UNITED OVERSEAS BANK
| BUY (UPGRADED)
JUNE 20 CLOSE: $26.22
FAIR VALUE: $28.90
OCBC Investment Research, June 20
As at Wednesday's closing, United Overseas Bank's shares rallied for nine straight days or up a strong 9 per cent.
Weakness in the banking sector both last month and this month was largely due to concerns over trade war, weakening global and regional economic outlook and more importantly, the rising likelihood of further cuts in interest rates.
In our report dated May 3, we advocated locking in some profits. Since then, the stock fell some 15.6 per cent to touch as low as $23.50 recently.
In the last 10 years, despite a prolonged period of low rates, UOB was able to enjoy a sustainable net profit compounded annual growth rate of 7.7 per cent.
Dividend distribution grew 7.2 per cent for the same period.
With a dividend payout of $1.20 and based on the current share price of $26.14, the yield is 4.6 per cent.
Our fair value for the stock remains unchanged at $28.90.
| NEUTRAL (MAINTAINED)
JUNE 20 CLOSE: $0.084
FAIR VALUE: $0.08
RHB Research Institute, June 20
GSS Energy (GSS) has entered into a sale and purchase agreement with Oakhurts Investment and PT Kharisma Agri Indo NUSA regarding a 80 per cent stake in GSS Energy Trembul for US$1 (S$1.36).
While we think farming out the oil and gas arm will be positive for GSS' shareholders, it also indicates the business has not performed as well as anticipated.
We would like to see a concrete upturn in its engineering business, as well as the monetisation of its oil and gas segment before revising our estimates.
The oil and gas segment has suffered many setbacks and delays throughout the year.
GSS is at an advanced stage of getting regulatory approvals to monetise the two proven wells, but it may see further delays due to the uncertain timeline of getting the green light.
As a result, the business will likely continue to drag on group earnings, until approvals are in hand and monetisation has been done.
Key downside risks are a decrease in oil prices, the trade war worsening and a slowdown in customer orders.
The opposite situation would present upside risks.
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.