SG & US Equity Analysts SG Equity Strategy 2013-9-23... · Disclaimer: The information contained in this document is intended only for use during the presentation and should not be

Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.

Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2013. All Rights Reserved. For internal circulation only.

Market Strategists Joshua Tan, Head of Research

Kenneth Koh, Research Assistant

SG & US Equity Analysts – SG Equity Strategy Ken Ang, Financials

Nicholas Ong, O&M & CPO

Lucas Tan, Real Estate

Wong Yong Kai, US Equities

Colin Tan, Telcos

Caroline Tay, Research Assistant

By Phillip Securities Research Mr. Chan Wai Chee, CEO

Peter Lee, Operations Exec

23rd Sep 8.15am/11.15am Morning Call & Webinar



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5

G3 + China growth picking up…

32

34

36

38

40

42

44

46

48

50

52

54

56

58

60

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Source: Bloomberg

EZ Mfg PMI

EZ Svc PMI

30

32

34

36

38

40

42

44

46

48

50

52

54

56

58

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Source: Bloomberg

Japan Mfg PMI

38

40

42

44

46

48

50

52

54

56

58

60

62

64

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

China Purchasing Mgr's Index(Source: CEIC)

Mfg: PMI

Svc PMI: Business Activity

34

36

38

40

42

44

46

48

50

52

54

56

58

60

62

Ja

n-0

0

Ja

n-0

1

Ja

n-0

2

Ja

n-0

3

Ja

n-0

4

Ja

n-0

5

Ja

n-0

6

Ja

n-0

7

Ja

n-0

8

Ja

n-0

9

Ja

n-1

0

Ja

n-1

1

Ja

n-1

2

Ja

n-1

3

(Source: CEIC, PSR est)

US Mfg PMI

US Services PMI



6

Bodes well for SG growth/earnings outlook

-20%

-10%

0%

10%

20%

30%

40%

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

CORPORATE EARNINGS %q-qSource: Bloomberg

SG

5

7

9

11

13

15

17

19

21

23

25

27

29

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

3,000

3,200

3,400

3,600

3,800

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Source: BloombergSTI

T4Q P/E

F4Q P/E

-30%

-20%

-10%

0%

10%

20%

30%

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

SG Gross ExportsSource: CEIC

%q-q

%y-y 3mma

• As G3 + China economy improves, the outlook for Export heavy nations like SG will improve as well

• SG exports turning positive • SG Corp Earnings rebound

generally suggests STI • STI outlook still positive (short

term notwithstanding)



7

Earnings rebound in China too… long 83188.HK!

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

China Industrial Profit(Source: CEIC)

%y-y 3mma

%y-y 12mma



8

US profits – still no trend reversal

400500600700800900

10001100120013001400150016001700180019002000

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

(Source: BEA, CEIC, PSR est)

12mma

US Corp. Profits Aft. Tax (US$b, saar)



9

Macro conditions still suggest…

1. OW Equities (no change, maintain) 2. OW Commodities (9th Sep 13 OW from NW) 3. UW Gold (maintain UW since 25th Oct 12) 4. UW +10yr US Treasuries (maintain UW since 4th Jan 13)

Short term outlook

• Emerging markets breakout • Gold is in midst of short term consolidation • S&P500 looks to short term correct • GSCI (commodities) needs to reclaim breakout point to stay bullish • STI may have short term pullback



FTSE ALL-World ex-US

• Breakout on better relative strength

vs. S&P500 leader

• If price can stay above the blue

zone, it implies further upside.



Gold

11

• Gold is bearish longer term

• Gold is bullish short term

• Major resistance zone between

1500-1600 and is a major selling

opportunity

Weekly MACD cross, short term up cycle

On bear market, RSI resistance is around 70

The recent gold surge is not accompanied by

outperformance of gold miners.



• Gold is bearish longer term

• Gold is bullish short term

• Recent bullish candle is setting up

a potential ascending triangle.

