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Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197501035Z © PhillipCapital 2020. All Rights Reserved. For internal circulation only.

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Phillip Securities Research 17th August 2020

UOB

DBS

OCBC

Capitaland

Manulife US REIT

Prime US REIT

IREIT Global

Koufu Group

Stock Counter Updates

APAC Realty

Asian PayTV

ComfortDelgro

NetLink Trust

PropNex

Starhub

UG Healthcare

Venture Corp

SG Bonds Weekly

Macro/Sector Outlook



Tay Wee Kuang

Research Analyst

Phillip Securities Research Pte Ltd

17th August 2020

United Overseas Bank LimitedBusiness headwinds weigh in



United Overseas Bank Limited ACCUMULATE (Maintained), TP: S$20.40 (prev S$20.70), Last: S$20.07

The Positives

+ S$90mn of allowances recognised on impaired loans in 2Q20 represents 13 bps in credit costs.

Lower than quarterly average of 20 bps over past four quarters.

GP of S$378mn constitutes remaining 54 bps of credit costs for the quarter, in line with 50

– 60 bps guidance.

The Negatives

- NII fell 12% YoY as NIM contracted to historical low of 1.48% from 1.81% (-33 bps).

NII impact exacerbated by deposits growth of 7% YoY which outpaced loans growth of 3% across the same period.

Lag effect from repricing of deposits to lift some pressure on NIM compression.

- Weakness observed across non-interest income.

Apart from fund management fees, net fee and commission income saw double-digit

declines YoY across the board.

Other non-interest income also fell by 11% on lower net trading income.

Results at a glance

(SGD mn) 2Q20 2Q19 YoY (%)

Net interest income 1,456 1,653 (12%)

Fees & Comm 445 527 (16%)

Other Non Int Income 359 403 (11%)

Total Revenue 2,260 2,583 (13%)

Expenses 1,040 1,129 (8%)

PPOP 1,220 1,453 (16%)

Allowances 396 51 n.m.

PATMI 703 1,168 (40%)Source: Company, PSR



United Overseas Bank Limited ACCUMULATE (Maintained), TP: S$20.40 (prev S$20.70), Last: S$20.07

Outlook

Semi-annual dividend of S$0.39 per share declared.

Annualised amount of S$0.78 per share for FY20.

Scrip dividend will be issued without discount with CET-1 ratio remaining healthy at 14.0%.

Expected to resume to S$1.10 dividend at the start of FY21 excluding special dividend.

Recognition of allowances to remain at current run rate over the next two years.

Previous guidance of 50 – 60 bps in credit cost per year amounts to S$350 – S$420mn per

quarter.

Together with RLAR of S$379, bank is in good position to weather COVID-19.

Investment Actions

Maintain ACCUMULATE recommendation with a reduced target price of S$20.40 (prev. S$20.70).

Downward revision of earnings estimate by 5% to reflect slower recovery from various business segments as a result of COVID-19.

Results at a glance

(SGD mn) 2Q20 2Q19 YoY (%)

Net interest income 1,456 1,653 (12%)

Fees & Comm 445 527 (16%)

Other Non Int Income 359 403 (11%)

Total Revenue 2,260 2,583 (13%)

Expenses 1,040 1,129 (8%)

PPOP 1,220 1,453 (16%)

Allowances 396 51 n.m.

PATMI 703 1,168 (40%)Source: Company, PSR



Tay Wee Kuang

Research Analyst


17th August 2020

DBS Group Holdings LtdNon-interest income provides relief to short-term woes



Results at a glance

(SGD mn) 2Q20 2Q19 YoY

NII 2,303 2,429 (5%)

Net Fees & Comm 681 767 (11%)

Other Non-II 742 513 45%

Total Income 3,726 3,709 0%

Expenses 1,483 1,546 (4%)

PPOP 2,243 2,163 4%

Allowance 849 251 n.m.

PATMI 1,247 1,603 (22%)

Source: Company, PSR

The Positives

+ Gains on investment holdings stave off slower business momentum.

Sitting on S$1.5bn of unrealised mark-to-market gains in investment securities.

Provide some buffer while business operations recover.

The Negatives

- NII fell 5% YoY in 2Q20 on NIM compression (-29 bps YoY).

Reported NIM of 1.62% in 2Q20; 1.74% for 1H20.

Stabilise at current levels to see NIM drop to 1.68% for FY20.

- Fee income fell 11% YoY due to lowered business activity in 2Q20 from Circuit Breaker

Credit card fees and investment banking fees fell 21% and 19% YoY respectively in 1H20

Gradual recovery in fees with increased capital market activity and face-to-face interactions with customers.

