Brokers' take
NetLink NBN Trust | Buy Target price: S$0.970 Feb 6 close: S$0.82 DBS Group Research, Feb 6
We believe the market is concerned that rising interest rates may lead to a search for higher yield. NLT has hedged its interest rates till March 2021 and growth in distributions (4.6 per cent compound annual growth rate over FY18-20 forecast) should translate into higher distribution yields. One unique advantage of NLT over Reits and Business Trusts is that any potential rise in the cost of capital might lead to higher regulated returns from 2022 onwards, translating into higher distributions.
Potential catalysts: (1) Newsflow on TPG Telecom's backhaul rollout leveraging on NLT's infrastructure in early 2018, (2) Widened scope of Smart Nation initiatives as NLT could use its debt headroom to invest in those initiatives, leading to a healthy growth in distributions in the long term, and (3) More clarity on 5G rollout and if NLT could be involved in the 5G rollout.
Singapore Exchange | Buy Target price: S$9.00 Feb 6 close: S$7.88 RHB, Feb 6
MAS and Malaysia's Securities Commission have announced the establishment of a Bursa SGX trading link. We are positive on this. The network - which would enable cross border clearing and settlement of traded stocks - should help to improve trading activities on SGX.
Our unchanged assumption is for FY19 (June) securities average daily traded value (SADV) of S$1.39 billion vs Q2 FY18 of S$1.14 billion, from which we derive our target price of S$9.00 (12 per cent upside), pegged to 24 times FY19 earnings per share.
Sarine Technologies | Add Target price: S$1.56 Feb 6 close: S$1.03 CIMB, Feb 5
We think the sell-off over the past 12 months (40 per cent decline in share price) is overdone and its current valuation of 15.9 times calendar year 2018 forecast price/earnings is attractive in light of the strong earnings growth outlook amid improving diamond market dynamics.
Chilean-based fund Axxion, now Sarine's biggest shareholder, increased its stake from 8.7 per cent to 9.18 per cent. . . over the last two weeks of January 2018. . . We believe this signals confidence in Sarine's overall business outlook and suggests the current valuation offers an attractive risk/reward profile.
In January 2018, Sarine announced plans to open its first diamond grading lab in Israel in February 2018 and a second lab in India in May 2018.
Compiled by Angela Tan
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.