• A break above 1400 implies further

upside to 1500 – 1550

• A break below 1300 implies further

downside to 1200.

• If there is another leg up, the

1550 zone is a good sell

opportunity,

Daily MACD cross, attempting short

term up cycle

Other indicators are not showing any

unusual strength,



S&P500 (daily) 9 Sep 2013

13

The “otherwise” is starting to

show some hints.

$RUT:$SPX

$NYMO is encouraging.

But indecision candle at

resistance.

Short term correction until proven otherwise

- US SP 500 Index USD5 CFD

- ETF: SPX.AMEX

To trade:



S&P500 (daily) (Today)

• $NYMO and RSI are getting

overbought.

• Daily down candle on higher

volume

• Longer term bullish

• Expect short term down side.

• Probable downside target is

in red zone support. (1675 –

1700)

- US SP 500 Index USD5 CFD

- ETF: SPX.AMEX

To trade:



15

•Short term objective on 46.0 breakout achieved

•With Bearish daily star formation

•RSI is oversold

•A retracement to 45.5 to 46.0 is possible

This corroborates the possible short term

correction in the S&P500

Pullback very probable

Industrials Sector (Update).

However, the good relative strength of all

breadth indicators imply that long term trend

is still up.



Sector Glances

16

Financials start to turn down.

Cyclicals peaking.

Industrials leading.

Materials and Energy turning

up.

Cyclicals Industrials

Materials Energy

(sequence of turning up)

More evidence of stage 4-5

business cycle (early-mid

expansion)



17

Sector trends

Tech, Industrials, Materials

and Energy still

outperforming Staples and

Utilities.

Implies between stage 4

and 5 of market cycle.

Good to be in Sectors that

shows improving relative

strength momentum (top

left) leading into good

relative strength (top

right).

Long Oil Service Sector

(OIH). (See later)



Sector Rotation

18

Phase 4 strategy: Short Bonds Long Stocks Long Commodities

… this also corroborates our assumption of Stage 4 of the economic cycle and materials and energy sector is to be favored.

Short Treasuries: TBT

Long Commodities: S&P GSCI

(ETF GSG.US)



19

2. Intermarket Relationships



Intermarket Relationship

20

Short Treasuries:

(ETF TBT)

Long Commodities:

S&P GSCI (ETF

GSG.US)



GSCI Index Fund

21

Long Commodities:

S&P GSCI (ETF

GSG.US)

Breakout on high volume

Target Price: $37

Cut loss price: $32

Need to see if next week can

reclaim back above the

breakout point, if it cannot, it

implies further downside.



Oil Service Sector

22

Indecision candle may signal

short term downside

Target Price: $52

Cut loss price: $44

Long Oil Service

Sector: OIH



23

2. Intermarket and Sector Analysis

Phase 4 strategy: Short Bonds Long Stocks (Materials, Energy) Long Industrial Commodities



10-Year US Treasury Note Price

• If price breaks out of 125.0, it

implies further short term

upside. Price target is 126.0-

126.5.

• At key technical level: wait

and see



$TNX


and see



TBT


and see

• A breakage of blue support

implies a move back to 72-

73.



CSI300 (23 Aug 2013)

27

Potential double bottom base?

Trade: ETF: FTSE ChinaA50 or 83188.HK



CSI300 Retracement to breakout point is

a good buying point

Breakout from

ascending triangle

Semi-bearish candle:

almost a dark cloud

cover.

Weekly MACD has

crossed – implying an

intermediate cycle

move

Improving macro in

China corroborates a

longer up move after

consolidation.

Trade: FTSE China A50 USD1 CFD

A retracement back to

the breakout point of

2300 is a good buying

opportunity.