DBS Group Holdings LtdACCUMULATE (Maintained), TP: S$21.00 (prev S$20.60), Last: S$21.07



Results at a glance

(SGD mn) 2Q20 2Q19 YoY

NII 2,303 2,429 (5%)

Net Fees & Comm 681 767 (11%)


Total Income 3,726 3,709 0%

Expenses 1,483 1,546 (4%)

PPOP 2,243 2,163 4%

Allowance 849 251 n.m.

PATMI 1,247 1,603 (22%)


Outlook

Quarterly dividend cut to S$0.18 per share from S$0.33 QoQ.

Bring FY20e dividend to S$0.87, down 30% from FY19 distribution of S$1.23.

Scrip dividend available for next four quarters at no discount.

Reserve build-up well underway and expected to taper in FY21.

Additional S$560mn in GP allowances added in 2Q20, bringing YTD GP allowances to S$1.26bn.

In line with 80 – 130 bps in credit costs (i.e. S$3 – 5bn) to be booked by end of FY21.

Investment Actions

Maintain ACCUMULATE recommendation with revised TP of S$21.00 (prev S$20.60).

Upward revision of income to reflect resilience observed from non-interest income to buffer decline in NII.

DBS Group Holdings LtdACCUMULATE (Maintained), TP: S$21.00 (prev S$20.60), Last: S$21.07



Tay Wee Kuang

Research Analyst


17th August 2020

Oversea-Chinese Banking Corp LtdOutlook eases along with front-loaded allowances



Results at a glance

(SGD mn) 2Q20 2Q19 YoY (%)

NII 1,483 1,626 (9%)

Net Fees & Comm 440 522 (16%)

Insurance 282 188 50%


Total income 2,625 2,656 (1%)

Expenses (1,107) (1,151) (4%)

PPOP 1,518 1,505 1%

Allowance (750) (111) n.m.

PATMI 730 1,223 (40%)


The Positives

+ Non-interest income grew 11% YoY to S$1.14bn despite poorer fee performance.

Insurance income and trading income grew 50% and 31% YoY in 2Q20.

Shareholders’ funds and reversal of mark-to-market losses in 2Q20 from 1Q20 boosted income in the second quarter.

The Negatives

- NII fell 9% YoY on 19 bps NIM compression.

2Q20 NIM of 1.60% was 19 bps from a year ago.

2Q20 exit NIM of 1.55% likely to recover slightly on deposits re-pricing.

- Write-down of OSV loan book contributed to higher levels of allowances.

S$518mn of SP recorded for the sector in 2Q20

Apart from national carriers and large corporates, book has been written down to 0.3% of value.

91 bps in credit cost in 1H20 looks front-loaded on 100 – 130 bps guidance; expected to taper in subsequent quarters.

Oversea-Chinese Banking Corp LtdACCUMULATE (Maintained), TP: S$8.92 (prev S$9.14), Last: S$8.95



Results at a glance

(SGD mn) 2Q20 2Q19 YoY (%)

NII 1,483 1,626 (9%)

Net Fees & Comm 440 522 (16%)

Insurance 282 188 50%


Total income 2,625 2,656 (1%)

Expenses (1,107) (1,151) (4%)

PPOP 1,518 1,505 1%

Allowance (750) (111) n.m.

PATMI 730 1,223 (40%)


Outlook

Semi-annual dividend cut to S$0.159 from S$0.28.

43% below previous dividend expectation of S$0.56 per share.

Scrip dividend available at 10% discount, consistent with previous scrip dividend elections.

Application for loan moratorium in Singapore tapers at lower than expected uptake.

Local loan moratorium represents 6 – 7% of loan book, below 15% expectation

Ease pressure on NPL formation in subsequent quarters after loan moratorium expires.

Investment Actions

Maintain ACCUMULATE recommendation at reduced target price of S$8.92 (prev S$9.14).

NIM estimates were lowered by further 5 bps. FY21 earnings expected to recover to normalised levels after more allowances were booked in 1H20.

Oversea-Chinese Banking Corp LtdACCUMULATE (Maintained), TP: S$8.92 (prev S$9.14), Last: S$8.95



Manulife US REITPortfolio bulwarked against short-term uncertainty

Natalie Ong

Research Analyst


17th August 2020



+ The Positives

1H20 NPI and DPU were in line, forming 49.2% and 47.0% of our FY20e NPI and DPU

Positive rental reversions of +7.9% on 217,300 sqft (4.6% of NLA) for 1H20

Only 0.3% of rental waivers and 0.3% of deferment provided, based on 1H20’s GRI

- The Negatives

Deterioration of rent collection

Portfolio valuations fell 2.9%, pushing gearing up from 37.7% to 39.1%

Manulife US REITBUY (Maintained), TP: US$0.90, Last: US$0.75

Results at a glance

(USD mn) 1H20 1H19 YoY Comments

Gross revenue 98.6 83.3 +18.3% Higher due to contributions from Capitol (acquired Apr 19) and

Centrepointe ( acquired Oct 19), partly offset by lower rental

form Michelson and lower carpark income

Net property income 62.2 52.3 +18.8%

Distributable income 48.0 40.0 +20.0%

DPU (cents) 3.05 3.04 +0.3% Higher despite larger unit base from Private Placement to

partially fund acquisitions




Manulife US REITBUY (Maintained), TP: US$0.90, Last: US$0.75

Outlook

Portfolio resilience due to:

long WALE, low expiries of 3.5%/6.1% by GRI in FY20/21,

tenant quality and

tight comparable supply in the markets that MUST has a presence in.

