CHINA AVIATION OIL | ADD (INITIATION)
TARGET PRICE: S$2.00
JAN 17 CLOSE: S$1.54
CIMB Research, Jan 16
China Aviation Oil (CAO) is the sole jet fuel importer to China, supplying 30-40 per cent of China's overall jet fuel supply. Imported (or bonded) jet fuel can only be utilised by outbound flights from China.
In our view, CAO is a proxy for China's burgeoning international aviation, which is set to grow with the country's increased urbanisation and "outward-looking" investment policies.
The stock currently trades at 9.9 times 2018 forecast earnings, above the historical 8-year forward price to earnings (PE) average of 8.8 times.
In our view, CAO should trade at a narrower discount to its peers, which currently trade at 16.6 times 2018 PE, given its higher returns and the likely structural rerating post-stellar net profit showing in 9-month 2016 (+40 per cent year on year).
CNMC GOLDMINE HOLDINGS | BUY
TARGET PRICE: S$0.65
JAN 17 CLOSE: S$0.43
DBS Group Research, Jan 16
CNMC announced that it expects to report a net loss for Q4 2016.
The unrealised forex loss as a result of the depreciation of the Malaysian ringgit against the US dollar is a temporary setback.
The lower ore grades mined in Q4 is unlikely to persist.
While there are no guarantees in mining, we note that higher-grade ores generally lie deeper underground and with CNMC still mining relatively close to the surface, we think that with time, the group would potentially gain access to the higher-grade ores.
DBS GROUP HOLDINGS | NEUTRAL (DOWNGRADE)
TARGET PRICE: S$16.85
JAN 17 CLOSE: S$18.35
Phillip Securities Research, Jan 16
We opine that owing to the high loan to deposit ratio (LDR), DBS has little headroom to stretch the ratio higher to boost net interest income growth. The high LDR would also leave DBS more susceptible to increasing competition for deposits amid rising interest rates
We expect DBS' strong non-interest income performance to be offset by a weak net interest income performance.
Our new target price is based on unchanged 0.95 time 2017 forecast book value.
LIAN BENG GROUP | CEASING COVERAGE
JAN 17 CLOSE: S$0.465
OCBC Investment Research, Jan 17
Due to a redistribution of internal resources, we are ceasing coverage on Lian Beng. As of its last closing price on Jan 16, Lian Beng is trading at 37 per cent of its net tangible assets.
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