Money Talk: UOB, SMRT, Yangzijiang ShipBuilding

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. UOB

Broker: CIMB

UOB's Q1 results were relatively staid compared to the better-than-expected results of its peers announced earlier. Its Q1 net profit of $788 million was within our and consensus expectations, forming 25 per cent of both full-year estimates.

The key features for Q1 were weak non-interest income and flat margins, crimping the impact of faster-than-peer loan growth. The tone of earnings was even weaker still if we exclude the tax writebacks and associate gains shoring up its bottomline.

The bank's 2014 guidance on ASEAN was also very cautious. Net interest margin fell 0.01 percentage point as margins in regional markets contracted, dousing the effect of the stable-to-rising margins in Singapore.

We slightly trim our 2014-2016 earnings per share forecasts and lower our target price from $23.80 to $21.76. Having outperformed year-to-date, we think the stock will no longer do so in the short-term. Downgrade from Add to Hold.


Broker: OSK-DMG

SMRT reported Q4 results that were in line with our expectations, with net profit swinging back into the black ($16.9 million) from losses a year ago.

We understand that the recent 20 per cent share price jump could be due to the market's renewed interest in the impending changes to rail refinancing. While the exact terms are still unknown, we reiterate our view that such changes should not help to lift SMRT's operating performance.

The financing of capex by the Government should merely help to strengthen the company's balance sheet as expenses would be morphed to leasing expenses from depreciation. The only positive catalyst to the operating situation, which is unlikely to happen, is the adoption of a cost-plus model.

As such, the recent share price jump is unwarranted. Maintain Sell with target price lowered to $1.00 (from $1.04).

3. Yangzijiang Shipbuilding

Broker: OCBC

Yangzijiang reported a 24 per cent year-on-year rise in revenue to 3.55 billion and a 11 per cent increase in net profit to 799.2 million, such that Q1 revenue and net profit accounted for about 25 per cent and 29 per cent of our full-year forecasts, respectively.

This was due to a higher-than-expected gross profit margin of 29.5 per cent in the quarter vs our expectations of 28 per cent, as well as a lower tax rate of 21 per cent.

For the next few quarters, management prefers to be more circumspect on the outlook for margins, while there should be a tax credit in the second quarter to bump up earnings. Looking ahead, management's focus will be on order execution.

Our fair value estimate rises from $1.21 to $1.29, and with the relatively weak stock performance year-to-date, we now see an upside potential of about 21 per cent (includes 3.6 per cent dividend yield). Upgrade to Buy.