1. finance
2. investing
3. stocks

March 31, 2015
SINGAPORE
STRATEGY
Notes from the Field
Wait for chance to long cyclicals
We ended 2014 on three themes: positioning for rising interest rates, a
tourism recovery and strong dollar. We had a consensus overweight
on banks and a non-consensus overweight on property since Nov 14.
Figure 1: Sector ratings
—————————————————————————————————————————
Kenneth NG, CFA
T (65) 6210 8610
E [email protected]
OVERWEIGHT
NEUTRAL
UNDERWEIGHT
Financials
Gaming
Commodities
REITs
Property
Telcos
Transport
Consumer
Show Style "View Doc Map"
‘‘
Capital Goods
Oil prices will not rebound
to $100 a barrel because
increased prices would draw
more shale and other output from
higher-cost producers to the
market... Shale oil companies are
one of the high-cost producers
that benefited from high oil prices..
We’re not against shale oil. We
welcomed shale oil but it’s not fair
for high-cost producers to push
low-cost producers out of the
market.”
Mohammed al-Madi,
Saudi governor to OPEC
Highlighted Companies
ST Engineering
FY14 was depressed by huge one-offs, making FY15
growth easy to achieve, especially as 24% of group
revenues is in US$ and will benefit as dollar
appreciates. A more positive guidance and stronger
MRO activities (as airlines ride the wave of oil prices)
are key catalysts.
Dairy Farm
North Asia has been strong, SE Asia has been weak.
We see potential for a margin recovery in ASEAN
and higher contributions from Yonghui Superstores
as a bonus. Stock is trading at -1s.d. valuations.
OCBC
Synergies driven from the integration of OCBC Wing
Hang would be the bank-specific catalyst among the
three Singapore banks. Like its peers, OCBC would
benefit from higher interest rates as well.
Guocoleisure
Main catalyst would be evidence of earnings
expansion as efforts to refurbish its hotels and
reverse the poor performance of its UK hotels, bear
fruits. Unexpected catalyst include a privatization
offer..
SOURCES: CIMB Research
We were rightly bullish on property
names that had a catalyst (KepLand)
and dollar strength proxies (Venture)
but not so right on financials. We still
think that banks can do well and keep
our overweight. We turn more
negative on commodities, property
and upgrade transport and REITs.
Index picks are CAPL, CD, DBS, DFI,
NOL, OCBC, STE and VMS. Small-cap
picks are GLL, OSIM, OUEHT, OEL,
QNM, SSG, SWCH and TIAN.
SIBOR is rising even if the
Fed is dithering
Investors are wondering if the banks’
outperformance has run its course
given wavering commitment to Fed
fund rate hikes as well as oil & gas
NPL concerns. Despite an uncertain
US rate hike scenario, SIBOR has
climbed steadily as a valve to adjust
for a rising dollar; this is good enough
to lift NIMs. Banks have guided that
their S$ loan books take 3-6 months
to reprice. We think that the next leg
of banks’ share price outperformance
could come in a spurt in 2Q-3Q as
effects on NII become clear. OCBC
and DBS remained preferred names.
Property names have run its
course; telcos expensive
Our previous bullish view on property
stems from cheap valuations acting as
a floor and corporate actions as the
catalyst. With KPLD being taken out,
GLP guidance weak and UOL having
done well, we revert to CAPL as the
top pick. That is a consensus call,
premised on rising ROEs, which
might not be as strong a catalyst. We
tone down our optimism on
developers. We revert to a preference
for REITs over developers as it seems
difficult for central banks to raise
rates amid slowing global growth and
QE-addicted equity markets. Telcos
are yield alternatives but have done
very well so our telco favourite, ST,
does not make it to our country picks
on valuation grounds and the threat
from new players with disruptive
business
models
(ViewQuest,
MyRepublic).
Oil price to stay low for now
The key to generating alpha in 2015
lies in when commodity prices can
rebound and timing positions in O&M
and plantations, the two most unloved
sectors. With oil newsflow all about
limited storage capacity, inventories
at record levels and Saudi Arabia
sticking to its guns, it looks like at
least winter before oil prices have a
chance of any reprieve. We stick to
beneficiaries of low oil price. NOL
joins CD in our top picks. Consumer
names have a chance for stronger
2H15 earnings growth and are primed
for an upgrade. We like supermarkets
(DFI, SSG) that have de-rated and
keep the most undervalued O&M
name (SWCH) in case oil rebounds
earlier than expected.
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
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Strategy │ Singapore
March 31, 2015
KEY CHARTS
Steadier earnings trend
The 4Q results season saw reported earnings more closely
matching our analysts’ expectations. Key stocks that beat
expectations include SingTel (associates), IHH (revenue
intensity), KEP, KPLD (higher property development
recognition), SMRT (lower costs) and ST Engineering
(lower tax). With the exceptions of ST and IHH, the other
outperformances were not quite operational-driven.
Meanwhile, the misses – banks (lower non-interest
income), GENS (low VIP hold rate, bad debt), SIA
Engineering (fewer heavy checks), SingPost (decline in
non-traffic mail) – had a tone of corporates that still have
somewhat challenged topline growth.
2.5
Positive-negative surprise ratio
2.0
1.5
1.0
0.5
To play offence or defence
4Q14
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
0.0
Sector ratings
There is a clear divergence in valuations between unloved
and loved sectors. ST and IHH delivered and both have
been rewarded with escalating valuations. At the unloved
end, commodities, offshore & marine and gaming are
cheap; they get cheaper. In a fragile, low-growth world,
the consensus strategy seems to be “avoid cyclicals and
aim for steady growth, at any price.” With cyclicals so
cheap, we think it is risky to underweight all, as evidenced
by KPLD’s and NOL’s unexpected rally in 1Q14. Our
strategy is a mix of avoiding expensive safety and taking
selective bets on value cyclicals. We upgrade transport
and REITs and downgrade property and commodities.
OVERWEIGHT
NEUTRAL
UNDERWEIGHT
Financials
Gaming
Commodities
REITs
Property
Telcos
Transport
Consumer
Capital Goods
Top picks
CIMB’s sector calls and stock picks
OCBC and DBS remain the easy choices to play rising
interest rates. KPLD is removed after privatisation; CAPL
take its place. REITs look increasingly attractive after a
