunday, as G-20 financial chiefs voiced “real concern” over its economic ripple effects.

Global growth was poised for a modest rebound to 3.3 per cent this year, up from 2.9 per cent last year, International Monetary Fund chief Kristalina Georgieva said after a two-day meeting of G-20 finance ministers and central bank governors in Riyadh.

But the projected recovery was “fragile”, she warned, amid global alarm over the spread of the new virus across multiple countries even as Chinese authorities lock down millions of people to prevent its spread, with major knock-on effects for the world economy.

“The Covid-19 virus – a global health emergency – has disrupted economic activity in China and could put the recovery at risk,” she said in a statement.


Singapore Press Holdings (SPH) will acquire five aged care assets in Japan for a total of 5.26 billion (S$65.8 million). Two of its special purpose vehicles have entered into sale and purchase agreements for the acquisition, said the media and property group, which publishes The Business Times, in a bourse filing shortly after midnight on Monday.

Broadway Industrial Group announced on Sunday that it has been served two writs of summons and statements of claim in relation to the sale of its foam plastics solutions and flow control device businesses, with the aggregate minimum amount of claims amounting to approximately S$9.3 million.

Wing Tai Asia sold 70 per cent or over 360 units of its latest condominium project The M over the weekend, even amid the ongoing Covid-19 outbreak.

Hong Leong Asia has been granted a time extension by the Singapore Exchange (SGX) to release its FY2019 results by March 31 on the back of the fallout from the Covid-19 outbreak.

China’s leader Xi Jinping said on Sunday the new-coronavirus epidemic is the communist country’s largest-ever public health emergency, but other nations were also increasingly under pressure from the deadly outbreak’s relentless global march.

British Prime Minister Boris Johnson is prepared to begin trade talks with the United States within the coming two weeks, the Telegraph reported on Sunday.

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


ZTE Corp

Recommended Action: Technical SELL

Although ZTE Corp (HK: 763) ZTE main price trend is still bullish with the new highs, based on the technicals, there is a high conviction the stock is headed for a hard correction.

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Oversea-Chinese Banking Corp Ltd – Earnings hoisted on stellar trading gains

Recommendation: Accumulate (Maintained), Last Done: S$11.02

Target Price: S$12.10, Analyst: Tay Wee Kuang

– 4Q19 revenue and earnings exceeded expectations. Net profit grew 34% YoY and QoQ improvement of 6% despite seasonally slower 4Q compared to 3Q

– NII grew 6% YoY on 7bps NIM expansion and modest loans growth of 3%. NIM held steady at 1.77% QoQ on lower funding costs despite pressure on asset yield.

– Non-interest income grew 58% YoY, with quadrupling of other NII from trading income, and double-digit growths experienced across fee income (+17% YoY) and insurance income (+25% YoY).

– Final dividend of $0.28 to bring FY19 distribution to $0.53 per share compared to $0.43 in FY18 (+23% YoY). This translates to a c.4.8% dividend yield based on current prices.

– We maintain ACCUMULATE at a higher target price of S$12.10 (previously S$11.70). We roll forward our Gordon Growth Model to FY20e without changes to estimations.

United Overseas Bank Ltd – Business as usual

Recommendation: Accumulate (Maintained), Last Done: S$25.70

Target Price: S$27.80, Analyst: Tay Wee Kuang

– 4Q19 revenue and PATMI were in line with estimates.

– Net profit grew 10% YoY on stellar trading income almost quadrupling to $224mn from $59mn in 4Q18 while NII and fee income growing a modest 2% apiece YoY.

– 4Q NIM fell 4bps YoY to 1.76% despite stable asset yield and funding costs a result of increased interest-bearing liabilities from growth of customer deposits YoY (+3% YoY).

– Proposed final dividend of 75 cents; consisting of 55 cents core dividend and 20 cents of special dividend, bringing dividend for FY19 to $1.30 per share (+8% YoY). This brings dividend yield to c.5.0% based on current price.

– Maintain ACCUMULATE with an unchanged target price of S$27.80. We hold FY20e stable after factoring headwinds in previous quarters.

Sheng Siong Group Ltd – Visible growth in 2020

ACCUMULATE (Maintained); TP S$1.41, Last close: S$1.29

– 4Q19 revenue met our estimates but PATMI missed due to higher operating expenses and taxes.

– Excluding IFRS(I) 16 accounting change, FY19 and 4Q19 PATMI grew by 9.3% and 8.4% YoY respectively.

– Multiple growth drivers intact for Sheng Siong in FY20e including store expansion, operating leverage, rebound in revenue per sqft and recovery in consumer sentiment.

– The supply chain impact from the Covid-19 appears manageable. Likely to see a healthy 1Q20e results following the spike in demand plus overall improving consumer sentiment. Our ACCUMULATE recommendation is maintained and target price raised to S$1.41 (previously S$1.32). We rolled-over our target price to FY20e earnings and 25x PE. Our FY20e earnings is lowered by 5% as we raise operating expense estimates.

Starhub Limited – Cost realignment exceeding expectations

Recommendation: ACCUMULATE (Maintained), Last Done: S$1.52

Target Price: S$1.70, Analyst: Paul Chew

– Revenue and EBITDA beat our expectations. Mobile revenues were higher than forecast. Earnings would have been stronger if we included one-off cost from the provision of cable maintenance and accelerated depreciation.

– Mobile competition turning more rational and ARPU even rebounded in 4Q19. Cybersecurity business surged 37% YoY but still loss-making.

– Starhub continues to make headway in their cost control efforts: 4Q19 staff cost ( -1.6% YoY), operating leases (-44% YoY) and other Opex (-44% YoY).

– Dividends per share maintained at 9 cents in FY19. Guidance for FY20e is to maintain the 9 cents full-year dividend, to be paid on a semi-annual basis. The dividend yield is 5.9%.

– Margin guidance by management was surprisingly more conservative than our forecast (Figure 1). We lowered our EBITDA for FY20e by 3%. However, our free cash-flow estimate was raised by S$100mn due to a cut in the capex guidance. We maintain our ACCUMULATE recommendation. Our TP is raised to S$1.70 (previously S$1.58) as we roll-over to FY20e earnings and peg Starhub’s valuations to 6.5x industry EV/EBITDA.

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Market Outlook: (PSR) DBS, IREIT, APTV, MMH, NTL, SATS, Singtel, ThaiBev, REITs Monthly & SG Bonds

Date: 18 February 2020

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Phillip Research in 3 minutes: #18 – Singapore Budget 2020

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