Need to see a

confirmation this week



29

STI (weekly) (5 Aug 2013)

NEXT

Still negotiating the Resistance (R)

at 3260, as expected price stalled

at 3259

Consolidating at resistance

If there is another leg down, the

first objective is the key support

zone between 2930 and 3110. This

is the level of the clusters of

consolidation patterns in Feb and

July 12, a 50% to 61.8%

retracement of the impulse wave

from Dec 11 to Apr 13, as well as

the 0.618 to 1 ratio of the last down

move starting in Apr 13.

A price retracement to the blue

support zone should be seen as a

good buying opportunity.



STI

• Longer term bullish

• Short term may have

pullback



STI

• Most likely scenario: pull

back till 3200

• Further upside is implied if

price can clear the resistance

at 3277

• We are biased to the upside

due to improving macro

economics

• A break up of 3277 implies a

target back to 3450



32

Macro conditions still suggest (longer term)

1. OW Equities (no change, maintain) Technicals: short pullback possible • Long China – ETF 83188.HK (maintain OW since 9th

Sep 13 ) Technicals: short pullback possible 2. OW Commodities (9th Sep 13 OW from NW):

Technicals: wait and see • Long Oil Service Sector – ETF OIH.US

3. UW Gold (maintain UW since 25th Oct 12) Technicals: wait and see (short term)

4. UW +10yr US Treasuries (maintain UW since 4th Jan 13) Technicals: wait and see (short term)



Singapore Strategy &

Stock Picks

Ken Ang

Investment Analyst

Phillip Securities Research Pte Ltd

23 Sept 2013



Contents

Singapore Sector Strategy

Top Picks & Deep Value Plays

3 Top Picks

3 Deep Value Plays



SINGAPORE STRATEGY



Sector Strategy – Singapore

Overweight

Industrials (Capital Goods)

O&M outlook robust Crude Oil

Niche areas Market leaders

Banking Sector

Strong 1H13 – NIMs Stable, Fees and

Comm strong WM, Trade

2H13 may be weaker but still +ve

Strong traction, Rising Int rates

Fig. SG Equity Strategy dd 20 Sept 13




Overweight

Telecom Sector

Attractive Dividends >4%

Positive on Data Monetizing Excess

data charges, Population growth

Overweight - Industrials

- Banking

- Telecoms

Neutral - Commodities

- Property

Underweight - REITs




Neutral

Commodities

Share price has declined

CPO prices Muted Upstream -ve

Property

Residential High Supply (2H13:

c100k units), Low Demand (TDSR)

Retail/Hospitality exposure preferred


- Banking

- Telecoms


- Property

Underweight - REITs




Underweight

REITs

Downside risk from QE assessment

Yields remain unattractive

Preferred REITs with Strong rental

growth, Stable margins


- Banking

- Telecoms


- Property

Underweight - REITs



SINGAPORE TOP PICKS



Singapore Stock Picks

Top Picks in the Singapore Market

Company Rating Price TP Upside M.Cap.

(S$) (S$) (%) (US$'mn)

DBS Group Accumulate 16.74 17.50 4.5% 32,758

Valuations 12 13E 14E

P/E (X) 12.2 11.7 11.1

P/B (X) 1.3 1.2 1.1

Dividend yield (%) 3.3% 3.3% 3.3%

SingTel Accumulate 3.80 3.99 5.0% 48,532

Valuations 12 13 14E

P/E (X) 16.8 15.8 15.6

P/B (X) 2.5 2.4 2.3

Dividend yield (%) 4.4% 4.4% 4.4%

Keppel Corp Accumulate 10.84 12.25 13.0% 15,695


P/E (X) 10.2 12.7 11.1

P/B (X) 2.1 2.0 1.9

Dividend yield (%) 6.6% 4.3% 4.5%

Source: Bloomberg, PSR

Deep value plays in the Singapore Market


(S$) (S$) (%) (US$'mn)

