Investors’ Corner (DBS Group, CDL HTrust, SingPost, Spackman Entertainment Group)

DBS Group Holdings
Price – $24.13
Target – $26.10

DBS Group Holdings (DBS) achieved good results across its Corporate Banking, Wealth Management and Consumer & SME (CSME) businesses in Singapore. However, CSME businesses in growth markets contributed only 0.4% of the group’s net profit in 2014. Management aims to increase contributions to income for CSME businesses in Singapore and Hong Kong from 44% in 2015 to 50% over the next 5 years, while that in growth markets to rise from 4% to about 10% over the same period. Meanwhile, the group is revamping its IT architecture leveraging on cloud computing to bring banking services to customers rather than getting them to visit branches. Delivering an entire bank in a smartphone through Digibank, the back-end processes are fully digital and automated, which minimise manpower requirement. As digital customers offer higher ROE, we raised DBS’s net profit forecasts owing to improved operating efficiency and cost reduction brought about by its digital transformation. Maintain BUY. UOB-Kay Hian (20 Nov)

CDL Hospitality Trust
Price – $1.62
Target – $1.85

CDL Hospitality Trusts (CDLHT) now owns a diversified portfolio with exposure in 7 countries through active capital deployment over the last 5 years, which provide stability to its distribution per unit (DPU) profile. The growth outlook has improved significantly driven by strong prospects in Singapore’s and New Zealand’s hospitality, coupled with full-year contribution from its two recent Europe acquisitions. We expect DPU to bottom in 2017 and forecast a 5% CAGR over 2017 – 2020. Current revenue per available room of $166 is 21% below peak and offers potential upside as competition from new rooms normalises. Moreover, CDLHT’s current gearing ratio at 33% also provides debt headroom of $310m to the 40% level for inorganic growth. Given an improving outlook and undemanding 12-month forward yield of 6.2%, we think valuations are attractive. Upgrade to BUY. UBS Securities (16 Nov)

Singapore Post
Price – $1.28
Target – $1.50

Singapore Post’s 2Q18 results were in line, with 1H18 core earnings meeting 47% of our FY17 forecast. In the result, we saw improvement in 3 out of 4 key earnings contributors – namely mail segment reporting an operating profit growth for the first time in five quarters; e-commerce segment’s operating loss continued to narrow; and the associates and JV reporting strong growth. The only uncertain part is the logistic segment which sank into loss because of doubtful debt for a key customer. Management announced initiatives in its strategic review which are practical and executable focusing on several low hanging fruits as well as long-term growth. Based on the lifted growth profile for mail business and possibly turnaround for e-commerce, we raised our FY19-20E earnings per share by 1-5% and discounted cash flow-based target price to $1.50. Upgrade to BUY. Maybank Kim Eng (16 Nov)

Spackman Entertainment Group
Price – $0.11
Target – $0.20

Spackman Entertainment Group (Spackman) recorded a loss of $0.8m in 3Q17 as there were no movie launches after Master in 2017. Nevertheless, 3 new movies would be launched in 2018, including Golden Slumber slated to launch in Feb-18 as well as Sovereign Default and Damaged to be released by 2H18. Meanwhile, China reopens the door to Korean entertainment after more than a year of a perceived “ban” arising from the dispute over the deployment of the US Terminal High Altitude Area Defence missile defense system in South Korea. We think this would be very beneficial for the company and its talent management agency associate. On consideration that Spackman’s share price has fallen quite sharply to an attractive level, coupled with the lifting of the ban on Korean media in China as well as a strong pipeline of new movies to be launched in 2018, we maintained our positive view on its outlook. Maintain BUY. RHB Research (16 Nov)