Relevance of office workspace

Densification trend to pause

Statistics for office-using sectors remains resilient

Maintain BUY with higher TP of US$0.90 (prev. US$0.80).

We lower our beta, resulting in a lower cost of equity assumption of 9.1% (prev. 10.0%)

DPU yield of 8.5%/8.7% for FY20e/FY21e



CapitaLand LimitedExperience and diversification as sword and shield

Natalie Ong

Research Analyst


17th August 2020



CapitaLand LimitedBUY (Maintained), TP: $3.82, Last: $2.81

Results at a glance

(SGD mn) 1H20 1H19 YoY Comments

Gross Revenue 2,027 2,131 -4.9% Lower mainly due to COVID-19 disruption (retail, lodging,

residential) and rental rebates of c.$158.6 million granted

to retail tenants, partially offset by contributions from the

ASB portfolio

EBIT 597 2,061 -71.0% Lower mainly due to fair value losses of IP in 1H20 as

compared to a gain in 1H19, lower portfolio gains from

assets recycling. Recurring income from IP accounted for

68.7% (1H 2019: 90.2%) of the total EBIT

Finance costs (457) (372) 23.0% Higher mainly due to increase in the Group’s borrowings,

resulting from the consolidation of ASB

Total PATMI,

Comprising:

97 875 -89.0%

Operating PATMI 261 361 -27.7%

Portfolio gains 9 135 -93.1% Lower asset recycling activity due to uncertainty in markets

Revaluation gains

and impairments

(174) 379 NM CL has changed their valuation frequency from semi-

annually to annually (1H19: gain of $618.2mn). Fair value

loss were attributed to CAPL's share of the FV loss of

$574.4mn on revaluation of IP primarily in CMT and CCT in

1H20, which still adopt semi-annual reporting due to the

ongoing merger


Note: IP stands for investment property, which are assets held for rental

+ The Positives

Green shoots in China (42% of AUM) and Retail (28% of AUM) portfolio

Pickup in residential sales after showrooms reopened in end-March

95% of office tenants and 89% of business park tenants in China have resumed operations in their premises

Recovery in core retail makets



+ The Positives

Green shoots in China (42% of AUM) and Retail (28% of AUM) portfolio

Pickup in residential sales after showrooms reopened in end-March

95% of office tenants and 89% of business park tenants in China have resumed operations in their premises

Recovery in core retail markets




- The Negatives

1H20 EBIT -71% YoY, dragged down by lodging (-82.5%) and retail (-25.3%) segments mainly attributable to fair value losses on investment properties in 1H20 as compared to a gain in 1H19, and lower portfolio gains from assetsrecycling

Outlook

Vietnam residential inventory running low, hampered by and industry-wide longer approvals process

Strategic advancement in digitalisation and flex-space offering to help future-proof portfolio

Diversified portfolio, office and industrial relatively resilient

Asset recycling may pickup in 2H20

Maintain BUY with a lower TP of S$3.82 (prev. $3.94).

We trim our FY20e revenue by 2.1% as we factor in additional rental rebates and a longer than anticipated recovery in the lodging segment, as well as the enlarged share based from the script dividend scheme.




Prime US REITTo thrive and not just weather

Tan Jie Hui

Research Analyst


17th August 2020



+ The Positives

NPI and DPU slightly surpassed expectations; minimal impact amidst COVID-19.

Gross revenue and NPI is up 5.7% and 7.6% YoY in 1H20, attributable to its accretive acquisition of Park Tower acquired in 1Q20.

Stable lease expiry profile; Strong leasing activity in 1H20.

Portfolio WALE remains at 4.8 years. Only 3.3% and 7.4% of the leases by GRI are due to expire in FY20 and FY21.

Strong leasing activity was observed in 1H20 as Prime reaped 82k sqft in new leases and renewals (of which 30k sqft was secured in 2Q) at an average positive rental reversion of 8.5%.

Healthy gearing levels and ample debt headroom

Prime’s gearing and interest coverage ratio improved from 33.7% to 33% and 5.1x to 5.4x respectively, with $91.4mn available undrawn facility to tap on for future growth opportunities.