strong run in developers’ share price (our non-consensus
4Q14 overweight sector) and against an expensive-looking
ST; we like OUEHT (replaces CDLHT), FCT, FCOT and
MINT among the REITs. In the transport sector, we think
the sale of APL reduces NOL’s balance sheet risks and at
0.8x P/BV, it joins CD as a country pick. STE and VMS
remain viable strong dollar proxies. For small cap picks,
we keep GLL, SSG, SWCH, OEL, TIAN but replace JAP
and QTVC with OSIM and QNM.
TOP PICKS
Defence: REITs choice out of limited ones
LEAST PREFERRED
Financials
OW
OCBC, DBS
UOB, SGX
Property
N
CAPL, FCL, Guocoleisure
City Dev, Wheelock
REITs
OW
OUE-HT, FCT, FCOT, MINT
AREIT, CCT, MCT, FEHT
Telcos
UW
Singtel
Starhub
Transport
OW
Comfortdelgro, NOL
SIA, Tiger
Capital Goods
N
STE, Swissco
SATS, SIAEC, Swiber, VARD
Commodities
UW
First Resources
Wilmar, IFAR, GGR
Gaming
N
GENS
Comsumer
N
SSG, OSIM, DFI, Q&M
Super, Courts
CMH, TIAN, OEL
Silverlake
10.0%
10.0%
Dividend yields of various asset class
Property was the glaring cheap sector at end-2014. The
glaring cheap sectors today are gaming and capital goods.
All have structural issues that suggest that the current
weakness will last through 2015, i.e. it is too early to get
back now. Their cheap valuations mean that we do not
dare to underweight some of these sectors. While we wait
for a chance to go long on these cyclicals, we think it pays
to sit in defence. With telcos back to almost peak
valuations and the potential threat of a fourth competitor,
REITs start to look increasingly attractive as a place to
hide again. We acknowledge that REITs are not totally
safe in a rising rate environment but the DPU downside is
palatable considering the prospects of other sectors.
9.0%
9.0%
8.0%
8.0%
7.0%
7.0%
6.0%
6.0%
5.0%
5.0%
4.0%
4.0%
+/- 1 s.d range (since 2010)
+/- 2 s.d range (since 2010)
Current
Mean
3.0%
2.0%
3.0%
2.0%
Banks
Telco
Transportati
on
REIT
(Healthcare)
REIT (Retail
Ex-Sin)
REIT (Retail)
REIT (Office)
REIT
(Industrial)
1.0%
REIT
(Hospitality)
1.0%
SOURCE: CIMB, COMPANY REPORTS
2
Strategy │ Singapore
March 31, 2015
Figure 2: CIMB’s top picks for 2015
Bloomberg
Ticker
Recom.
CAPL SP
CD SP
DFI SP
DBS SP
NOL SP
OCBC SP
STE SP
VMS SP
Add
Add
Add
Add
Add
Add
Add
Add
3.65
2.89
9.40
20.38
1.02
10.65
3.50
8.48
4.04
3.42
10.90
22.00
1.53
11.85
3.93
8.96
11,331
4,504
12,710
36,756
1,916
30,859
7,916
1,700
18.9
18.4
23.2
11.8
15.4
10.7
18.7
14.6
13.3
12.4
16.2
21.8
10.5
16.4
9.6
17.7
13.3
11.7
45.0%
7.9%
7.6%
7.1%
na
6.9%
4.7%
9.4%
13.6%
0.90
2.61
7.66
1.27
0.73
1.26
4.86
1.24
1.43
0.86
2.46
6.65
1.19
0.70
1.17
4.60
1.21
1.35
4.9%
14.8%
35.5%
11.2%
5.7%
12.5%
27.0%
8.6%
11.3%
7.1%
15.6%
32.7%
11.7%
4.3%
12.7%
26.7%
9.2%
11.9%
11.9%
15.2%
30.4%
12.4%
3.6%
12.7%
26.9%
9.9%
12.9%
22.2
7.3
15.4
na
6.7
na
11.2
9.2
13.6
13.5
5.7
14.2
na
6.2
na
10.9
8.4
11.0
1.5%
3.4%
2.6%
3.3%
5.5%
3.4%
4.3%
5.9%
3.2%
2.3%
3.8%
2.8%
3.8%
0.6%
3.8%
4.5%
5.9%
3.5%
Guocoleisure
GLL SP
OSIM International
OSIM SP
OUE Hospitality Trust
OUEHT SP
Overseas Education Ltd
OEL SP
Q&M Dental Group
QNM SP
Sheng Siong Group
SSG SP
Swissco Holdings
SWCH SP
Tianjin Zhongxin Pharmaceutical Group TIAN SP
Average
Add
Add
Add
Add
Add
Add
Add
Add
0.92
2.00
0.95
0.82
0.58
0.80
0.41
1.16
1.18
2.35
1.01
1.05
0.78
0.84
0.90
1.45
911
1,122
910
248
329
875
198
2,080
19.7
15.7
16.1
16.5
38.2
23.0
3.7
15.2
15.8
18.0
14.5
14.8
13.1
30.5
20.9
3.2
13.1
14.0
na
0.2%
5.0%
14.0%
18.6%
5.6%
15.8%
9.4%
9.8%
0.76
3.49
1.05
2.04
5.47
4.98
0.67
1.54
1.53
0.74
3.22
1.07
1.89
5.02
4.86
0.59
1.43
1.46
3.8%
23.4%
6.5%
12.9%
15.1%
22.1%
22.2%
11.7%
10.1%
4.2%
23.1%
7.2%
14.9%
17.2%
23.5%
21.9%
11.4%
10.8%
na
22.5%
7.8%
18.5%
18.2%
25.3%
22.8%
11.4%
na
12.4
7.7
na
10.8
18.6
12.3
12.3
9.1
10.6
12.0
7.0
na
7.4
15.6
11.4
12.7
7.9
9.6
2.4%
4.0%
7.5%
3.0%
1.3%
3.9%
5.5%
2.1%
3.9%
2.4%
4.5%
7.9%
3.8%
1.6%
4.3%
6.3%
2.1%
4.3%
Company
Price Target Price
(local curr)
(local curr)
Market Cap
(US$ m)
Core P/E (x)
CY2015
CY2016
3-year EPS
CAGR (%)
P/BV (x)
CY2015
CY2016
Recurring ROE (%)
CY2015
CY2016
CY2017
EV/EBITDA (x)
Dividend Yield (%)
CY2015
CY2016
CY2015
CY2016
Top picks
CapitaLand
ComfortDelGro
Dairy Farm Int'l
DBS Group
Neptune Orient Lines
OCBC
ST Engineering
Venture Corporation
Average
Small-cap picks
SOURCE: CIMB Research
Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends
3
Strategy │ Singapore
March 31, 2015
Wait for chance to long cyclicals
1. DIVERGENT SECTOR VIEWS
Table of Contents
1. DIVERGENT SECTOR VIEWS
Right now, we see a wide sectorial divergence in the market in valuation terms
and earnings outlook. On one end, the unloved cyclicals (offshore & marine,
commodities, transport, gaming) trade at cheap valuations and no one thinks it
is the time to take a bet here. On the other end, the incredibly expensive, safe
growth stocks (healthcare, telcos) trade at expensive valuations and conversely,
no one thinks one should take money off the table. From a strategist’s point of
view for Singapore, we think that the big alpha for 2015 will come from 1) when
one chooses to go overweight on gaming and capital goods, particularly, the
small-cap offshore and marine, and 2) avoiding any pitfalls in the consensus
sectors of telcos and banks. Sure, we too agree that it is too early right now to
take the bet on the unloved cyclicals; but we are also cautious not be overly
pessimistic and close the barn door after the horse has bolted. Our strategy is to:
1) overweight sectors and stocks where a positive change in view is in the works,
2) stay largely in “safe growth” for now, and 3) gradually pare down over-owned
sectors.
p.4
2. STOCK PICKS
p.10
1.1 Overweight on banks, transport and REITs
Figure 3: Financials’ valuation band (x)
Figure 4: Transport’s valuation band (x)
30x
20x
12-mth Fwd Rolling FD
Core P/E (x)
18x
Figure 5: REITs’ valuation band (x)
23x
12-mth Fwd Rolling FD
Core P/E (x)
28x
21x
+1 SD
26x
16x
+1 SD
14x
Mean
12x
19x
+1 SD
24x
22x
17x
20x
15x
Mean
18x
13x
11x
14x
-1 SD
8x
12x
9x
6x
10x
7x
04
05
06
-1 SD
16x
-1 SD
10x
Mean
07
08
09
2.3x
10
11
12
13
P/BV (x)
Current ROE (RHS)
2.1x
14
04
15
13.5%
13.0%
05
06
07
08
09
10
2.0x
11
12
13
14
P/BV (x)
Current ROE (RHS)
1.8x
15
16%
12-mth Fwd Rolling FD
Core P/E (x)
04
05
2.5x
$A$1:$G$18
06
07
08
09
10
$A$24:$G$41
11
12
13
14
P/BV (x)
Current ROE (RHS)
14%
12.5%
1.5x
12.0%
1.3x
1.6x
10%
1.4x
11.5%
1.2x
11.0%
1.0x
6%
4%
0.7x
10.5%
04
05
06
07
08
09
10
11
12
13
14
15
SOURCE: CIMB RESEARCH
