UOB Kay Hian - Singapore Banks 8 Nov 2010

8/8/2019 UOB Kay Hian - Singapore Banks 8 Nov 2010

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Singapore DailyMonday, November 08, 2010

Refer to last page for important disclosures. Page 3 of 16

United Overseas Bank (NOT RATED/S$18.38) Management sees opportunities to grow regionally due to low credit

penetration and growing affluence. It will support its customers as theyexpand via intra-regional trade.

UOB expects double-digit growth in fee income in 2011. Investment-related fee income is expected to grow due to revival in sale of wealthmanagement products and partnership with Prudential. Managementexpects pick-up in fund management with growth in funds undermanagement in 2H10.

Loan Growth (yoy)

Source: Respective banks

Deposits Growth (yoy)


Sector Catalysts Growth moderation. We expect moderation in industry loan growth from

12% in 2010 to 8% in 2011 due to slower economic growth.

Attractive valuation. Valuations for banks are undemanding with DBStrading at P/B of 1.28x and OCBC at 1.64x. Singapore banks are extremelaggards in current liquidity-induced rally.

Assumption Changes We have adjusted our earnings forecast for DBS and OCBC to reflect

good results for 3Q10.

Risks Economic recovery in US, Europe and Japan remains fragile and requires

further stimulus. Any slowdown in economic growth could result in slowergrowth in loans and fee income for Singapore banks.

Net Interest Margin (NIM)

1.6

1.8

2.0

2.2

2.4

2.6

1Q06 1Q07 1Q08 1Q09 1Q10

(%)

OCBC

UOB

DBS


Loans/Deposits Ratio

70.075.0

80.0

85.0

90.0

95.0

1Q06 1Q07 1Q08 1Q09 1Q10

(%)

OCBC

UOB

DBS


NPL Ratio

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1Q06 1Q07 1Q08 1Q09 1Q10

(%)

OCBC

UOBDBS


Loan Loss Coverage

60.0

80.0

100.0

120.0

140.0

1Q06 1Q07 1Q08 1Q09 1Q10

(%)

OCBC

UOB

DBS


Tier-1 Capital Adequacy Ratio (CAR)

8.0

9.0

10.0

11.0

12.0

13.014.0

15.0

16.0

1Q06 1Q07 1Q08 1Q09 1Q10

(%)

OCBC

UOBDBS


-5.0

0. 05. 0

10.0

15.0

20.0

25.0

30.0

1Q07 1Q08 1Q09 1Q10

(x)

OCBC

UOBDBS

-5.0

0. 0

5. 0

10.0

15.0

20.0

25.0

1Q07 1Q08 1Q09 1Q10

(%)

OCBC

UOB

DBS


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Property Singapore

Property Nuggets: Industrial - Deals and rentals surging ahead

Whats New Industrial deals surging. The total value of the factory and warehouse

units transacted in 9M10 was S$3.42b and S$83.3m respectively,according to Cushman and Wakefield. These exceed the full-yeartransactions of 2009 by 87% and 198% respectively. The transactionvalue of factory units ytd is just S$290m shy of the record S$3.71b infactory units transacted in 2008. The buying interest in industrialproperties is underpinned by a recovery in the manufacturing sector andrenewed interest by investors seeking higher net yields in the industrialspace of 6% vs 3% for residential properties.

Rentals rising in response. Singapore has become the seventh mostexpensive market in the world to rent a prime warehouse, up two places

from ninth position six months ago. Average prime warehouse rentalstracked by Colliers International were up 3.3% to S$1.56psf pm in 1H10from 2H09, while ground-floor factory rents rose 2.1% to reach S$1.91psfpm over the same period.

Action The rising deal flow and rentals reinforces our preference for industrial

property stocks. Our favourite remains A-REIT for its broad exposure tothe industrial segment.

Sector Catalysts Pick-up in industrial rents and capital values, new foreign direct

investments, and yield-accretive acquisitions in the sector.

Assumption Changes None. We expect factory, warehouse and business park rentals to rise 5-

15% in 2010 and 5-10% in 2011.

Risks A weaker-than-expected pick-up in demand, depressing rentals and

capital values in industrial segment.