Prime US REITBUY (Maintained), TP: US$0.94, Last: US$0.77

- The Negatives

Overall portfolio occupancy dipped QoQ from 94.9% to 93.0%.

Decline in portfolio occupancy in Q2 is mainly due to the expiring leases in Village Center I and 171 17th Street.

A property developer and Holland and Hart exited Village Center post-development of Village Center III.

Wells Fargo returned some of their space in 171 17th street post expiry of the previous lease extension.



Prime US REITBUY (Maintained), TP: US$0.94, Last: US$0.77

Outlook

Upcoming commercial supply into the markets that Prime has presence in continues to be minimal as majority of the buildings under construction are pre-leased.

We remain positive on Prime’s outlook due to its income stability supported by long WALE of 4.8 years, minimal expiries of 3.3% and 7.4% in FY20 and FY21 and high levels of asset and trade sector diversification.

Despite heightened level of cautiousness surrounding new leases and expansions amidst uncertainty, Prime saw robust leasing activity in 1H20 which spilled over to 3Q20. Post 1H20, an additional 36k sqft of renewals and expansion leases were executed by existing tenants at positive reversions.

Maintain BUY with a higher TP of US$0.94.

Our target price translates to a FY20e distribution yield of 8.6% and a total upside of 24.0%. We adjusted our revenue and

NPI forecasts upwards to reflect the new leases and renewals signed in 1H20. Our higher TP is mainly attributable to a lower

cost of equity assumption of 9.50% (prev. 9.96%) to reflect the relative resilience of US office asset class.



IREIT Global Rough start to growth, but growth nonetheless

Tan Jie Hui

Research Analyst


17th August 2020



+ The Positives

Stable results.

Gross revenue and NPI was up by 2.6% and 1.4% YoY attributable to the new lease at Münster South Building which commenced in Jul 2019.

However, DPU in S$ terms dipped by 2.7% as it was impacted by weaker EUR/SGD exchange rates.

Acquisition of remaining 60% stake in the Spanish portfolio to provide greater diversification benefits and organic growth opportunities.

The acquisition will decrease IREIT’s portfolio exposure to Germany from 91% to 81%; no single property will contribute to more than 30% of IREIT’s valuation.

The properties’ passing rents are on average 15% below market rents, presenting future organic growth opportunities as leases are marked to market.

Lower gearing levels to provide more headroom for more inorganic growth opportunities ahead.

The enlarged portfolio is expected to see gearing levels at 35%, down from 39% previously. IREIT will be in a better position to embark on further inorganic growth opportunities.

IREIT GlobalHOLD (Downgraded), TP: S$0.68, Last: S$0.73

(€’000) 1H20 1H19 YoY Remarks

Gross revenue 17965 17503 2.6%

Higher gross revenue from the new lease at Münster

South Building which commenced in Jul 2019 and the

positive effects arising from the finalisation of prior

year’s service charge reconciliation

Property expenses -2300 -2061 11.6%

Net property income 15665 15442 1.4%

Income available for distribution 11660 11671 -0.1%

DPU (€ cents) 1.82 1.84 -1.1%

DPU (S cents) 2.85 2.93 -2.7%

DPU in S$ terms was impacted by weaker EUR/SGD

exchange rates

Commitment: Tikehau Capital, CDL and AT Investments will

undertake all Rights units unsubscribed during Rights Issue.

Assuming only Tikehau Capital, CDL and AT Investments subscribed to the rights issue, AT Investments may potentially own 15.4% of IREIT’s shareholdings and become a controlling unitholder to IREIT. Tikehau Capital and CDL will own 29.3% and 24.5% respectively.



IREIT GlobalHOLD (Downgraded), TP: S$0.68, Last: S$0.73

Outlook

Amid the looming recession, the take-up in office space and investment activity in Europe is expected to slow down in 2020. However, office rents where IREIT’s properties are located are not expected to be significantly affected due to strong local fundamentals e.g. low vacancy rates and lack of supply. IREIT’s portfolio has remained resilient with majority of the leases supported by blue-chip tenants.

The impending acquisition will increase and diversify IREIT’s asset and tenant base, and mark what we believe to be the beginning to IREIT’s growth plans now that it is backed by supportive stakeholders.

Downgrade to NEUTRAL with a lower TP of S$0.68.

Our target price translates to a FY20e distribution yield of 6.9% and a total upside of 0.8%. We factored in for the rights issue

to fully fund the acquisition and repay the CDL loan. In light of more organic growth opportunities presented by the Spanish

portfolio, we increased our terminal growth rate to 1.5% from 1% previously.

The Negatives

Rights issue to fund acquisition and repay loan; Acquisition is DPU and NAV dilutive.

IREIT will be issuing 281.8mn units to raise c. €90mn (S$140.9mn). It will be used to fund the proposed acquisition (c. €49.1mn)and repay the €32m term loan facility granted by CDL. The acquisition is expected to be completed in 4Q20.