Amara Holdings Buy 0.560 0.74 32.1% 259


P/E (X) 16.2 15.4 8.3

P/B (X) 1.2 1.0 0.9

Dividend yield (%) 1.1% 1.1% 1.1%

Boustead Singapore Buy 1.365 1.94 41.8% 560


P/E (X) 8.6 10.1 9.6

P/B (X) 2.3 2.1 1.9

Dividend yield (%) 5.1% 5.1% 5.4%

Courts Asia Buy 0.785 1.03 31.2% 352


P/E (X) 10.6 10.8 8.8

P/B (X) 1.5 1.4 1.2

Dividend yield (%) 4.1% 2.8% 3.4%


Analyst

Ken Ang

Kenangw [email protected]

+65 6531 1793

Phillip Research Team

[email protected]



(S$) (S$) (%) (US$'mn)



P/E (X) 12.2 11.7 11.1

P/B (X) 1.3 1.2 1.1

Dividend yield (%) 3.3% 3.3% 3.3%



P/E (X) 16.8 15.8 15.6

P/B (X) 2.5 2.4 2.3

Dividend yield (%) 4.4% 4.4% 4.4%



P/E (X) 10.2 12.7 11.1

P/B (X) 2.1 2.0 1.9

Dividend yield (%) 6.6% 4.3% 4.5%




(S$) (S$) (%) (US$'mn)



P/E (X) 16.2 15.4 8.3

P/B (X) 1.2 1.0 0.9

Dividend yield (%) 1.1% 1.1% 1.1%



P/E (X) 8.6 10.1 9.6

P/B (X) 2.3 2.1 1.9

Dividend yield (%) 5.1% 5.1% 5.4%

Courts Asia Buy 0.785 1.03 31.2% 352


P/E (X) 10.6 10.8 8.8

P/B (X) 1.5 1.4 1.2

Dividend yield (%) 4.1% 2.8% 3.4%


Analyst

Ken Ang


+65 6531 1793


[email protected]





(S$) (S$) (%) (US$'mn)



P/E (X) 12.2 11.7 11.1

P/B (X) 1.3 1.2 1.1

Dividend yield (%) 3.3% 3.3% 3.3%



P/E (X) 16.8 15.8 15.6

P/B (X) 2.5 2.4 2.3

Dividend yield (%) 4.4% 4.4% 4.4%



P/E (X) 10.2 12.7 11.1

P/B (X) 2.1 2.0 1.9

Dividend yield (%) 6.6% 4.3% 4.5%




(S$) (S$) (%) (US$'mn)



P/E (X) 16.2 15.4 8.3

P/B (X) 1.2 1.0 0.9

Dividend yield (%) 1.1% 1.1% 1.1%



P/E (X) 8.6 10.1 9.6

P/B (X) 2.3 2.1 1.9

Dividend yield (%) 5.1% 5.1% 5.4%

Courts Asia Buy 0.785 1.03 31.2% 352


P/E (X) 10.6 10.8 8.8

P/B (X) 1.5 1.4 1.2

Dividend yield (%) 4.1% 2.8% 3.4%


Analyst

Ken Ang


+65 6531 1793


[email protected]

Singapore Stock Picks – Top Picks

DBS

Benefit from rising int rates

Especially from Short-term

rates. DBS can leverage off its

high % of cheap CASA deposits

Higher exposure to Greater

China Benefit from improving

economic environment in China

P/B of 1.2X trading at a

discount to peers (~1.4X)

Re-rating potential through

continued strong growth traction





(S$) (S$) (%) (US$'mn)



P/E (X) 12.2 11.7 11.1

P/B (X) 1.3 1.2 1.1

Dividend yield (%) 3.3% 3.3% 3.3%



P/E (X) 16.8 15.8 15.6

P/B (X) 2.5 2.4 2.3

Dividend yield (%) 4.4% 4.4% 4.4%



P/E (X) 10.2 12.7 11.1

P/B (X) 2.1 2.0 1.9

Dividend yield (%) 6.6% 4.3% 4.5%




(S$) (S$) (%) (US$'mn)