14%
12%
1.5x
10%
8%
1.1x
0.9x
16%
2.0x
12%
1.9x
1.7x
15
1.0x
0.5x
2%
0.8x
0%
04
05
06
07
08
09
10
11
12
13
14
15
SOURCE: CIMB RESEARCH
0.0x
04
05
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
06 07 08
Feb-07
Mar-07
8%
6%
4%
2%
09
10
11
12
13
14
15
SOURCE: CIMB RESEARCH
Banks: We view banks as a safe-growth category that has not yet performed to
its full potential. The sector outperformed in 2014 but generally remains at
below-mean valuations. Arguably, it can be deemed as increasingly over-owned
but with few alternatives in the market, we do not see choices. We remain
overweight on the banks, with OCBC as our top pick and DBS as our second
pick. Banks did well in Nov-Dec but lagged in Jan-Mar on 1) lack of clarity on
US Fed fund rate hikes, 2) newfound NPL concerns from industrial sectors, and
3) a relatively muted 4Q14 earnings season. Despite the lack of inflation
expectations and lack of clarity on whether the US Fed will eventually raise
rates this year, a strengthening dollar has cause the S$ SIBOR to move from
0.4% to 1.0% this year. We believe this will provide tailwinds for 2Q14 earnings.
Additionally, bond deal flow has been relatively buoyant, particularly for OCBC
and DBS. We believe this will help 1Q earnings spring back up from a
seasonally weak 4Q. Clearly, NPLs and credit costs will rise as interest rates rise
but that should not overshadow the positives of higher NII.
4
Strategy │ Singapore
March 31, 2015
Figure 7: NOL's P/BV vs ROE
2.2x
14%
Current P/BV
Core ROE
2.0x
2.5x
60%
Current P/BV
Core ROE
13%
50%
1.6x
11%
1.4x
10%
1.2x
9%
1.0x
8%
40%
30%
Current P/BV
12%
Current core ROE
Current P/BV
2.0x
1.8x
1.5x
20%
10%
1.0x
0%
-10%
0.5x
0.8x
7%
0.6x
6%
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
Current core ROE
Figure 6: OCBC's P/BV vs ROE
-20%
-30%
0.0x
16
-40%
01
SOURCES: CIMB, COMPANY REPORTS
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
SOURCES: CIMB, COMPANY REPORTS
Transport: We raise transport from underweight to overweight. The
unchanged top pick is ComfortDelGro while NOL added as a second pick,
after our analyst, Raymond Yap, upgraded the stock on 18 Feb. Our
expectations are for oil prices to stay at these levels or lower, until the winter
season approaches. Transport stocks tend to get some tailwinds from lower
energy costs but that is not the key thesis for us turning positive (since the
positive impact is limited if pricing power is lacking). For airlines and shipping,
excess supply means that pricing power is weak and any reduction in costs is
likely to be reflected in lower pricing. The investment thesis for ComfortDelGro
had been the transition from the current loss-making local bus operations to an
asset-light bus contracting model and the potential of further overseas growth
with a cashed-up balance sheet as assets are sold back to the government.
Similarly, NOL is turning into an improved balance sheet story as the
impending sale of APL Logistics will net a gain of US$900m and halve its net
gearing ratio. Our analyst thinks that a less ugly balance sheet and a potential
swing back to profitability (on rising transpacific freight rates) will make 1x
P/BV a support. NOL currently trades at 0.8x P/BV.
REITs: We raise REITs from underweight to overweight. Our end-2014
preference for developers over REITs was due to developers’ -1 s.d. valuations
and REITs being vulnerable to the trend of rising interest rates. Our change of
heart stems from 1) strong outperformance from almost all the cheap, large-cap
developers, and 2) an increasing sense that central banks will find it difficult to
exit from this era of cheap money. We assume that while the US Fed will
implement rate hikes, rates will rise very slowly after a symbolic hike. Against
such a backdrop, we think that REITs could achieve yet another year of
understated outperformance. Key risks are 1) asset acquisition at inflated prices
from parent sponsors, and 2) rising interest rates. On average, the REITs will
suffer a 77bp decline in dividend yield when their cost of borrowing rises by
25bp but with dividend yields where they are, we think this is palatable in an
environment where we do not see anything compelling in the other sectors.
Our favourite sub-sector is hospitality. Our analyst Pang Ti Wee expects
Chinese tourist arrivals to grow by single-digits in 2015, due to 1) a low base in
2014, 2) the emergence of sports tourism and sports events as a demand driver,
3) SG50 celebration events, 4) cheaper airfare and cheaper tourism offerings on
the back of lower airfare and a strong dollar, and 5) efforts by STB to woo the
Chinese back to the market. Our property team prefers OUE-HT, FCT, FCOT
and MINT. On the overall REIT asset class, our property team believes that
REITs are in a sweet spot for external growth with their effective capital
platforms, lowly-geared balance sheets and generally cheap funding cost. We
think this will be the catalyst for sustained DPU growth, hence, the upgrade.
5
Strategy │ Singapore
March 31, 2015
Figure 8: DPU sensitivity to 25bp rise in cost of borrowing
REITs
Healthcare
Parkway Life REIT
Hospitality
Ascott Residence Trust
CDL Hospitality Trust
Far East Hospitality Trust
OUE Hospitality Trust
Industrial
Ascendas Reit
Cache Logistics Trust
Cambridge Industrial Trust
Mapletree Logistics Trust
Mapletree Industrial Trust
Office
CapitaCommercial Trust
Fraser Commercial Trust
Keppel REIT
OUE Commercial REIT
Office
CapitaMall Trust
Frasers Centrepoint Trust
Mapletree Commercial Trust
SPH REIT
Starhill Global REIT
Suntec REIT
Retail (Ex-Singapore)
Lippo Malls Indonesia Retail Trust
Bloomberg Ticker
Gearing Ratio
Fixed (% of total debt)
Cost of
borrowing
Impact on DPU with 25bp rise in interest cost
2015
2016
2017
PREIT SP
35.2%
80.0%
1.4%
-0.4%
-0.6%
-0.6%
ART SP
CDREIT SP
FEHT SP
OUEHT SP
38.5%
31.7%
31.4%
32.7%
80.0%
52.0%
60.0%
100.0%
3.0%
2.3%
2.2%
2.2%
-0.9%
-1.2%
-1.0%
0.0%
-1.0%
-0.9%
-0.8%
-0.7%
-0.8%
-0.7%
-1.2%
0.0%
AREIT SP
CACHE SP
CREIT SP
MLT SP
MINT SP
33.6%
34.9%
34.8%
34.7%
32.8%
66.1%
70.0%
89.6%
76.0%
86.0%
2.7%
3.3%
3.7%
2.1%
2.2%
-0.7%
-0.5%
-0.4%
-0.5%
-0.2%
-0.8%
-0.4%
-0.9%
-0.6%
-0.4%
-0.9%
-0.6%
-0.5%
-0.8%
-0.4%
CCT SP
FCOT SP
KREIT SP
OUECT SP
29.3%
37.2%
43.3%
38.3%
83.0%
51.0%
65.0%
73.6%
2.3%
2.7%
2.2%
2.8%
-0.6%
-1.3%
-1.6%
-1.1%
-1.1%
-1.2%
-1.7%
-1.3%
-0.5%
-1.5%
-1.8%
-1.3%
CT SP
FCT SP
MCT SP
SPHREIT SP
SGREIT SP
SUN SP
33.8%
29.3%
37.9%
