Money Talk: Singapore's tech sector, SingTel

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's tech sector

Broker: OCBC

Continued macroeconomic uncertainties have manifested in the recent results of the cyclical tech sector. For companies under our coverage, Venture Corp's Q1 earnings fell slightly short of our expectations while ECS Holdings' net profit was below (forecasts).

Other companies that reported lacklustre results include Amtek Engineering and Hi-P International. Nevertheless, we note that the weakness was not broad-based, as there were still companies which reported notably strong results, such as Silverlake Axis and UMS Holdings.

Although expectations for a global macroeconomic recovery appear to be panning out, we believe downside risks are evident given that data points remain largely mixed. Hence, we maintain Neutral on the tech sector.

But we upgrade Venture Corp from Hold to Buy, with a higher fair value estimate of $8.24 (previously $7.78). Venture Corp remains our preferred sector pick.

2. SingTel

Broker: Maybank Kim Eng

SingTel held its annual Investor Day last week, which affirms our view that growth will restart this year.

By our estimates, 82 per cent of SingTel's sum-of-the-parts valuation will be in growth mode this year vs just 34 per cent a year before. In Singapore, growth will be driven by the adoption of 4G and the monetisation of Pay TV, while all SingTel's associates, except AIS, are expected to perform well on the back of rising data usage amid benign conditions. With regional currencies expected to be more stable, growth at associates, especially Bharti, should strengthen this year.

Elsewhere, Optus plans to aggressively regain market share, while the digital life initiatives, launched in 2012, are already enabling SingTel companies to better compete. While AIS may cut guidance, (the impact) is not large enough to affect the overall growth trajectory.

Lastly, group digital life chief executive Allen Lew took pains to emphasise that the $2 billion allocated for non-telco investments is in line with global benchmarks, that investee companies are already proving their worth in giving SingTel group companies an edge in the market place, and that financial discipline will be maintained and dividends will stay intact.

Maintain Buy with a target price of $4.35.

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