DBS Stock Pulse: (1) Earnings review – Earnings and TP lifts for SATS, UOB, OCBC; cuts for Genting, Venture, and ARAUS (2) Equity Picks – Remove Venture, reduce DFI
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Group Research - Equities11 Nov 2024
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Singapore Equity Picks

Venture Corp: Remove at SGD13.65 from Dividend

Our analyst cut FY24F/FY25F earnings by 16% following Venture’s weaker-than-expected 3Q24 results release, despite a seasonally stronger period being anticipated. While exposure to AI data centres offer significant potential for growth, this is offset by the weaker life sciences segment where high funding costs remain a concern. Near-term resistance is seen at SGD13.69, close to the current level. The shares removed returned an amalgamated c.17% (including dividends paid).

 

DFI: Reduce by 3,000 shares of SGD2.37

DFI shares have risen 27% since we added the stock back on 24 September following news of its Yonghui disposal. The stock now trades at 4.3% of its FY24F yield and 6.4% of FY25F. While the mid-term outlook for the stock is positive, we believe a consolidation of the stock’s recent gains is possible in the near-term. With the reduction, there remains 5,000 shares at SGD1.86 in equity picks.

 

Trending Sector

Singapore Residential

Record six new launches in November

 

  • Three launches over the weekend – The Collective at One Sophia (10% sold at SGD2,750psf), Union Square Residences (20% sold at SGD3,200psf) and Chuan Park (close to 70% sold at SGD2,500psf)
  • Await three more launches scheduled for the coming weekend - Emerald of Katong, Nava Grove, and Novo Place EC
  • Robust sales momentum to be positive for developers as well as the property agencies – PropNex and APAC Realty

 

Stocks to Watch

SATS – Earnings (+), TP (+)

Reaching new heights with achievable ambitious

  • 2QFY25 surpassed expectations from positive operating margin surprise
  • FY25/26F earnings estimates raised by 13%/4%; FY27F core EPS to finally exceed pre-pandemic levels
  • Strategy update resulted in more confidence in the group’s longer-term growth prospects
  • Maintain BUY with higher TP of SGD4.40

 

UOB – Earnings (+), TP (+)

Look towards active capital management plans

  • 3Q24 revenue and profit beat consensus by over 6%
  • Non-interest income jumped 34% y/y, 28% q/q on record fee income and exceptional trading and liquidity performance
  • Higher specific allowance due to Citi Thailand operational issues which are expected to normalise in the next two quarters, as well as collateral revaluations
  • Maintain BUY; higher TP of SGD37.90

 

OCBC – Earnings (+), TP (+)

Awaiting clarity on capital plans

  • 3Q24 revenue and net profit beat consensus on strong growth in wealth fees and record trading income
  • FY24F NIM outlook and credit costs guidance revised downwards
  • Management affirms commitment to return capital to shareholders, subject to capital plans
  • Maintain HOLD with a revised TP of SGD16.10


Venture – Earnings (-), TP (-)

3Q24 weak, profit and revenue dip despite seasonal strength

  • 3Q24 weak; profit and revenue dipped despite seasonal strength, below expectations
  • Exposure to AI data centres offer significant growth potential; life sciences segment faces near-term challenges
  • Poised to benefit from the accelerating adoption of China+1 strategies with the Trump presidency
  • Cut FY24F/FY25F earnings by 16%; maintain BUY with lower TP of SGD15.10

 

Genting Singapore – Earnings (-), TP (-)

The house will eventually win

  • 3Q24 adj. EBITDA dropped 53% y/y and 19% q/q, missing our and consensus’ expectations
  • Poor performance was largely attributable to lower VIP rolling volume and below-trend win rate
  • FY24F/25F EBITDA cut by 22%/8%, with soft VIP volumes expected to persist in the near term; dividend cut to 40Scts
  • Maintain BUY with a lower TP of SGD0.95 on lower valuation peg given near term headwinds; valuation stays attractive

 

Acrophyte Hospitality Trust (ARAUS) – Earnings (-), TP (-)

Favourable risk-reward at this juncture

  • Active asset management efforts tracking along well with divestment of another underperforming asset in 3Q24
  • FY24/25F DPU lowered to 1.55/1.65 UScts on lower margins and higher cost of debt, implying forward yields of c.8%
  • Attractive entry price at 0.3x P/NAV; near-term risks adequately priced in
  • Maintain BUY with revised TP of USD0.25 (prev. USD0.40)

 

Singtel

Relief from a fine of just AUD12mn (+ve)

  • On 8th November 2024, Optus was fined AUD12mn (USD8mn) for failing to provide emergency call services
  • No further regulatory actions are expected, and there will be no impact on our projections due to existing provisions
  • Maintain BUY with a TP of SGD3.82

 

Grand Venture

Fuelled by strong semiconductor performance; AI set to drive future gains

  • Double-digit growth in revenue (+35.8% y/y) and adj. net profit (+59.0% y/y) in 9M24 mainly driven by strong semiconductor performance, in line
  • Better 2H24 on the cards with growing confidence on recovery in 2025
  • GVT well positioned to capitalise on AI in both the semiconductor front-end and back-end with its suite of offerings
  • Maintain BUY with TP SGD0.70

 

Singapore Airlines

2QFY25 results missed expectations amid cost headwinds

  • 2QFY25 operating profit fell 30.8% q/q and 59.3% y/y to SGD325.4mn, with 1HFY25 operating profit of SGD796mn representing 39% and 36% of consensus and DBS's full-year estimate
  • Underperformance attributed to higher-than-expected costs, stemming from labour, fuel, and inflight expenses
  • Operating margin fell sharply to 6.8% in 2QFY25, down from 10.0% in 1QFY25 and 17.1% in 2QFY24
  • We currently have a HOLD call and a TP of SGD6.40

 

UMS Integration

3Q24 results inline, expecting higher contribution from new customer

  • 3Q24 earnings fell 32.3% y/y on a 8.9% revenue decline, in line
  • Semiconductor outlook improving; expecting higher contribution from new customer
  • Well-positioned to benefit from the accelerating adoption of the China +1 strategy with Trump’s presidency
  • We have a hold call with a TP of SGD1.08

 

Legend

 

(+)

(-)

Earnings

Positive earnings revision

Negative earnings revision

Recommendation

Upgrade

Downgrade

TP

Increase

Decrease

 

 





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PT DBS Vickers Sekuritas (Indonesia)
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Jakarta 12940, Indonesia
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Fax: 6221 3003 4943
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