Looking at pro forma data based on 1H20 numbers, DPU for the enlarged portfolio was to decline by 18.9% from 2.85c to 2.31c. NAVPS for the enlarged portfolio was also to fall by 14.5% from €0.55 to €0.47.



Terence Chua

Senior Research Analyst


17th August 2020

Koufu Group Limited2H20 recovery on track



Koufu Group LtdBuy (Maintained), TP: S$0.77, Last: S$0.69

Positives

• Marked improvement in footfall in Phase 2 of Singapore’sreopening after the circuit breaker. Business operations inMacau have also resumed operations albeit at significantlylower footfall

• F&B retail that saw the greatest hit in 1H20 sees markedrecovery.

• New store openings resumed. The Group also opened theirfirst R&B Tea kiosk in Indonesia on 4 July 2020. Openingspostponed in 1H20 will resume in 2H20.

Negatives

• Expected TOP of Integrated Facility (IF) pushed to 4Q20, atthe earliest. Construction of the IF has been resumedhowever, and they expect to move into the IF in 1Q21.

Outlook: We continue to remain positive on the Group’s outlook post circuit breaker. We believe the recovery in consumption post circuit breakerwill continue to improve footfalls and revenue of the food courts and coffee shops in 2H20. We expect the completion of the Group’s IF in 4Q20 tosee cost savings and an additional revenue source for them. Koufu has announced a dividend of 0.5 cents per share against 1H20 earnings per shareof 0.46 cents, signaling their confidence in the 2H20 recovery.

Maintain BUY with lower TP of S$0.77: We are maintaining our BUY rating with a lower target price of S$0.77. We tweaked our FY21e and FY22eearnings estimates down slightly by 3.2% and 2.9% respectively as the TOP of the Group’s IF gets delayed to 4Q20 from 3Q20 previously.



Timothy Ang

Credit Analyst


17 August 2020

SG Bonds Weekly

Week 34



Bond Market Update – Week 34

New SGD bond issue today

Issuer: Olam International

Rank: Senior unsecured

Price guidance: 4%

Tenor: 5.5 years

Denomination: S$250k

Comments:

Neutral on pricing, 53.4% ownership by Temasek and 17.4% byMitsubishi will drive demand. The lockdowns affected commodityprices (grains, cotton, coffee, almonds, pepper and dairy) andeat-out food products, but expected to rebound as they relax.High short-term debt of 60.5%, thus looking to extend tenors withthis issue

Phillip Bond Desk: 6212 1818 or [email protected]

Asian bond markets still buoyant

Demand for higher yields in Asia as US Treasury yields too low.UST auction last week was lackluster. New bond issuances arehigh as issuers take advantage of lower rates to refinance.



Paul Chew

Head Of Research


17 August 2020

APAC Realty Ltd1H20 Results

Tepid rebound



APAC Realty (NEUTRAL (Downgraded), TP: S$0.365, Last: S$0.375)

Positives

• New homes sales revenue the anchor for growth. Commissionrevenue from new launches rose 16% YoY in 1H20. It was the fastest-growing revenue segment for the company.

Negatives

• Interim dividend unchanged. Despite the improvement in earnings,the interim dividend was kept unchanged. Despite the rebound inproperty transactions in July and August, concerns remain whetherthe weak economy will hurt buying sentiment in 4Q20.

Outlook: 2H20 will bear the brunt of the lockdown especially new home sales and resale. There was no viewing of units from 7 April to 19 June. AnotherS$0.7mn from JSS grant can be expected in 2H20. A positive has been the company efforts to expand more aggressively the ERA model into SE Asia, suchas Malaysia, Indonesia and Vietnam. This will lay the foundation for future growth outside Singapore.

Downgrade to NEUTRAL from ACCUMULATE with a lower target price of S$0.365 (prev. S$0.55) : We are lowering our recommendation due to theweaker than expected results and reducing our earnings estimates for FY20e and FY21e.

SGD'000s 1H20 1H19 YoY (%) Comments

Revenue 172,823 163,061 6% Includes S$0.9mn JSS grant.

- resale and rental 112,900 111,500 1%

a) resale 81,300 73,000 11%

b) rental 31,600 38,500 -18% Immediate impact from the lockdown.

- new home sales 54,300 47,000 16%

Gross profit 21,671 19,978 8%

Operating expenses 12,603 13,726 -8% S$0.7mn decline in recruitment expense.

Operating Profit 9,068 6,252 45% Includes S$0.5mn unrealised FX gain.

