Brokers' take

ST Engineering | buy Fair value: S$4.00 Feb 7 close: S$3.28 OCBC Investment Research, Feb 7

Singapore Technologies Engineering (STE) announced in Jan 18 that its aerospace arm (ST Aerospace) and electronics arm (ST Electronics) secured new contracts worth S$510 million and S$742 million in Q4 2017, respectively. These contract wins bring the total new orders received in FY17 for ST Aerospace and ST Electronics to S$2.8 billion and S$2.2 billion, respectively.

Looking ahead, with the first converted aircraft redelivered, we expect the costs associated with the learning curve of converting this first A330-300 passenger aircraft to freighter for DHL to progressively decline for the rest of the conversion.

Over the longer-term, we remain positive on: 1) STE's electronics sector exposure to high growth areas relating to smart nation initiatives (ICT-related business) and cyber security, 2) aerospace arm gaining traction on PTF projects, as well as 3) improved outlook for marine sector, assuming oil prices can stay at higher levels compared to H1 2017. All considered, as we adjust upwards our forecasts and roll-forward our valuations, our fair value increases from S$3.61 to S$4.00.

Singapore Exchange | buy Target price: S$8.90 Feb 7 close: S$8.01 DBS Group Research, Feb 7

The convenience of holding cross-border stocks arising from the Bursa Malaysia (BM)-Singapore Exchange (SGX) trading link is likely to generate interest particularly among retail investors, who unlike funds, may not already have their own access to multiple markets through existing channels. Back in the 1990s, the convenience of transacting in Singapore dollar without being exposed to foreign currency as well as transacting through Singapore brokers were reasons attributed to CLOB's success. Between January and August 1998, before the trading of Malaysian shares on CLOB ceased, about 20 per cent of the average monthly turnover on the SGX was attributed to the trading of Malaysian shares. In the case of BM-SGX trading link, we should still expect to see healthy trading activity on both markets as a result of the trading link. We reiterate our positive view on SGX and believe that SGX's continued efforts to drive market liquidity and new product initiatives should bear fruit in the coming years.

Manulife US Reit (MUST) | Buy Target price: US$0.98 Feb 7 close: US$0.94 RHB Equity Research, Feb 7

MUST's FY17 results are in line. While the market is slightly concerned over the impact of faster-than-expected US Fed rate hikes, we note that this is on the backdrop of a stronger US job market and higher wage growth, which is positive for office demand. MUST also offers scope for organic growth (via rental growth and escalations) and inorganic growth potential from acquisitions. We see minimal impact from recent changes in the tax structure. Its valuation remains attractive, offering an attractive FY18 forecast yield of 6.5 per cent, which is over 100 basis points higher than that of S-Reits that specialise in office space.

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.