Brokers' Call

Yangzijiang Shipbuilding (YZJ) | Add (maintained)

Target price: $1.29

Aug 8 close: 99 cents

Broker: CGS-CIMB, Aug 8

Shipbuilding-related revenue grew 63 per cent quarter on quarter and 120 per cent year on year to 7.6 billion yuan (S$1.52 billion), thanks to the delivery of 20 vessels and accelerated progressive construction of larger containerships.

The delivery of large vessels secured at better pricing and margin, and stronger top line helped to boost shipbuilding gross margin to 21 per cent, bettering our 20 per cent expectation. Therefore, we have upped our gross margin expectations for FY2018 to 19 per cent and 17 per cent for forecasted FY2019.

YZJ secured 22 vessels year to date and its order book stood at 114 vessels worth US$4.1 billion, to keep the yard facilities at a healthy utilisation rate up to 2020. Growth catalysts could come from stronger orders, margins and earnings. A plunge in shipbuilding activities from a trade war is a risk.

Apac Realty | Hold (upgrade)

Target price: 62 cents

Aug 8 close: 61.5 cents

Broker: DBS Group Research, Aug 8

We believe Apac's current share price has already priced in the impact of recent property cooling measures.

We have already assumed market transaction activities to be lower this year as compared with last year, and to stay flat next year, while the healthy project pipeline in the second half of the year and FY2019 should provide some support.

A higher payout of commission to agents for new home sales led to a lower 8.7 per cent growth in net profit to $13.6 million.

The uncertainty and expected slowdown in sales velocity in the second half of the year and potentially next year might lead developers to rethink their land-banking strategy or even put a halt to this altogether.

The collective sale market could also come to a standstill.

Singapore banking sector | Overweight (maintained)

Broker: OCBC Investment Research, Aug 7 Despite trade tensions and the market in a risk-off mode, the three local banks reported a relative good set of second-quarter results.

More importantly, the guidance is still fairly positive as all three banks expect loan growth in the mid-to high single-digit level.

With six more Fed rate hikes expected by end-2019, outlook for net interest margin is positive. Allowances have generally dropped quarter on quarter and non-performing loan ratios have also stabilised.

Both OCBC and UOB reported the highest quarterly net earnings in the second quarter. Based on current consensus estimates from Bloomberg, net earnings growth is projected at 21 per cent in FY2018 and 11 per cent in FY2019 - record earnings for the banks. This underlines optimism in terms of growth expectation for both net and non-interest income.

DBS dished out a 60 cent interim dividend, while UOB gave 50 cents and OCBC 20 cents. On an annualised basis and at current prices, this translated into dividend yields of 3.5 to 4.5 per cent.

Property cooling measures will rein in mortgage growth rate, especially from FY2019, but we expect this to be mitigated by other areas of growth, including cards, investment and trading income. We remain fairly upbeat on the outlook for the banks for the next one to two years.

Raffles Medical Group (RMG) | Buy (maintained)

Target price: $1.28

Aug 7 close: $1.11

Broker: UOB Kay Hian, Aug 7

RMG's first-half net profit of $32.7 million accounted for 50.4 per cent of our full-year estimate.

Although second-half earnings are typically seasonally stronger, we are mindful of the impending start-up costs for Raffles Chongqing hospital (CQH) due in the third quarter. First-half operating margin improved slightly to 16.3 per cent from 16 per cent in the first half of last year.

An interim dividend of 0.5 cent per share was declared.

Second-quarter revenue was flat, aided by effective cost management. However, we do expect staff cost to rise from the third quarter as CQH opens in the fourth quarter.

The healthcare services segment was again supported by the addition of new corporate clients, while the hospital services segment registered a slight increase in local patients, circumventing a softer demand from foreign patients. Foreign patient volume continues to be under pressure on the back of a higher Singapore dollar (versus regional currencies), and higher treatment and ancillary costs in Singapore.

A version of this article appeared in the print edition of The Straits Times on August 13, 2018, with the headline 'Brokers' Call'. Print Edition | Subscribe