Today’s Focus
Hi-P - Upgrade to BUY with higher TP of S$0.91; buy
ahead of new phone launches
U.S. stocks fell moderately as the outcome of the FOMC
meeting offered nothing new for investors hoping to hear a
more definitive sign of further monetary easing. Attention
remains on the outcome of the ECB policy meeting and
expectations are high after President Mario Draghi said the
ECB will do whatever it takes to preserve the Euro. If the ECB
disappoints, financial markets could react again.
STI’s rise above 3025 this week is within our expectation and
we maintain our view that even as this level gets taken out;
the index would soon have to face a stronger resistance
around 3100. A pullback looks ever more likely with even inch
that the index claws higher. Blue chip stocks that had led the
STI rally becomes more vulnerable to profit taking as the index
inches higher.
OCBC’s 2Q12 net profit came in at S$648m (-22% q-o-q;
+12% y-o-y). Results were 5% above consensus (S$616m) but
slightly below our analyst’s forecast (-3%, S$670m). Key
disappointment was net interest margin (NIM) which fell by
9bps q-o-q; 10bps y-o-y. Loan growth recovered at 3% q-o-q,
14% y-o-y largely from housing loans and construction. Noninterest
income fell due to lower insurance contribution. Nonperforming
loan (NPL) ratio improved to 0.9% (1Q12: 1.0%)
while loan loss coverage improved to 125% (1Q12: 106%).
Maintain Buy with TP raised to S$11.00 (from S$10.50) after
rolling forward valuation window to FY13.
Hi-P reported weak Q2 dragged by low margin mix but second
half is expected to see magnificent rebound. Ramp up could
start as early as Jul/Aug, driven by new smartphones and
tablets for customers such as Apple, Amazon and RIM. Our
analyst has adjusted FY12/13F earnings by -4%/14%. Upgrade
to Buy with higher TP of S$0.91 (Prev S$0.86). At current
valuations, Hi-P is cheaper than the average for its peers.
2Q12 results for CapitaLand were within expectations, lifted
by higher operating performance and portfolio and revaluation
gains. Our analyst expects a better 2H as more residential
project contributions kick in, with Singapore residential
continuing to drive profits. Maintain Buy, TP $3.42, (Prev S$
3.39). ROE will likely trend up from next year after declining in
the past couple of years as new projects bear fruit.
US Indices Last Close Pts Chg % Chg
Dow Jones 12,971.1 (37.6) (0.3)
S&P 1,375.3 (4.0) (0.3)
NASDAQ 2,920.2 (19.3) (0.7)
Regional Indices
ST Index 3,051.1 14.7 0.5
ST Small Cap 457.7 0.4 0.1
Hang Seng 19,820.4 23.6 0.1
HSCEI 9,762.4 88.1 0.9
HSCCI 3,878.0 30.0 0.8
KLCI 1,632.5 0.9 0.1
SET 1,201.1 1.8 0.2
JCI 4,130.5 (11.9) (0.3)
PCOMP 5,298.7 (8.9) (0.2)
KOSPI 1,879.9 (2.1) (0.1)
TWSE 7,268.0 (2.5) (0.0)
Nikkei 8,641.9 (53.2) (0.6)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012
100-Day MA
Index
STI
Total Market cap (US$bn) 552
Total Daily Vol (m shrs) 1,472
12m ST Index High 3,215
12m ST Index Low 2,529
Source: Bloomberg
Stock Picks – Large Cap
Rec’n Price ($)
1/8
Target Price
($)
SembCorp Industries Buy 5.330 6.00
SembCorp Marine Buy 4.910 5.85
SingTel Take profit 3.540 3.29
City Development Take profit 11.690 10.85
UOB Take profit 20.000 19.50
Stock Picks – Small Cap
Rec’n Price ($)
1/8
Target Price
($)
STX OSV Holdings Buy 1.575 2.00
Ezion Holdings Buy 0.945 1.35
Bumitama Agri Buy 1.090 1.35
Nam Cheong Buy 0.179 0.24
Source: Bloomberg, DBS Vickers