Brokers' take

United Overseas Bank | Buy (upgraded) June 20 close: S$26.22 Fair value: S$28.90 OCBC Investment Research, June 20

As at Wednesday's closing, United Overseas Bank's (UOB's) shares rallied for nine straight days or up a strong nine per cent.

Weakness in the banking sector in May and June was largely due to concern of trade war, weakening global and regional economic outlook and more importantly, the rising likelihood of further cuts in interest rates.

In our report dated May 3, 2019 titled Time to lock in some profits, we advocated locking in some profits.

Since then, the stock fell some 15.6 per cent to touch as low as S$23.50 recently.

In the last 10 years, despite a prolonged period of low rates, UOB was able to enjoy a sustainable net profit compounded annual growth rate (CAGR) of 7.7 per cent.

Dividend distribution grew 7.2 per cent for the same period.

With a dividend payout of S$1.20, and based on current share price of S$26.14, yield is 4.6 per cent.

Our fair value for the stock remains unchanged at S$28.90.

GSS Energy | Neutral (maintained) June 20 close: S$0.084 Fair value: S$0.08 RHB Research Institute, June 20

GSS Energy (GSS) has entered into a sale and purchase agreement with Oakhurts Investment and PT Kharisma Agri Indo NUSA regarding a 80 per cent stake in GSS Energy Trembul for US$1.

While we think farming out the oil & gas arm will be positive for GSS's shareholders, it also indicates the business has not performed as well as anticipated.

We would like to see a concrete upturn in its engineering business, as well as the monetisation of its oil & gas segment before revising our estimates.

The oil & gas segment has suffered many setbacks and delays throughout the year.

GSS is at an advanced stage of getting regulatory approvals to monetise the two proven wells, but may see further delays due to the uncertain timeline of getting the green light.

As a result, the business will likely continue to drag on group earnings, until approvals are in hand and monetisation has been done.

Key downside risks are a decrease in oil prices, the trade war worsening, and a slowdown in customer orders.

The opposite situation would present upside risks.

Compiled by Navin Sregantan

Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Brokers who wish to send in their reports can e-mail us at btnews@sph.com.sg