P/E (X) 16.2 15.4 8.3

P/B (X) 1.2 1.0 0.9

Dividend yield (%) 1.1% 1.1% 1.1%



P/E (X) 8.6 10.1 9.6

P/B (X) 2.3 2.1 1.9

Dividend yield (%) 5.1% 5.1% 5.4%

Courts Asia Buy 0.785 1.03 31.2% 352


P/E (X) 10.6 10.8 8.8

P/B (X) 1.5 1.4 1.2

Dividend yield (%) 4.1% 2.8% 3.4%


Analyst

Ken Ang


+65 6531 1793


[email protected]


SingTel

Attractive dividends >4%

Potential for growth from payout

range of 60%-75% NPAT

Healthy EBITDA growth in SG

& AU SG data monetizing,

AU focused on maximizing profit

Strong Growth Potential

Overseas associate (AIS,

Telkomsel), Digital Life

initiatives when crystallize.





(S$) (S$) (%) (US$'mn)



P/E (X) 12.2 11.7 11.1

P/B (X) 1.3 1.2 1.1

Dividend yield (%) 3.3% 3.3% 3.3%



P/E (X) 16.8 15.8 15.6

P/B (X) 2.5 2.4 2.3

Dividend yield (%) 4.4% 4.4% 4.4%



P/E (X) 10.2 12.7 11.1

P/B (X) 2.1 2.0 1.9

Dividend yield (%) 6.6% 4.3% 4.5%




(S$) (S$) (%) (US$'mn)



P/E (X) 16.2 15.4 8.3

P/B (X) 1.2 1.0 0.9

Dividend yield (%) 1.1% 1.1% 1.1%



P/E (X) 8.6 10.1 9.6

P/B (X) 2.3 2.1 1.9

Dividend yield (%) 5.1% 5.1% 5.4%

Courts Asia Buy 0.785 1.03 31.2% 352


P/E (X) 10.6 10.8 8.8

P/B (X) 1.5 1.4 1.2

Dividend yield (%) 4.1% 2.8% 3.4%


Analyst

Ken Ang


+65 6531 1793


[email protected]


Keppel Corp

Strong Order Book wins

S$4.4bn vs FY13F S$5.9bn

Y-Y Higher O&M margins

>14% for FY13E-15E vs 13.5%

for FY12 from repeat orders for

KFELS B Class jack-up rigs

Strong track record vs

Chinese Peers Deliver timely

Attractive dividends >4%

Strong order book provides

visibility till 2019





(S$) (S$) (%) (US$'mn)



P/E (X) 12.2 11.7 11.1

P/B (X) 1.3 1.2 1.1

Dividend yield (%) 3.3% 3.3% 3.3%



P/E (X) 16.8 15.8 15.6

P/B (X) 2.5 2.4 2.3

Dividend yield (%) 4.4% 4.4% 4.4%



P/E (X) 10.2 12.7 11.1

P/B (X) 2.1 2.0 1.9

Dividend yield (%) 6.6% 4.3% 4.5%




(S$) (S$) (%) (US$'mn)



P/E (X) 16.2 15.4 8.3

P/B (X) 1.2 1.0 0.9

Dividend yield (%) 1.1% 1.1% 1.1%



P/E (X) 8.6 10.1 9.6

P/B (X) 2.3 2.1 1.9

Dividend yield (%) 5.1% 5.1% 5.4%

Courts Asia Buy 0.785 1.03 31.2% 352


P/E (X) 10.6 10.8 8.8

P/B (X) 1.5 1.4 1.2

Dividend yield (%) 4.1% 2.8% 3.4%


Analyst

Ken Ang


+65 6531 1793


[email protected]

Singapore Stock Picks – Deep value plays

Amara Holdings

Deep discount to valuation

FV of S$0.74 @ 40% to RNAV

of S$1.23.