26.0%
28.6%
34.7%
81.8%
94.0%
74.5%
54.7%
100.0%
60.0%
3.5%
2.7%
2.2%
2.4%
3.2%
2.4%
-0.7%
-0.3%
-0.6%
-0.7%
-0.3%
-1.1%
-0.6%
-0.7%
-0.7%
-0.9%
-0.4%
-1.3%
-0.5%
-0.5%
-1.0%
-0.7%
0.0%
-1.1%
LMRT SP
31.3%
100.0%
4.7%
-0.6%
-0.4%
-0.4%
SOURCES: CIMB, COMPANY REPORTS
1.2 Neutral on capital goods, gaming, property, consumer
Property was the cheapest sector back in Nov 14. Today, gaming and capital
goods take over as the two cheapest sectors, after underperforming. Despite the
glaring value, we have no conviction to go overweight on these sectors just yet.
We have no doubt that eventually, an important driver of alpha for a Singapore
country portfolio will come with the right timing to reposition in this sector;
just not quite so now. We think it is just too early right now.
Figure 9: Developers’ valuation band (x)
60%
Figure 10: Gaming’s valuation band (x)
60x
Disc to NAV
Gaming 12-mth Fwd Rolling
FD Core P/E (x)
55x
40%
45x
18x
30x
14x
Mean
20x
10x
90
92
94
96
98
00
02
04
06
08
10
12
14
10x
2010
-1 SD
8x
-1 SD
15x
-80%
Mean
12x
25x
-60%
+1 SD
16x
+1 SD
35x
-40%
12-mth Fwd Rolling
FD Core P/E (x)
22x
20x
40x
-20%
24x
50x
20%
0%
Figure 11: Capital goods’ valuations (x)
6x
4x
2011
2012
2013
2014
2015
04
05
$A$1:$G$18
06
07
08
09
10
11
12
13
14
15
2.5
14x
P/bk
P/BV (x)
Current ROE (RHS)
12x
2.0
50%
45%
5.0x
$A$24:$G$41
Rolling P/BV (x)
ROAErecurring
4.5x
40%
10x
35%
1.5
8x
1.0
6x
3.0x
20%
10%
2x
0.0
90
92
94
96
98
00
02
04
06
08
10
12
14
SOURCE: CIMB RESEARCH
0x
2010
22%
20%
18%
2.5x
16%
15%
4x
0.5
3.5x
25%
2011
2012
2013
2014
2.0x
5%
1.5x
0%
1.0x
2015
SOURCE: CIMB RESEARCH
26%
24%
4.0x
30%
28%
14%
12%
10%
04
05
06
07
08
09
10
11
12
13
14
15
SOURCE: CIMB RESEARCH
Property: We take the opportunity of a strong performance early in the year to
close out our overweight position on developers and revert to neutral.
Developers were clearly cheap at end-14, being one of the few sectors that were
trading at -1 s.d. valuations. Individual stocks also had specific corporate
6
Strategy │ Singapore
March 31, 2015
actions (special dividend, privatisation, takeover) that would act as catalyst and
potentially close the large RNAV discounts. After a good 1Q15, developers are
still cheap but perhaps just less so. Unfortunately and perhaps more
importantly, the catalysts for the further closing of any valuation discounts are
getting less convincing to this strategist. Our analyst Lock Mun Yee expects the
next leg of share price performance to be driven by asset recycling activities,
either via a trade sale or divestment to private funds or S-REITs. Hence, we
prefer developers with asset pipelines that can benefit from capital recycling,
which explains the top picks of Capitaland and FCL. The chink in this catalyst
is that 1) asset values are now not low, 2) the environment is more for cap rates
to expand than contract, and 3) retail rental growth is plateauing. In our view,
the above factors combine to make it tough to achieve significant divestment
gain (that could give ROE a boost).
Figure 12: Property stocks’ current discount to RNAV
Trough disc to RNAV
Current disc to RNAV
Average GFC disc to RNAV
Premium (disc) to trough
Premium (disc) ave GFC
- 1 s.d. discount to RNAV
Current RNAV
Implied price at -1 s.d. disc to RNAV
Current price
CapitaLand
-66%
-28%
-49%
38%
21%
-46%
5.05
2.71
3.65
CityDev
-66%
-30%
-24%
36%
-6%
-34%
14.54
9.67
10.18
Ho Bee
-85%
-42%
-66%
42%
24%
-54%
3.73
1.70
2.15
FCL
-52%
-42%
n.a.
11%
n.a.
-47%
3.02
1.59
1.76
Keppel
Land
-90%
-13%
-54%
77%
41%
-51%
5.14
2.53
4.46
GLP
-28%
-20%
n.a.
8%
n.a.
-21%
3.30
2.61
2.64
OUE
-56%
-52%
n.a.
3%
n.a.
-50%
4.50
2.25
2.15
Wheelock Wingtai
-71%
-83%
-30%
-33%
-45%
-50%
42%
50%
16%
17%
-49%
-47%
2.64
2.88
1.34
1.51
1.86
1.94
UEM
-76%
-24%
-61%
52%
38%
-59%
3.57
1.45
2.73
UOL
-80%
-27%
-40%
53%
13%
-49%
10.51
5.33
7.68
SOURCES: CIMB, COMPANY REPORTS
Gaming: We keep gaming at neutral even though prospects are poor.
Valuations are just too outright cheap, having fallen through 2011-12 valuation
troughs. Analyst Jessalynn Chen views Genting Singapore as cheap at 6x
FY15 EV/EBITDA and 1.1x CY15 P/BV. We agree that gaming is one of those
sectors that are unloved and absolutely cheap at this moment; the issue is the
lack of any significant catalyst to change this situation. Well-known negatives
include 1) GENS’s missing VIP gamblers after a more difficult environment for
China’s SME bosses and anti-corruption policies, 2) GENS’s strategy flip-flop to
focus on mass market, after losing market share to MBS, and 3) still-high bad
debt charges. The missing Chinese gambler today means that new casino
projects in Jeju and Japan, modelled after Singapore, could fall short of
attracting their necessary audience, unless the clampdown on China corruption
is not a structural trend. The smaller potential positive catalyst of attracting
more mass-market gamblers with room at the new hotel in Jurong
unfortunately runs against the trend of a weakening ringgit. If not for GENS’s
absolutely cheap valuations, we would underweight the sector.
Figure 13: Gaming stocks’ EV/EBITDA comparisons (x)
Company
Genting Singapore
Genting Hong Kong
Singapore Average
Bloomberg
Ticker
GENS SP
GENHK SP
Recom.
Add
Add
Price
(lcl curr)
0.93
0.36
Target
Price
(lcl curr)
1.20
0.44
Market
Cap
(US$ m)
8,166
2,853
Figure 14: ST Electronics’ orders are scalable, could grow 20%
in FY15 on increased spending in integrated security systems
S$'m
EV/EBITDA (x)
CY2015 CY2016
5.3
4.5
1.1
28.0
3.2
16.3
800
740
700
Galaxy Entertainment
MGM China Holdings
Sands China
SJM Holdings
Wynn Macau
Macau/HK Average
27 HK
2282 HK
1928 HK
880 HK
1128 HK
Add
Hold
Hold
Hold
Hold
36.00
15.02
32.50
10.34
16.58
43.03
19.72
38.38
11.76
21.31
19,739
7,360
33,815
7,542
11,108
12.6
11.0
12.1
8.3
15.2
11.8
13.4
13.4
10.2
11.5
17.8
13.2
MAG MK
BST MK
GENT MK
GENM MK
Hold
Hold
Hold
Add
2.72
3.34
8.88
4.18
2.61
3.15
9.50
5.38
1,044
1,210
8,897
6,387
9.9
6.7
7.1
8.4
8.0
11.0
6.5
5.3
6.1
7.2
8.9
11.6
615
593 581
576
600
635
635
513 509
500
419.6
400
300
238
Magnum Bhd
Berjaya Sports Toto
Genting Bhd
Genting Malaysia
Malaysia Average
Average (all)
206
192
200
151
126
100
100
0
SOURCES: CIMB, COMPANY REPORTS
SOURCES: CIMB, Bloomberg
7
Strategy │ Singapore
March 31, 2015
Capital goods: We stay neutral on capital goods in Nov 14. The sector is cheap
but we think that there is a greater probability of more negative newsflow that
