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Solid Performance by DBS

*Vard Holdings
– Has been selected by Prysmian Group for the design and construction of one cable laying vessel. The contract value, including owner supplied special equipment, amounts to €170m (NOK1.6b).
– The vessel is scheduled for delivery from Vard Brattvaag in Norway, in 4Q 2020. Several of the Group’s specialized subsidiaries are also involved in the project through deliveries of equipment and solutions.
– Trades at 0.86x P/B

*BreadTalk
– Set up a 50.5% owned JV with Din Tai Fung Restaurant (15%), and several other partners to operate the Din Tai Fung brand of restaurants in UK.
– First outlet is scheduled to open by end 2018 in Covent Garden, London, with a second restaurant at Centre Point in the pipeline.

*SIA Engineering
– Entered into a non-binding LOI with Cebu Air, Inc to further collaborate to expand maintenance, repair and overhaul (MRO) services in the Philippines.
– Both companies will explore the feasibility of potential growth opportunities for its two JV companies in the Philippines through the expansion of line maintenance operations, growth of hangar facilities and expansion of training academy services.
– It is expected that these growth opportunities will have an estimated investment value of US$15m to US$20m and is likely to generate employment in the Philippines.
– Trades at about 21x P/E and 2.5x P/B

NEUTRAL NEWS
* Keppel Corp
– Signed a non-binding MOU with Filinvest Development Corporation to develop solutions for sustainable urbanisation in the country.
– Will explore cooperation opportunities in developing and enhancing urban solutions for Filinvest’s development portfolio.
– The partnership seeks to leverage the strengths of Keppel Urban Solutions, an end-to-end integrated master developer of urban developments that brings together the Keppel’s diverse capabilities in energy, property, infrastructure, data centres and connectivity to create highly liveable, smart and sustainable communities.
– Trades at 13x P/E and 1.3x P/B

*Frasers Property
– Entered into a conditional share purchase agreement with Tran Thai Lands Company Limited to acquire 24m shares, representing 75% of the issued share capital of Phu An Khang Real Estate Joint Stock Company (PAK).
– It is intended that PAK will undertake the development of a residential-cum-commercial project on a mixed-use development plot in District 2, Ho Chi Minh City, Vietnam to be held by PAK.
– The aggregate consideration of VND 408.6b ($23.89m) implies a purchase valuation of 0.75x P/B, based on PAK’s unaudited proforma NAV of VND544.8b (S$31.86m) upon completion of the proposed acquisition.
– The Consideration will be fully satisfied in cash on the occurrence of stipulated events and will be funded by the Group’s internal cash resources and/or external bank borrowings
– Trades at 0.8x P/B.

*Ascendas Hospitality Trust
– Acquiring KY-Heritage Hotel Dondaemun, a freehold 215-room four-star hotel in Seoul, for 73b won ($90.1m).
– The consideration is at a 3.2% discount to the latest valuation of the hotel and translates to a pro-forma NPI yield of 4.1%.
– The acquisition is expected to be fully funded by debt, and complete by Jun ’18.
– Pro-forma 9MFY18 DPS is expected to increase 0.01¢ to 4.15¢.
– Offers an annualised 9MFY18 yield of 6.9%.

*Koh Brothers
– Entered into a JV with FEC Properties to jointly acquire and redevelop two freehold residential sites through the special purpose entity, FEC Skypark (FECS)
– Its 20% stake in the Total Land Acquisition Cost is $81,464,360, which the group will fund its investment in FECS by internal resources and external borrowings.
– FECS intends to redevelop the Estoril Site and the Hollandia Site into a single residential project with a combined GFA of 22,500 sqm.
– The latest JV will allow the Group to expand its development portfolio in Singapore.
– Trades at 0.5x P/B

NEGATIVE NEWS
*Hai Leck
– Warned of a net loss for 3QFY18 but is expected to remain profitable for 9MFY18.
– Expected loss is due to lower revenue arising from market conditions.

Company Update: DBS Group (DBS SP)
Commentary
1Q18 earnings beat consensus estimates by 8.6% underpinned by broad-based growth in all business segments and as ROE of 13% reached highest in a decade.

Results update
1Q18 Net profit: +16% YoY to record S$1.5bn led by the following:
(1) Net interest income: +16% YoY to S$2.1bn
– Loans expanded 13% from growth across trade, corporate and consumer loans (incl. consolidation of retail and wealth management business of ANZ)
– Net interest margin improved 9 b.p. to 1.83% in line with higher interest rates

(2) Net fee income: +12% YoY to S$744mn
– Wealth management fees by an underlying 31% to a new high from higher investment product and bancassurance sales
– Card fees rose 27% from higher credit and debit card activities (incl. ANZ business in Taiwan and Indonesia).
– Brokerage commissions rose 29% from increased equity market activities

(3) Other net-interest income: +25% YoY to S$488mn
– Net gain of S$86mn from HK property disposal
– Net trading income up 36% YoY from higher trading gains

May 1, 2018

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