Money Talk: Singapore Exchange, DBS, Osim

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. Singapore Exchange (SGX)

Broker: OSK-DMG

SGX's Q4 results were within our and consensus estimates. FY2014 was a tough year for the securities market, with average daily value down 22 per cent year-on-year amid a record low-volatility environment.

Turnover velocity was broadly stable quarter-on-quarter at 38 per cent vs 39 per cent in Q3. We think it is still too early to gauge the impact of the various micro structure changes that SGX has been introducing.

Nevertheless, underlying pre-tax profit was 10 per cent lower year-on-year, reflecting SGX's efforts to diversify its revenue streams. It expects its securities business to recover in FY2015, which we have imputed.

Maintain Neutral and our $7.40 target price retained.

2. DBS

Broker: OCBC

DBS released its Q2 net earnings this morning, which came in better than expected at $969 million versus consensus estimate of $938 million. This resulted in H1 earnings of $2.2 billion, up 20 per cent.

At the net earnings level, there was a quarter-on-quarter drop in Q2 net earnings largely because of the one-off item in Q1 (from the sale of its stake in the Bank of the Philippines Islands).

Net interest margin improved marginally from 1.62 per cent in Q2 2013 and 1.66 per cent in Q1 2014 to 1.67 per cent in Q2. Net interest income showed both good year-on-year and quarter-on-quarter growth to $1.557 billion in Q2.

DBS has declared a H1 dividend of 28 cents, unchanged from H1 2013. The ex-dividend date is Aug 13. The dividends will be payable on or about Oct 3.

3. Osim

Broker: CIMB

Osim's H1 net profits were largely in line, meeting 48.6 per cent of our full-year estimate and 48.4 per cent of consensus vs last year's 50.5 per cent. The slight deviation came from the disruptive effect of the World Cup 2014, which led to slower-than-expected sales in June.

Near-term catalysts for the stock include 1) accretive acquisitions, 2) better-than-expected productivity gains and 3) strong sales growth.

While the China story has definitely slowed, we think that store optimisation and product innovation can drive earnings growth through 2015.

We maintain our Add call and reiterate our target price of $4.60.

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