would bring share prices lower this year. It is natural for the effects of weak oil
prices to filter through the system. Weak oil prices will prompt the oil majors to
squeeze the oil services companies with lower renewal rates for rigs. Order
cancellations by speculative investors or shorter contract tenures for oil services
companies could then knock the wind out of the yards. The Petrobras fallout
could lead to the cancellation of unbuilt semi-subs and drillships. Other than
bad debt provision, cancellation of rigs (from Brazil) that have yet to start
construction could still pose a de-rating risk for KEP and SMM. We think
SMM has more to lose as Sete Brasil contributes a bigger chunk of our forward
earnings forecast; we have gone underweight on SMM. Cheap valuations make
the sector risky for an outright underweight, especially if oil prices run on any
geopolitical tensions, as was the case last week. For sector weights, we prefer
ST Engineering as a play on US$ strength as well as government spending on
security projects. Later this year or heading into 2016, as excess oil production
is flushed out and oil prices find a floor, we believe the second tier names will
run harder. It is for this reason that we keep Swissco as one of our small-cap
top picks, in case we are late in going overweight on this sector.
Consumer: Consumer is kept at Neutral. Valuations are mid-range and
various stocks do have growth catalysts going forward. Our top picks are Sheng
Siong, Dairy Farm and OSIM. For quite a few stocks, we see stronger earnings
catalysts in 2H15. We add Dairy Farm after its share price de-rating. We like
Sheng Siong because we see growth engines restarting with a return of store
openings. We like Dairy Farm because we see its sub-par ASEAN markets
potentially bottoming and valuations attractive at -1s.d. We replace Japfa with
OSIM as a top pick, on the belief that the latter could see clearer prospects for
an earnings uptick earlier (2Q15), driven by new product launches, whereas the
timing for Japfa’s earnings recovery is less certain. The common view that
falling commodity prices will help the sector is not necessarily true for the
names we like. Indeed, falling commodity prices do have a positive impact on
food manufacturers like Super Group but we think the positives of lower
commodity prices may be erased by currency weakness, subdued local demand
and competition. For healthcare picks, we replace Raffles Medical with Q&M
as the latter is likely to have stronger earnings growth engines.
1.3 Underweight on telcos, commodities
Figure 15: Consumer valuations (x)
60x
Figure 16: Telcos’ valuation band (x)
Consumer 12-mth Fwd
Rolling FD Core P/E (x)
19x
Figure 17: Commodities (x)
25x
12-mth Fwd Rolling FD
Core P/E (x)
18x
21x
17x
+1 SD
40x
+1 SD
17x
15x
Mean
30x
13x
13x
10x
11x
-1 SD
12x
-1 SD
7x
10x
05
06
07
08
09
10
11
12
13
14
70x
P/BV (x)
Current ROE (RHS)
60x
50x
15
04
160%
3.6x
140%
3.4x
120%
3.2x
100%
3.0x
80%
2.8x
60%
2.6x
40%
2.4x
20%
2.2x
0%
2.0x
-1 SD
9x
11x
0x
Mean
15x
14x
20x
+1 SD
19x
16x
Mean
12-mth Fwd Rolling FD
Core P/E (x)
23x
50x
05
$A$1:$G$18
06
07
08
5x
09
$A$24:$G$41
10
11
12
13
14
P/BV (x)
Current ROE (RHS)
04
15
22%
3.5x
20%
3.0x
18%
2.5x
16%
2.0x
14%
1.5x
12%
1.0x
10%
0.5x
05
$A$1:$G$18
06
07
08
09
$A$24:$G$41
10
11
12
13
20x
10x
0x
06
07
08
09
10
11
12
13
14
15
SOURCE: CIMB RESEARCH
15
25%
P/BV (x)
Current ROE (RHS)
20%
15%
40x
30x
14
04
05
06
07
08
09
10
11
12
13
14
15
SOURCE: CIMB RESEARCH
8
04
05
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
06 Feb-07
07 08
Mar-07
10%
5%
0%
09
10
11
12
13
14
15
SOURCE: CIMB RESEARCH
Strategy │ Singapore
March 31, 2015
Telcos: We keep telcos as a non-consensus underweight. The positive view on
SingTel is now driven by a strong showing by its associates (Telkomsel and
Bharti). We acknowledge that SingTel provides exposure to emerging markets,
which is why its valuations are not cheap. Our analyst, Foong Choong Chen,
likes SingTel best, expecting re-rating catalysts to include growth in associate
earnings and Optus regaining market share. He is more bearish on Starhub as
he expects limited ability to surprise on dividends given the latter’s high capex
and spectrum payments. On the overall telco market, from a top-down view, we
remain cautious on the sector, with valuations high and with the threat of a
potential fourth player entering the market. The home market is where SingTel
is not doing, and of which there are threats.
Figure 18: SingTel's EV/EBITDA
Figure 19: Crude palm oil prices vs. Brent crude
MYR
15.0x
Crude Palm Oil (LHS)
Crude Oil, Brent (RHS)
US$
4,500
160
4,000
140
12.0x
3,500
120
11.0x
3,000
100
2,500
80
2,000
60
1,500
40
EV/EBITDA
14.0x
13.0x
10.0x
9.0x
8.0x
7.0x
6.0x
02
03
04
05
06
07
08
09
10
11
12
13
14
1,000
2008
15
SOURCES: CIMB, COMPANY REPORTS
20
2009
2010
2011
2012
2013
2014
2015
SOURCES: CIMB, Bloomberg
Commodities: Commodities is downgraded from neutral to underweight.
Although Wilmar and Golden Agri beat our expectations in their 4Q14 results
season, the better results were due to sale of inventory and lower effective tax
rates. Wilmar guides that lower CPO, crude oil and sugar prices will negatively
impact its plantation, biodiesel and sugar milling segments, with positives from
processing and downstream business on lower feedstock costs and higher sales
volume. In our opinion, both stocks lack re-rating catalysts, given unexciting
CPO prices and overcapacity in the refining space. Our analyst, Ivy Ng, picks
First Resources as her top pick, as we deem its estates’ young age profile,
attractive valuations and hands-on management as differentiating positives.
From a top-down perspective, we don’t think you need to own this sector for
now.
9
Strategy │ Singapore
March 31, 2015
2. STOCK PICKS
2.1 Large-cap top picks
Figure 20: Capitaland's P/BV vs ROE
3.5x
7.0%
2.5x
6.0%
2.0x
5.0%
1.5x
4.0%
1.0x
Current core ROE
8.0%
3.0x
Current P/BV
Capitaland
9.0%
Source:
The catalyst for share
price performance would be to maintain or improve
ROE beyond the Please
current
c.7-8%,
through
asset
divestments
fill in the
values above
to have them
entered
in your report and capital
recycling. We expect some malls to be divested to its REITs. Ahead, CAPL
will also deepen its presence in Singapore and China, expand its footprint
in Vietnam, Indonesia, and Malaysia as well as grow its serviced residence
network (80k by 2020) and increase its fund management activities.