PATMI 7,757 5,104 52%

Dividend Per Share (S$ cts) 0.75 0.75 0%



Paul Chew

Head Of Research


17 August 2020

Asian Pay Television Trust

2Q20 Results

Foreign exchange boost



Asian Pay Television Trust (BUY (Maintained), TP: S$0.15, Last: S$0.129)

Positives

• Free-cash flows (FCF) remains healthy - FCF of $13mn this quartermore than covers the dividend payment of $4.3mn.

• Broadband subscriber still grows - steady climb for the eleventhconsecutive quarter to 246,000. Revenue rose 7% YoY but down0.6% in constant currency terms following ARPU decline of 9% YoYcompensated by subscribers rising 9.3% YoY.

Negatives

• As expected, following the rights issue, APTT lowered dividends to 0.25 cent per quarter (previously 0. 30 cents). APTT will announce their FY21 dividend policy in 3Q20 results.

• One-off S$5.4mn settlement expense. There was a S$5.4mn one-time programming settlement fee paid by APTT to the content agents.

• Jump in broadcasting cost. There was an unexpected jump in broadcast and production cost. The reason was timing in accruing the cost but will stabilize on an annual basis.

Outlook: Total subscribers are rising around 2% per year but blended ARPU* is declining by 5%. We still expect total revenue to contract.

Maintain BUY: 3 reasons for our BUY recommendation: (i) Dividends are sustainable: Dividends far exceeded FCF during FY14 to FY18. APTT had to gear upto pay dividends. Following the massive cut in dividend in FY19, we now expected dividend of S$18mn per year to be well covered by FCF of

S$58mn. This makes the current yield of 7.8% attractive and maintainable, in our opinion. (ii) Upside from 5G:Mobile operators looking to launch 5Gservices will prefer to tap on APTT backhaul to connect to their base stations rather than using an incumbent and competitor network. (iii) Operationalmore stable: Subscriber growth in premium TV and broadband will help in stemming the decline in revenue. Broadband has higher margins as there is nocontent cost.



Asian Pay Television Trust (BUY (Maintained), TP: S$0.15, Last: S$0.129)

Total subscribers (cableTV, premium digital, broadband) starting to rise

againDividend sustainable and well covered by FCF



Paul Chew

Head Of Research


17 August 2020

ComfortDelGro Corp Limited1H20 Results

Bottomed out



ComfortDelgro (ACCUMULATE (Upgraded), TP: S$1.65, Last: S$1.39)

Positives

• Positive operating cash-flows: Despite the net loss, Comfort generatedS$214mn of operating cash-flow in 1H20. It reflects the high fixed costof the business, where annual depreciation is S$450mn per annum andanother S$1.7bn staff cost.

Negatives• Public transport profits also collapsed: We were surprised that bus

services profits similarly plunged despite schedules not as severelycurtailed as a rail. Bus schedule cut in Singapore was for cross borderservices into Johor and CDB routes. Bus does not bear ridership risk butthe decline in fuel prices affected profits.

• Taxi operations swung to losses. Taxi division incurred a loss of S$68mnin 1H20. We estimate the rental rebates provided by Comfort to itsSingapore taxi drivers in 1H20 was around S$80mn.

• Comfort will not pay an interim dividend due to the losses suffered(1H19: 4.5 cents). We are forecasting a full-year dividend of 2.8 cents.

Outlook: (i) Taxi – Taxi driver earnings are held up currently relief measures from both Comfort and the government. Around 1/3 of taxi driver takings isdue to government support measures. (ii) Public transport - Rail traffic is starting to climb back up sharply from the low in May (Figure 2). There are twotenders pending award in Singapore (Bulim by Tower Transit and Sembawang-Yishun by SMRT) that are currently not run by SBS. This will be anopportunity to further grow its current 61% market share in public bus services.

Upgrade to BUY with a higher target price of S$1.65 (prev. S$1.70): Our PATMI for FY20e is slashed by 24% but FY21e forecast is raised 12%. Comfort isour preferred proxy to the easing of lockdown measures compared to the air transport sector. Comfort has a 60% market share of bus and taxi services inSingapore plus a 36% share in the rail network. The high fixed cost of the business can also lead to steeper operating leverage as activity improves.

Results at a glance

(SGD mn) 1H20 1H19 YoY Comments

Revenue 1,526.7 1,927.0 -20.8%

- Publ ic transport 1,226.9 1,407.9 -12.9%

- Taxi 178.6 338.2 -47.2%

EBIT 6.7 222.4 -97.0%

- Publ ic transport 56.3 117.9 -52.2% Includes S$63mn government rel ief.

- Taxi (68.4) 57.9 n.m. Includes S$22mn impairment.

Staff cost 749 852.7 -12.2%

PATMI (5.9) 146.3 n.m. Excluding govt. rel ief a net loss of S$66mn.

Interim DPS (cents) - 4.5 n.m.




