Brokers' Call

UNITED OVERSEAS BANK

Broker: Maybank Kim Eng

Call: Hold

Target Price: $18.34

United Overseas Bank (UOB) recently showcased its digital banking capabilities and the initiatives it intends to roll out, including digitalisation efforts to differentiate itself.

By developing its own tokenisation technology for contactless ATMs and instant issuance of digital cards, UOB has a first-mover advantage with a lead time of six to 12 months ahead of its peers in the mobile contactless payment space.

To anchor its small and medium-sized enterprise (SME) franchise, it launched Singapore's first cloud-based integrated solution - BizSmart - to help SMEs streamline work processes and save costs. It is also adopting new ideas and technologies.

While digitalisation has resulted/will result in higher cost-income ratios for UOB, these costs are necessary to retain customers and possibly draw new customers for faster and customised solutions as banks compete in the digital space.

THAI BEVERAGE

Broker: OCBC Investment Research

Call: Hold

Target Price: $1.01

As various media outlets have revealed, Thai Beverage has joined several major foreign brewers in a bid for a stake in Vietnam's largest brewer Sabeco.

Sabeco has filed documents to seek approval for a listing on the Vietnam Stock Index, following which the divestment of Sabeco will be done in two tranches. The Vietnamese government will auction 53.59 per cent this year and the remainder in 2017. The government is reportedly looking for the highest bidder.

Considering stiff competition and uncertainties, a wait and watch attitude is preferable. A "hold" rating is suggested, while longer-term investors may consider accumulating at current price levels.

SINGAPORE AIRLINES

Broker: OCBC Investment Research

Call: Hold

Target Price: $10.80

Singapore Airlines' (SIA's) recent operating results showed passenger capacity growth outpaced passenger traffic growth across all its passenger airlines.

Overall passenger load factor (PLF) fell 5.2 percentage points year on year to 79.7 per cent as capacity grew 3.6 per cent, while passenger traffic declined 2.9 per cent.

For the parent airline, passenger traffic posted a decline of 6.8 per cent year on year on softer demand across all regions against a 0.3 per cent decrease in capacity, resulting in a 5.6 percentage point fall in PLF to 80 per cent.

SIA's operating results show indications of weakening demand amid an intensifying competitive environment. Coupled with competition from Chinese and Gulf carriers, passenger yields will continue to be under pressure in the near to medium term.

A version of this article appeared in the print edition of The Straits Times on September 26, 2016, with the headline 'Brokers' Call'. Print Edition | Subscribe