Our Add call is consensus market view as stock valuations remain
compelling, at a 29% discount to RNAV.

Key risk to our view is if there is a delay to asset recycling activities, which
would mean a delay in ROE boosts.
3.0%
0.5x
2.0%
0.0x
Title:

1.0%
07 08 09 10 11 12 13 14 15 16
Current P/BV
Core ROE
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
Figure 21: ComfortDelGro’s P/E vs EPS
22x
0.18
20x
Catalysts include 1) boost in capital efficiency from bus asset sale for the
eventual implementation
Model,
earnings
tailwinds
Please fill inof
theBus
valuesContracting
above to have them
entered 2)
in your
report
from savings in energy cost in FY15-16, and 3) continued growth in
overseas businesses.

We have an Add rating vs the consensus Hold as we believe that CDG has
a good chance to channel the freed-up capital from the Singapore public
bus business into higher return overseas businesses.

Key risks include potential stiffer competition in the bidding processes for
new public bus packages.
0.16
0.14
16x
0.12
14x
0.10
12x
0.08
10x
Title:
Source:

18x
EPS
Current core P/E
ComfortDelGro
0.20
0.06
07 08 09 10 11 12 13 14 15 16
Current core P/E
Recurring EPS
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
45x
0.46
Dairy Farm
40x
0.41

Potential catalysts include a recovery of margins for ASEAN
supermarkets/hypermarkets,
sustained
health
and beauty
excellence and
Please fill in the values
above to have
them entered
in your report
higher-than-expected contributions from Yonghui Superstores. With the
stock still trading at 1 s.d. below its 5-year forward P/E mean (23x), we
believe that earnings accretion from Yonghui has not been priced in.

The stock is a consensus Add with four positive recommendations and
three neutral ratings. Our FY15 EPS is 1% ahead of consensus.

Dairy Farm has received the final and unconditional approval of the China
Securities Regulatory Commission to acquire a ~20% stake in Yonghui for
US$908m, dissipating fears of a potential rejection. That said, Wellcome
Hong Kong has enjoyed several years of solid returns. A normalisation
could prove to be a downside risk.
0.36
35x
0.31
30x
EPS
Current core P/E
Figure 22: Dairy Farm’s P/E vs EPS
0.26
25x
0.21
20x
0.16
15x
0.11
10x
0.06
07 08 09 10 11 12 13 14 15 16
Current core P/E
Recurring EPS
Title:
Source:
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
10
Strategy │ Singapore
March 31, 2015
Figure 23: DBS's P/E vs EPS
25x
23x
2.10
DBS
1.90

80% of DBS’s S$Source:
loans are pegged to floating rates, i.e. SIBOR or SOR.
The hike in SIBOR
from
toabove
1.0%
thisthem
year
is likely
translate into
Please
fill in0.4%
the values
to have
entered
in your to
report
NIM expansion and higher net interest income from 2Q15 onwards as the
loans typically take 3-6 months to reprice.

DBS is the consensus top pick in the banking sector as its CASA ratio is
the highest, which means its funding cost should remain low even as it
reprices its loans upwards, leading to wider NIM expansion.

DBS’s share price has re-rated on expectations of meaningful NIM
expansion with the recent hike in SIBOR and SOR. Should the Fed delay
tapering and interest rates rise slower than expected, the disappointment
may be reflected in its share price. NPLs could also start to show up,
especially in the oil & gas space where DBS is most exposed.
1.70
19x
1.50
17x
15x
EPS
Current core P/E
21x
1.30
13x
1.10
11x
0.90
9x
0.70
7x
5x
0.50
07 08 09 10 11 12 13 14 15 16
Current core P/E
Recurring EPS
Title:
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
Figure 24: NOL's P/BV vs ROE
2.5x
Neptune Orient Lines
Title:
30.0%
20.0%

We expect NOL’sSource:
share price to do well this year as it is likely to be
profitable in 2015Please
on the
back
ofabove
lower
bunker
prices
and
a recovery in
fill in the
values
to have
them entered
in your
report
transpacific freight rates as the US economy is robust and carriers are
determined to push through higher contract rates from May. NOL will
also enjoy the full-year cost benefits of the new ships delivered last year.

There are 10 buy calls and eight hold calls on the stock currently. We are
one of the bullish analysts because of the cyclical profit recovery in
container shipping as well as NOL’s recent sale of its logistics arm at a
superb price that will strengthen its balance sheet.

Asia-Europe spot rates could come under pressure in FY15 because of the
heavy deliveries of ultra-large container vessels but NOL has more
exposure in the transpacific compared to the Asia-Europe trade.
Current P/BV
10.0%
1.5x
0.0%
-10.0%
1.0x
Current core ROE
2.0x
-20.0%
0.5x
-30.0%
0.0x
-40.0%
07 08 09 10 11 12 13 14 15 16
Current P/BV
Core ROE
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
Figure 25: OCBC's P/E vs EPS
14x
13x
1.10
12x
0.90
Source:
40% of OCBC’s S$
loan book is pegged to the SIBOR and SOR and will
pose as tailwinds Please
to NII.
of earnings
from
fill inEvidence
the values above
to have themsynergies
entered in your
report OCBC Wing
Hang will be the second catalyst to drive share price.

OCBC is consensus’s second top pick after DBS, but our top pick. We
agree that DBS is most geared to interest rates but we are not sure if rates
will rise sustainably. Meanwhile, DBS is most exposed to the oil & gas
sector, a sector where we expect NPLs to show up most. OCBC has the
added bonus of WHB synergies and associate contributions from Bank of
Ningbo – both of which could cushion the impact of NPLs and slower
NIM expansion should interest rates rise at a slower pace than expected.

Key risks to our view include 1) wealth management synergies not
panning out for OCBC-Wing Hang, 2) lower contributions from GEH, and
3) NPLs showing up from ASEAN, oil & gas and housing loans.
10x
0.80
9x
0.70
8x
0.60
7x
6x
0.50
07 08 09 10 11 12 13 14 15 16
Current core P/E
Recurring EPS
Title:

1.00
11x
EPS
Current core P/E
OCBC
1.20
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
11
Strategy │ Singapore
March 31, 2015
26x
0.21
ST Engineering
24x
0.20

22x
0.19
20x
0.18
18x
0.17
A change in tone for a more positive guidance could be the key catalyst.
fill in in
the values
to have revenue
them enteredand
in your
reportfor FY15 are
Despite the huge Please
one-off
FY14,above
overall
PBT
guided to be comparable, which we believe could be too conservative.
Other catalysts could come from 1) stronger-than-expected MRO
spending as airlines ride the wave of low oil prices, 2) heightened
investments in electronics systems to counter global terrorism and
natural/ industrial disasters.
16x
0.16

14x
0.15
Consensus is neutral on the stock with five Holds, three Adds and one
Reduce recommendation. Our FY15 EPS is in line with consensus.

Key risks include earnings shock in land systems with more asset
impairment / provisions. Execution hiccup in marine division could also
be a de-rating catalyst.
12x
EPS
Current core P/E
Figure 26: STE's P/E vs EPS
0.14
07 08 09 10 11 12 13 14 15 16
Current core P/E
Recurring EPS
Title:
Source:
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
Figure 27: Venture's P/E vs EPS
20x
Venture
1.40
18x

Key catalysts to drive share price performance are 1) Continued earnings
momentum both Please
qoq fill
and
yoy,
further
penetration
into
Life Sciences
in the
values2)
above
to have them
entered in your
report
customers and 3) growth in 3D printer related business. We believe DPS
will remain unchanged at S$0.50 over FY15-17, translating into dividend
yields of 5.9%.