Figure 1: Singapore taxi fleet is down 13% this year Figure 2: Rail passengers for SBS have tripled from May20 low

Source: PSR, CEIC

19,478

18,542

16,086

16,000

17,000

18,000

19,000

20,000

Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20

Singapore Taxi FLeet

ComfortDelgro (ACCUMULATE (Upgraded), TP: S$1.65, Last: S$1.39)

195,515

628,983

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20

SBS Rail Passengers



Paul Chew

Head Of Research


17 August 2020

NetLink NBN Trust1Q21 Update

Minor disruption but compensated



NetLink NBN Trust (Accumulate (Maintained), TP: S$1.03, Last: S$0.965)

Positives

• Compensated for the loss in revenue. Netlink wascompensated for the lockdown. EBITDA grew 3.4% YoY dueto the contribution of S$2mn from JSS and another net$1mn property tax rebate.

Negatives

• All activity reliant revenue suffered. Lockdown delayedactivity in multiple business segments. Residentialsubscriber net adds of only 827 this quarter to 1.428mnwas the slowest on record. Non-residential connectionseven declined by around 680 to 47k.

Outlook: The availability of workers is now back to normal capacity. We expect any loss in revenue this quarter to recover in the following months.Only diversion revenue (~4% FY19 revenue) could face a long delay. It is dependent on major construction projects which will require more time torestart. Conversely, the pandemic has resulted in more activities to be conducted at homes. This will help to accelerate the adoption of fibre withhouseholds.

Maintain ACCUMULATE: We find NetLink dividend yields attractive and sustainable. Recurrent revenues from the monthly subscription ofresidential connections provide a stable base of cash-flows to maintain dividends. Furthermore, regulated returns from capital expenditure willprovide additional growth in future years.



Paul Chew

Head Of Research


17 August 2020

PropNex Ltd 2Q20 Results

Surge in cash and dividends up 20%



PropNex (BUY (Maintained), TP: S$0.70, Last: S$0.59)

Positives

• Minimal capex and working capital. Net cash jumped to a record S$99.7mn dueto the S$20.4mn generated in 1H20 and a delay in final and special dividend ofS$8.3mn (or 2.25 cents). Despite the 45% revenue jump in 1H20 to S$241mn,additional working capital required to support the growth was only S$300k andcapital expenditure of S$110k.

• Revenue from project marketing jumped 148% YoY to S$49.2mn. Gross marginsimprove as new launches provide a higher share of commission for PROP.

• Interim dividend raised by 20%. In-line with the jump in profits, PROP raiseddividends by 20% to 1.5 cents. This interim payout of S$5.6mn is well supportedby the 1H20 FCF of S$20.4mn.

Outlook: a) New launches: Mass market products in OCR and RCR will gain the most traction with the support of HDB upgraders. CCR is faced with largerenbloc supply and foreign buying slowing down. Transaction volumes have started to recover in July despite the absence of new launches. Unsold units(excluding EC) have been declining the past five quarters from 36.8k units in 1Q19 to currently 27.9k. b) Private resale: Unlike new launches wheredevelopers can lower prices, in the resale market, sellers are holding on to their asking prices leaving a large bid-ask gap. c)HDB resale: Transactions willbe relatively stable between 21,000 to 22,000 units (2019: 23,714 units). The current HDB grants are an attractive incentive for buyers. Furthermore, thedelay in construction activity may nudge buyers into resale rather than new BTOs.

Maintain BUY with higher TP of S$0.70 (prev. S$0.60): The current 7% dividend yield amounts to S$14.8mn payout. This compares to their FCF thataveraged S$23mn over the past three years. There is also the added buffer of S$99.7mn net cash on the balance sheet.

SGD mn 2Q20 2Q19 YoY Comments

Revenue 105.9 92.1 15% Growth driven by project marketing sales. - Agency services 54.8 70.5 -22%

a) Private resale 21.3 28.5 -25% Sellers have not lowered prices.b) HDB resale 19.1 18.3 4%

c) Rental 14.4 23.3 -38% Viewing of units restricted. - Project Marketing 49.2 19.8 148% Market share gains and higher industry volume

Staff costs (3.5) (2.6) 34% Gross profit 12.6 9.1 39%

Operating profit 9.3 4.5 105% Grant of S$1mn offset by S$0.5mn marketing fee.PATMI 7.3 3.7 96%

Interim dividend (cts) 1.50 1.25 20% Negative

• Higher staff cost. Staff cost rose 34% due to higher provision of bonus andsalary base. The increase in staff cost inline with gross profits means a loss inoperating leverage, unlike the 1Q20. Unclear the split between the variable andfixed components of staff cost.