Normalization of recurring

earnings completion of

Amara Sg refurbishment,

100AM retail mall, Amara

Sanctuary higher occupancy

Overseas expansion

Bangkok (By 1Q14), Shanghai

(2015 Mix devt) and potentially

Myanmar





(S$) (S$) (%) (US$'mn)



P/E (X) 12.2 11.7 11.1

P/B (X) 1.3 1.2 1.1

Dividend yield (%) 3.3% 3.3% 3.3%



P/E (X) 16.8 15.8 15.6

P/B (X) 2.5 2.4 2.3

Dividend yield (%) 4.4% 4.4% 4.4%



P/E (X) 10.2 12.7 11.1

P/B (X) 2.1 2.0 1.9

Dividend yield (%) 6.6% 4.3% 4.5%




(S$) (S$) (%) (US$'mn)



P/E (X) 16.2 15.4 8.3

P/B (X) 1.2 1.0 0.9

Dividend yield (%) 1.1% 1.1% 1.1%



P/E (X) 8.6 10.1 9.6

P/B (X) 2.3 2.1 1.9

Dividend yield (%) 5.1% 5.1% 5.4%

Courts Asia Buy 0.785 1.03 31.2% 352


P/E (X) 10.6 10.8 8.8

P/B (X) 1.5 1.4 1.2

Dividend yield (%) 4.1% 2.8% 3.4%


Analyst

Ken Ang


+65 6531 1793


[email protected]


Boustead Singapore

Growth of recurring income

Exclusive distribution for

Geospatial Tech (28% of PBT).

MY, Indo and AU growth areas

Strong pipeline of work

Record high order books of

S$491m mostly from niche

Industrial Ppty Design & Build

and Energy related engineering

Attractive Dividends 5.1% -

5.3% for FY14E-15E. Minimal

Capex, ~52% payout ratio





(S$) (S$) (%) (US$'mn)



P/E (X) 12.2 11.7 11.1

P/B (X) 1.3 1.2 1.1

Dividend yield (%) 3.3% 3.3% 3.3%



P/E (X) 16.8 15.8 15.6

P/B (X) 2.5 2.4 2.3

Dividend yield (%) 4.4% 4.4% 4.4%



P/E (X) 10.2 12.7 11.1

P/B (X) 2.1 2.0 1.9

Dividend yield (%) 6.6% 4.3% 4.5%




(S$) (S$) (%) (US$'mn)



P/E (X) 16.2 15.4 8.3

P/B (X) 1.2 1.0 0.9

Dividend yield (%) 1.1% 1.1% 1.1%



P/E (X) 8.6 10.1 9.6

P/B (X) 2.3 2.1 1.9

Dividend yield (%) 5.1% 5.1% 5.4%

Courts Asia Buy 0.785 1.03 31.2% 352


P/E (X) 10.6 10.8 8.8

P/B (X) 1.5 1.4 1.2

Dividend yield (%) 4.1% 2.8% 3.4%


Analyst

Ken Ang


+65 6531 1793


[email protected]


Courts Asia

Current share price low

Remain positive, expect sales

growth in mid term despite

recent slowdown (new products)

Unique in-house credit

facilities Benefit from credit

tightening in SG and MY.

Source of recurring revenue.

Cust data reduce bad debts.

Expansion to Indonesia

Providing new growth potential.



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Synergistic Trading and Rental business model, Regional growth prospects, Strong execution



Market Strategists Joshua Tan, Head of Research

Kenneth Koh, Research Assistant

SG & US Equity Analysts Ken Ang, Financials

Nicholas Ong, O&M & CPO

Lucas Tan, Real Estate

Wong Yong Kai, US Equities

Colin Tan, Telcos

Caroline Tay, Research Assistant

By Phillip Securities Research Mr. Chan Wai Chee, CEO

Peter Lee, Operations Exec

Ask Questions!



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SG & US Equity Analysts SG Equity Strategy 2013-9-23... · Disclaimer: The information contained in this document is intended only for use during the presentation and should not be