Consensus Add. Street is in line with our view. There are 7 Adds, 3 Holds
and no Reduce call on this stock.

Key risks are customers’ order push back and European economic
softness.
16x
1.00
EPS
Current core P/E
1.20
14x
12x
0.80
10x
8x
0.60
6x
0.40
4x
2x
Title:
Source:
0.20
07 08 09 10 11 12 13 14 15 16
Current core P/E
Recurring EPS
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
12
Strategy │ Singapore
March 31, 2015
2.2 Small-cap top picks
Figure 28: Guocoleisure’s P/E vs EPS
30x
0.038
Guocoleisure
0.037

The key catalyst Source:
to drive share price performance is the core earnings
expansion as Please
management
strives
to entered
reverse
the historical
fill in the values above
to have them
in your report
underperformance of GLL’s UK hotels through refurbishment and
rebranding.

We expect the share price to increase 20-30% in the next 3 years due to a
narrowing discount to RNAV (from the current c.45% to 30%) as well as
positive earnings delivery (c.38% upside in 3 years).

Risks for our call include mainly noises from energy prices (GLL receives
royalty income from oil & gas production in Bass Strait) and fluctuations
in FX.
0.036
26x
0.035
24x
0.034
EPS
Current core P/E
28x
0.033
22x
0.032
20x
0.031
18x
0.030
13
14
15
Title:
16
Current core P/E
Recurring EPS
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
23x
0.16
21x
0.14
19x
OSIM
0.10
The key share price catalysts would be successful renewal of OSIM
massage productsPlease
and fillgradual
brand
traction
TWG
inreport
north Asia. The
in the values
above to
have themfor
entered
in your
company is launching a new chair product in April.

We expect the share price to rise >50% in three years, with half of the
upside driven by earnings growth from TWG and its core OSIM business;
and the other half of the upside driven by a valuation multiple re-rating
from the current 15.8x CY15 P/E to valuations of 18.5-19.0x.

The risk for this scenario not panning out is weak Asian consumer
demand driven by any unforeseen, sudden decline in spending power.
Earnings risk for TWG stems from failure to build the brand,
necessitating sustained high advertising and promotion spend.
15x
0.08
13x
0.06
11x
0.04
9x
7x
0.02
10
11
12
13
14
Current core P/E
15
Title:
Source:

0.12
17x
EPS
Current core P/E
Figure 29: OSIM's P/E vs EPS
16
Recurring EPS
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
Figure 30: OUEHT's P/BV vs ROE
1.06x
OUE-HT
7.4%
1.04x
7.2%
Source:
Mandarin Orchard
Singapore is one of the top performing hotels in
Singapore. The recent
Crowne
Plaza
at report
Changi Airport
Please fill acquisition
in the values aboveof
to have
them entered
in your
allows OUE-HT to reduce its single asset concentration risk while
benefiting from strong demand for hotels at the Changi Airport vicinity.

Its 7.5% FY15 dividend yield is attractive compared to its closest peers’
6.4% (FEHT) and 6.7% (CDL-HT). We expect earnings to grow by 31% in
the next three years on AEI initiatives for its two hotel assets.
Current P/BV
7.0%
0.98x
6.8%
0.96x
0.94x
6.6%
0.92x
Current core ROE
1.02x
1.00x
6.4%
0.90x
0.88x
6.2%
0.86x
0.84x
6.0%
13
14
15
Current P/BV
16
Title:


Risk is sustained weakness of the rupiah and ringgit, which could temper
demand for Singapore hotel rooms from regional travellers. Also, slow
Chinese visitor arrival rates could also result in a dampened outlook for
the hospitality sector.
Core ROE
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
13
Strategy │ Singapore
March 31, 2015
20x
0.08
Overseas Education
Title:
18x
0.08

The key catalystsSource:
to drive share price performance is increase in student
enrolment and continued
fee
hike.
completed,
OEL’s
Please fill in the
values
aboveWhen
to have them
entered in your
report new school
can effectively raise its capacity by 22%.

We see possible share price upside of >70% if enrolment growth and fee
hikes come through. Earnings growth will be driven primarily by
enrolment increase.

The risk for this scenario not panning out is an increase in the supply of
seats for students in foreign system schools, aggressive price competition
and a drastic reduction in number of higher income expatriates coming
into Singapore. Although personnel costs form about 75% of total
operating expenses, we believe OEL can keep cost in check as it is not
difficult to hire teaching staff and the company has an established
database of teaching aspirants.
0.07
16x
0.07
14x
EPS
Current core P/E
Figure 31: Overseas Education's P/E
0.06
12x
0.06
10x
0.05
8x
0.05
6x
0.04
13
14
15
16
Current core P/E
Recurring EPS
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
Figure 32: Q&M’s P/E vs. EPS
60x
0.021
55x
0.019
0.017
50x
0.015
45x

Title: catalyst is earnings from China raising the group’s
The key share price
Source:
growth profile. Secondary
catalysts include the potential listing of its
China business. Please fill in the values above to have them entered in your report

We expect the share price to rise >60% if its new vehicles execute well.
Q&M has entered a new leg of growth with projected EPS CAGR of 20%
over the next three years, driven by Aidite and strong recurring earnings
in its core market, Singapore. Further acquisitions in China are expected
following its recent S$60m MTN issue. Q&M’s new earnings growth
profile (vs. 3% historical EPS CAGR) justifies our view that the stock
should be trading at least at parity with its historical valuation multiple
(41x P/E).

Risks for this scenario not panning out are 1) downtime at Aidite as it
shifts to a new facility, and 2) setbacks in future China acquisitions. Profit
guarantees at Aidite will help cushion risks.
EPS
Current core P/E
Q&M
0.013
40x
0.011
35x
0.009
30x
0.007
25x
0.005
11
12
13
14
15
Current core P/E
16
Recurring EPS
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
Figure 33: Sheng Siong's P/E vs EPS
30x
28x
0.040
Sheng Siong
0.038

Key catalysts are new store additions, further inroads in its new
integrated dormitory
andabove
continued
improvement
in sales mix.
Pleasesegment
fill in the values
to have them
entered in your report

We expect its share price to rise >33% in three years, mostly on earnings
growth. We project EPS CAGR of 10% over FY15-17, driven by three new
stores p.a. and same-store-sales growth of 2-3.5%. Continued sales mix
shift towards fresh food will also improve gross margins. Share price
rocketed up ~10% since its new store announcements and strong 4Q14
results. Current valuation of 22.5x CY15 P/E is still below its historical
peak. SSG also offers a dividend yield of 4-5%.

Key risk is an inability to secure new stores and drive growth.
Competition is muted in this climate (DFI was consolidating in 2014) and
margin pressures are not a big risk.
26x
0.034
24x
0.032
22x
0.030
EPS
Current core P/E
0.036
0.028
20x
0.026
18x
0.024
16x
0.022
14x
0.020
10
11
12
13
Current core P/E
14
15
16
Recurring EPS
Title:
Source:
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
14
Strategy │ Singapore
March 31, 2015
Figure 34: Swissco's P/E vs EPS
25x
Swissco
0.09

Contract extensions with Pemex for the Ensco’s rigs at rates that are
+-10% from existing
rates
could
thethem
stock.
Please
fill in the
valuescatalyse
above to have
entered in your report

We expect the share price to more than double in three years, led by
reversion to the historical mean of 9x P/E for small/mid cap O&M stocks.
Even if no new contract is secured in 2015, FY15 earnings are intact,
mainly from the long-term charters on hand. Our assumptions take into
account two new contract wins p.a. in 2015-16.