Paul Chew

Head Of Research


17 August 2020

StarHub Limited2Q2020 Results

Mobile weakness will persist



StarHub (Neutral (Maintained), TP: S$1.24, Last: S$1.21)

Positives

• PayTV stable QoQ basis. PayTV revenue was unchanged on a QoQbasis at S$46.9mn. The contraction in subscribers is now at 2k to 3kper quarter compared to the average 20k per quarter in FY19.StarHub even managed to eke out a modest $1 QoQ rise in ARPU toS$39.

Negatives

• Mobile revenue was weak on lower ARPU and subscribers. 2Q20mobile revenue fell 25% YoY to $143mn. Revenue was hurt by 25%YoY decline in postpaid ARPU to a record low S$30. The restriction oninternational travel led to a fall in roaming revenue.

• Interim dividend cut to 2.5 cents. This is a 45% decline from 1H19 4.5cents. Recall that in FY19, StarHub was paying quarterly dividends of2.25 cents. Management guidance is dividends at least 5 cents forFY20e.

Outlook: The outlook will be grim for at least the next two quarters. The loss in roaming and tourism-related revenue cannot be replaced until ourinternational borders are reopened. We are lowering our FY20e EBITDA forecast by only 3% after incorporating around S$30mn of government grants.Service revenue guided to drop 10% to 20% in FY20e.

Maintain NEUTRAL with lower TP of S$1.24: Our valuation is based on a 6X EV/EBITDA FY20e. We have excluded other income in our EBITDA valuationas we deem it to be one-off grants and compensation for the current environment.



Paul Chew

Head Of Research


17 August 2020

UG Healthcare Corp2Q20 Results

Earnings up 9x, more growth ahead



UG Healthcare (BUY (Maintained), TP: S$4.15, Last: S$2.98)

Positives

• Spike in revenue - Revenue jumped 81% YoY in 2H20. Bulk of the growthcame from higher selling and more distribution volume. Productioncapacity was flat on a YoY basis at 2.9bn gloves.

• Record gross margins - at a record 36% in 2H20. The 4Q20 margins stoodat 48% as ASPs only significantly increase from April onwards.

• Positive operating leverage - Past three years, UG net profit was draggeddown by administrative expenses as it was expanding its distributionnetwork. Admin expenses, which are relatively fixed in nature, wasaround 13% of sales. 2H20 admin expenses dropped to 8% of sales andonly rose 5% YoY.

Negatives• Foreign exchange loss of S$5mn. Under operating expenses, UG was hit by a

foreign exchange loss of S$5mn. This is due to weak Brazilian Real faced byits subsidiary.

Outlook: We believe the bulk of 2H20 S$12.5mn PATMI came from just 4Q20, judging by the huge 48% GP profit. We think the incremental appr.30% pointuplift gross margins in 4Q20 (vs 3Q20) lead to an additional S$15mn of gross profits. PATMI in 4Q20 could be at least S$10mn. If we then annualise theS$10mn, FY21e PATMI would be S$40mn. But this excludes prices that have been rising for the industry every month even in July and August.

Maintain BUY: Our valuation is based on a 15x PE FY21e, a 40% discount to larger peers. We raised our FY21e PATMI by 55%. UG is raising productioncapacity by 59% to 4.6bn gloves by FY22e in two stages - FY21e add 500mn pieces and FY22e add 1.2bn pieces. Our gross margins assumptions haveincreased modestly by 80 bps to 43%. Revenue estimates increased by 35% on account of the higher than expected increase in capacity and selling prices.



Paul Chew

Head Of Research


17 August 2020

Venture Corporation Limited2Q20 Results

Stronger recovery in 2H20



Venture Corp (NEUTRAL (Downgraded), TP: S$18.40, Last: S$18.84)

Positives

• Increase in dividends With the increase in net cash to S$833mn as atJun20 (Jun19: S$760mn), the interim dividend for 1H20 increased to0.25 cents (1H19: 20 cents).

• Gross margins surged. 1H20 gross margins stood at 26.6%m almost2% point increase YoY. This was a surprise despite the lower revenuesand economies of scale. Reason for the higher margins was due tothe difference in product mix.

Outlook: Manufacturing activities were restricted in April either directly impacting the factory or indirectly via the supply chain due to the lockdown.2H20 is expected to be stronger than 1H20 which essentially lost one month of revenue. We expect some spillover of uncompleted orders to occur into2H20. Venture mentioned a number of new products to be released in early 2021. Our forecast assumes a 12% YoY improvement in PATMI in 2H20.

Downgrade to NEUTRAL from ACCUMULATE with higher TP of S$18.40 (prev. S$16.60): We nudged up our valuation metrics to 16x PE (prev. 15x).Higher valuation is warranted as recovery is underway and earnings temporary depressed by the pandemic. VMS is paying an attractive 4.4% yield, wellsupported by an S$833mn net cash balance sheet. New life science projects and shift in the supply chain from China to SE Asia will be supportive ofrevenue growth.


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