Money Talk: CapitaMall Trust, Singapore Exchange, Singapore banks

SINGAPORE - Stay up to date on market chatter with our picks of the latest broker research reports, compiled by The Straits Times Money Desk.

1. CapitaMall Trust (CMT)

Broker: OCBC

CMT reported Q1 distribution per unit (DPU) of 2.57 cents, 4.5 per cent higher than that achieved last year. This met 23.4 per cent of both ours and consensus full-year DPU projections.

The better performance was driven mainly by higher occupancy at Plaza Singapura and Atrium@Orchard, and completion of Phase 1 asset enhancement initiatives (AEIs) at IMM Building.

Looking ahead, CMT will continue to focus on executing its AEIs at Bugis Junction and Tampines Mall. In addition, it will also embark on Phase 2 AEI at IMM Building and reconfigure Level 2 of JCube to increase the retail offerings and enhance the shoppers' experience.

We are making minor adjustments to our forecasts. Maintain Buy with unchanged $2.20 fair value on CMT.

2. Singapore Exchange

Broker: OSK-DMG

Singapore Exchange's Q3 net profit of $76 million missed our and consensus estimates, with its first nine months' earnings of $243 million accounting for 69 per cent and 70 per cent of our and consensus full-year net profit estimates respectively.

Q3 was another tough quarter for the securities market, as the average daily turnover (ADT) fell 37 per cent year-on-year to $1.1 billion. Securities revenue slipped 32 per cent due to weaker ADT, partly cushioned by a higher average clearing fee on an increase in uncapped trades.

Derivatives revenue was also down, but by just 2 per cent year-on-year on weaker volumes from the Nikkei 225 futures and options.

We revise down our earnings forecasts by 5-6 per cent on lower ADT assumptions. We lower its target price to $7.30 from $7.80. Maintain Neutral.

3. Singapore banking sector

Broker: Maybank Kim Eng

Singapore's residential property market is showing signs of weakness and investors are worried about the spillover effects on the banks sector, which has enjoyed a robust housing loan compound annual growth rate of 15 per cent in the past five years.

Tighter lending rules, a deliberate move to slow down the pace of immigration and an expected influx of new home completions point to further price weakness ahead. Concerns over weaker housing loan quality thus loom large.

With the property market in a state of flux, loan quality concern does look significant at first glance. But we argue that the downside risks are still modest and manageable. First off, the authorities have taken proactive steps since Sep 2009 to curb residential property speculation, tightening the measures in response to changing circumstances.

Second, housing loans have historically shown great resilience even under prolonged economic stress. Third, household balance sheets are strong with people more cashed up now than during the period prior to the 1997-1998 Asian financial crisis. Fourth, our analysis indicates that household leverage remains reasonable even under tremendous stress.

Based on our estimates, a fourfold rise in the ratio of non-performing housing loans (from 0.5 per cent currently to 2 per cent) would conservatively reduce earnings per share by up to 3 per cent. Maintain Overweight on banks. For exposure, DBS is our top pick as it is best positioned to take advantage of a rising interest rate environment. We would remain cautious towards OCBC.