Brokers' Call

OCBC's first-quarter net profit in 2017 came in at $973 million, reflecting positive signs with potential upside to earnings.
OCBC's first-quarter net profit in 2017 came in at $973 million, reflecting positive signs with potential upside to earnings.PHOTO: REUTERS

OCBC BANK

Broker: Maybank Kim Eng

Call: Hold

Target Price: $10.46

OCBC's first-quarter net profit in 2017 came in at $973 million, reflecting positive signs with potential upside to earnings.

Lending rose quarter on quarter mainly from corporates looking to invest in the United Kingdom, Australia, etc. Loan growth estimates are expected to rise to 6 per cent as more lending opportunities could arise for further growth.

However, first-quarter net interest margin fell 1 basis point to 1.62 per cent due to a 2-basis- point adjustment on higher non-recognition of interest income on non-performing loans.

Margin compression will likely continue as the bank faces competitive pressures and chases after high-quality credit.

Assets under management at OCBC's private banking arm, Bank of Singapore (BOS), rose decently by US$6 billion (S$8.4 billion) quarter on quarter to US$86 billion. Wealth management fees rose 37 per cent quarter on quarter, partly due to positive market sentiment. Organic growth from BOS franchise and tie-ups of product launches with its other subsidiaries, such as Lion Global Investors, makes it well-positioned in the space.


F&N

Broker: DBS Group Research

Call: Hold

Target Price: $2.37

Fraser and Neave's net profit in the second quarter ended at $8.5 million, down 29 per cent year on year, on the back of a 5.8 per cent year-on-year drop in revenue.

However, stronger profit contribution is expected in the second half, on the back of accounting for its increased equity stake in Vinamilk.

Beverage revenue dropped 21.5 per cent year on year in the second quarter to $113.6 million due to lower sales in Singapore and Malaysia, mitigated partially by vending business, commencement of third-party brands and distribution network expansion in Myanmar.

The business segment posted a pretax loss of $5.2 million due to weak performances from Malaysia and Singapore, arising from weaker volumes, higher raw material prices and a weaker ringgit.

Investments in marketing and brand in Thailand also impacted profit before interest and tax contribution.


RIVERSTONE HOLDINGS

Broker: CIMB

Call: Add

Target Price: $1.11

Riverstone's first-quarter core net profit is deemed ahead of expectations. Reported net profit rose 24 per cent year on year to RM33.6 million (S$10.9 million) in the first quarter. Excluding foreign exchange gains/losses and certain tax allowances , group core net profit rose 17 per cent year on year to RM29.4 million.

Group revenue rose 39 per cent year on year to RM206 million in the first quarter as the additional one billion pieces per annum capacity that started operations in the second half of 2016 has been fully filled by the increased demand for healthcare and cleanroom gloves.

Riverstone registered strong operating cashflow of RM40 million in the first quarter versus RM13 million in the first quarter of 2016, thanks to higher profitability as well as better trade receivables management.

The balance sheet remained strong.

Management expects increasing demand for its cleanroom products from non-hard disk drive segments. Sales of its cleanroom and healthcare gloves are gaining traction in the US and Japan.

A version of this article appeared in the print edition of The Straits Times on May 15, 2017, with the headline 'Brokers' Call'. Print Edition | Subscribe