Key risks are charter cancellation and renewal of contracts at lower rates
(>10%).
0.08
0.07
15x
0.06
10x
0.04
0.05
EPS
Current core P/E
20x
0.10
0.03
5x
0.02
0x
-
0.01
13
14
15
Current core P/E
Title:
Source:
16
Recurring EPS
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
Figure 35: TIAN's P/E vs EPS
20x
18x

Source:
The key catalyst is
the organic earnings growth, driven by the long-term
demand for pharmaceutical
ageing
population. The
Please fill in theproducts
values above from
to have China’s
them entered
in your report
regulator’s lifting of the price ceiling for low-priced drugs could boost
sales and margin of Su Xiao Jiu Xin Pills.

We are looking at easily 20-30% share price upside, driven by over 30%
EPS expansion in FY14-17. Share price downside should be limited by the
huge 66% discount to the trading price of its A-shares. Apart from that,
the S-shares’ 13.5x CY16 P/E is also much lower than peers’ average of
over 20x.

Key risks include stiffer competition and a potential increase in raw
material prices.
0.50
16x
0.45
EPS
Current core P/E
Tianjin ZhongxinTitle:
0.55
14x
0.40
12x
0.35
10x
8x
0.30
12
13
14
Current core P/E
15
16
Recurring EPS
SOURCE: CIMB RESEARCH
SOURCE: CIMB RESEARCH
15
Strategy │ Singapore
March 31, 2015
#03
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Strategy │ Singapore
March 31, 2015
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17
Strategy │ Singapore
March 31, 2015
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CIMB Securities (Thailand) Co., Ltd. may act or acts as Market Maker and issuer including offering of Derivative Warrants Underlying securities
of the following securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making
investment decisions.
AAV, ADVANC, AMATA, ANAN, AOT, AP, ASP, BANPU, BAY, BBL, BCH, BCP, BEC, BECL, BGH, BH, BIGC, BJC, BJCHI, BLA, BLAND, BMCL,
BTS, CENTEL, CK, CPALL, CPF, CPN, DCC, DELTA, DEMCO, DTAC, EARTH, EGCO, ERW, ESSO, GFPT, GLOBAL, GLOW, GUNKUL,
HEMRAJ, HMPRO, INTUCH, IRPC, ITD, IVL, JAS, KBANK, KCE, KKP, KTB, KTC, LH, LOXLEY, LPN, M, MAJOR, MC, MCOT, MEGA, MINT,
NOK, NYT, PS, PSL, PTT, PTTEP, PTTGC, QH, RATCH, ROBINS, RS, SAMART, SCB, SCC, SCCC, SIRI, SPALI, SPCG, SRICHA, STA, STEC,
STPI, SVI, TASCO, TCAP, TFD, THAI, THCOM, THRE, THREL, TICON, TISCO, TMB, TOP, TPIPL, TTA, TTCL, TTW, TUF, UMI, UV, VGI, TRUE,
WHA.
Corporate Governance Report:
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the
policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the
Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public
investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may
be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result.
Score Range:
Description:
90 - 100
Excellent
80 - 89
Very Good
70 - 79
Good
18
Below 70 or
N/A
No Survey Result
Strategy │ Singapore
March 31, 2015
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and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand)
Co. Ltd, CIMB Securities Limited, CIMB Securities (Australia) Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons
who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only
for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative
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Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a
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Distribution of stock ratings and investment banking clients for quarter ended on 31 December 2014
1586 companies under coverage for quarter ended on 31 December 2014
Rating Distribution (%)
Investment Banking clients (%)
Add
58.4%
6.0%
Hold
29.4%
4.3%
Reduce
12.2%
1.0%
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2014.
AAV – Very Good, ADVANC – Very Good, AEONTS – not available, AMATA - Good, ANAN – Very Good, AOT – Very Good, AP - Good, ASK – Very Good,
ASP – Very Good, BANPU – Very Good , BAY – Very Good , BBL – Very Good, BCH – not available, BCP - Excellent, BEAUTY – Good, BEC - Good, BECL –
Very Good, BGH - not available, BH - Good, BIGC - Very Good, BJC – Good, BLA – Very Good, BMCL - Very Good, BTS - Excellent, CCET – Good,
CENTEL – Very Good, CHG – not available, CK – Very Good, CPALL – not available, CPF – Very Good, CPN - Excellent, DELTA - Very Good, DEMCO – Good,
DTAC – Very Good, EA - Good, ECL – not available, EGCO - Excellent, GFPT - Very Good, GLOBAL - Good, GLOW - Good, GRAMMY - Excellent, HANA Excellent, HEMRAJ – Very Good, HMPRO - Very Good, ICHI - not available, INTUCH - Excellent, ITD – Good, IVL - Excellent, JAS – not available, JUBILE –
not available, KAMART – not available, KBANK - Excellent, KCE - Very Good, KGI – Good, KKP – Excellent, KTB - Excellent, KTC – Good, LH - Very Good,
LPN – Very Good, M - not available, MAJOR - Good, MAKRO – Good, MBKET – Good, MC – Very Good, MCOT – Very Good, MEGA – Good, MINT Excellent, OFM – Very Good, OISHI – Good, PS – Very Good, PSL - Excellent, PTT - Excellent, PTTEP - Excellent, PTTGC - Excellent, QH – Very Good,
RATCH – Very Good, ROBINS – Very Good, RS – Very Good, SAMART - Excellent, SAPPE - not available, SAT – Excellent, SAWAD – not available, SC –
Excellent, SCB - Excellent, SCBLIF – Good, SCC – Very Good, SCCC - Good, SIM - Excellent, SIRI - Good, SPALI - Excellent, STA – Very Good, STEC - Good,
SVI – Very Good, TASCO – Good, TCAP – Very Good, THAI – Very Good, THANI – Very Good, THCOM – Very Good, THRE – not available, THREL – Good,
TICON – Good, TISCO - Excellent, TK – Very Good, TMB - Excellent, TOP - Excellent, TRUE – Very Good, TTW – Very Good, TUF - Good, VGI – Very Good,
WORK – not available.
19
Strategy │ Singapore
March 31, 2015
CIMB Recommendation Framework
Stock Ratings
Definition:
Add
The stock’s total return is expected to exceed 10% over the next 12 months.
Hold
The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.
Reduce
The stock’s total return is expected to fall below 0% or more over the next 12 months.
The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward
net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.
Sector Ratings
Overweight
Neutral
Underweight
Definition:
An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.
A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.
An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.
Country Ratings
Overweight
Neutral
Underweight
Definition:
An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.
A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.
An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.
*Prior to December 2013 CIMB recommendation framework for stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand,
Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange were
based on a stock’s total return relative to the relevant benchmarks total return. Outperform: expected to exceed by 5% or more over the next 12 months.
Neutral: expected to be within +/-5% over the next 12 months. Underperform: expected to be below by 5% or more over the next 12 months. Trading Buy:
expected to exceed by 3% or more over the next 3 months. Trading Sell: expected to be below by 3% or more over the next 3 months. For stocks listed on
Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Outperform: Expected positive total returns of 10% or
more over the next 12 months. Neutral: Expected total returns of between -10% and +10% over the next 12 months. Underperform: Expected negative total
returns of 10% or more over the next 12 months. Trading Buy: Expected positive total returns of 10% or more over the next 3 months. Trading Sell: Expected
negative total returns of 10% or more over the next 3 months.
20