Hong Leong Finance | Buy

Target price: $3.20

Nov 15 close: $2.58

Broker: DBS Group Research, Nov 15

Hong Leong Finance's (HLF) loan growth dipped 2.4 per cent quarter on quarter (+5.8 per cent year on year).

Since last December, the loan book has still grown by 4.7 per cent. For now, HLF is adopting a cautious stance to write loans selectively and focus more on risks, given headwinds in the macroeconomic outlook.

According to HLF, branches have been actively writing HDB loans at competitive rates and terms. HLF also continues to maintain adequate provisions and recorded a $7 million write-back this quarter. As HLF mostly lends on a secured basis, we remain confident of HLF's asset quality, demonstrated by its low provision and non-performing loans levels historically.

HLF announced that it has embarked on internally driven projects as well as projects with fintechs as it starts its digital transformation journey and embraces the disruptive economy through innovation.

In the last quarter, Singdollar fixed deposits rates have continued to inch up. HLF has locked in its funding requirements for at least a year in advance as its deposit base is mainly made up of fixed deposits of up to one year.

UOL Group | Buy

Fair value: $8.41

Nov 14 close: $6.12

Broker: OCBC Investment Research, Nov 14

UOL's third-quarter 2018 results have met our expectations. Group revenue slipped 2.6 per cent year on year to $523.8 million. Although Patmi dipped 84.8 per cent year on year to $92.8 million, this was attributed primarily to the negative goodwill arising from the consolidation of UIC in Q3 2017.

While UOL highlighted that the recent property cooling measures have negatively affected sentiment, it remains comfortable at the current run rate of close to 70 per cent and 30 per cent sales for its Amber45 (six months after launch) and The Tre Ver projects (four months after launch), respectively.

UOL's hotels revenue per available room performance was mixed, with Parkroyal on Kitchener Road, Parkroyal Parramatta and Pan Pacific Melbourne being the outperformers. For retail, rental reversions were positive for Velocity@Novena Square and United Square, flat for Kinex amid an ongoing repositioning exercise and negative for West Mall and Marina Square. Its office portfolio performance was more robust, with healthy leasing momentum and occupancy rates.

Singapore Airlines | Hold

Target price: $10.20

Nov 14 close: $9.41

Broker: DBS Group Research, Nov 14

We downgrade Singapore Airlines to hold with a target price of $10.20. SIA reported second-quarter 2019 earnings that were below our expectations as passenger yield for the flagship segment declined 1 per cent year on year and the one-off share of losses at associate Virgin Australia led to 81 per cent decline in net profit for the quarter to $56.4 million, with interim earnings falling by 81 per cent year on year to just $196 million.

Meanwhile, the group also cut its interim dividend from 10 cents to eight cents.

We lower our FY2019 and FY2020 estimates by 31 per cent and 23 per cent respectively to reflect lower passenger yield assumptions and the one-off losses at Virgin Australia, and expect consensus to also cut forecasts.

SIA's share price could re-rate on the back of yield recovery, sustained improvement in revenues, and ongoing cost management initiatives to lower its costs. More significant passenger yield improvement is needed for core earnings to rebound. With fuel prices at a substantially higher level currently, passenger yields need to improve for SIA to post returns equal or better than its cost of capital.

SIA's transformation programme has started to bear fruit as non-fuel costs across all segments have fallen and further gains from the programme could help to alleviate cost pressures and further optimise revenues.