Peer Comparison

MARKET WEIGHT(Maintained)

Sector Update

Top Stock Picks - IndustrialCompany Rec Target Share

Price Price(S$) (S$)

A-REIT BUY 2.50 2.08

Source: UOB Kay Hian

Key IndicatorsIndicator Date Figure

GDP Growth yoy Sep 10 10.3% Unemployme t Rate Sep 10 2.1% CPI Inflation Sep 10 3.7% Prime Rate Sep 10 5.38% 3-month SIBOR Sep 10 0.44%

Source: Bloomberg, MAS, MTI, UOB Kay Hian

Sector Discount To NAV

-100

-50

0

50

100

150

200

250

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

(%)

Property Developer

REITs

LT Mean

Pro perty Developer = 21%

REITs = 11%

Source: Bloomberg, UOB Kay Hian

Upcoming EventsDate Events

15 Nov Retail sale Index16 Nov Export/ Trade Data

Source: Bloomberg, UOB Kay Hian

Analysts

Vikrant Pandey

+65 6590 6623

[email protected]

Vijay Natarajan

+65 6590 6626

[email protected]

Terence Khi

+65 6590 6614

[email protected]

Price Target Upside/ Market Curr Fwd Curr Fwd Book Price/ RNAV NetCompany Ticker Rec 4 Nov 10 Price (Downside) Cap. PE PE Yield Yield NAV ps Book ps ROE Gearing*

(S$) (S$) to TP (%) (US$m) (x) (x) (%) (%) (S$) (x) (S$) (%) (%)DEVELOPERsAllgreen AG SP BUY 1.20 1.50 25.0 1,487.1 11.3 10.0 2.5 2.5 1.49 0.80 1.75 7.1 35.8CapitaLand CAPL SP SELL 3.92 3.70 (5.6) 13,019.4 23.8 22.0 1.8 1.8 3.17 1.24 4.65 8.7 27.2City Devt CIT SP BUY 13.22 14.25 7.8 9,367.2 18.5 17.6 0.8 0.8 6.78 1.95 14.23 10.4 45.6GuocoLand GUOL SP SELL 2.24 1.95 (12.9) 2,065.4 8.4 5.9 3.6 4.0 2.20 1.02 2.44 6.8 106.1Ho Bee HOBEE SP HOLD 1.70 2.05 20.6 976.8 5.6 6.2 1.2 1.2 1.81 0.94 2.56 32.4 28.1Keppel Land KPLD SP BUY 4.79 5.20 8.6 5,411.9 22.9 17.9 1.7 1.7 2.42 1.98 5.06 9.6 39.1SC Global SCGD SP HOLD 1.63 1.85 13.5 510.0 4.8 3.9 1.2 1.2 1.28 1.27 2.30 13.7 281.7Wheelock WP SP BUY 1.97 2.35 19.3 1,836.8 9.3 8.9 3.0 3.0 2.12 0.93 2.60 11.6 (24.4)Wing Tai WINGT SP BUY 1.76 2.25 27.8 1,088.8 6.6 5.9 2.8 2.8 2.14 0.82 2.72 9.8 45.1REITsAscendasreit AREIT SP BUY 2.08 2.50 20.2 3,036.0 15.1 15.2 6.3 6.7 1.57 1.32 1.81 8.0 33.7AscottREIT ART SP BUY 1.25 1.40 12.0 1,078.4 19.4 16.5 6.4 6.7 1.28 0.98 1.00 3.6 7.7CapitaComm CCT SP BUY 1.48 1.70 14.9 3,256.1 21.6 21.2 5.0 5.1 1.42 1.04 1.00 4.7 19.0

CapitaMall CT SP SELL 1.99 1.85 (7.0) 4,937.8 24.5 24.4 4.7 4.8 1.52 1.31 1.62 5.2 26.1CDL Htrust CDREIT SP BUY 2.19 2.45 11.9 1,634.4 19.5 16.5 4.8 5.7 1.46 1.50 1.44 5.5 18.8FrasersCT FCT SP HOLD 1.48 1.60 8.1 885.2 18.7 20.5 5.5 5.8 1.29 1.14 1.16 6.5 29.0K-REIT KREIT SP BUY 1.38 1.60 15.9 1,445.0 34.3 28.9 4.6 5.2 1.47 0.94 0.98 1.5 11.8Starhill Gbl SGREIT SP HOLD 0.615 0.65 5.7 931.2 17.2 18.4 6.6 6.5 0.81 0.75 0.51 4.3 26.8Suntec REIT SUN SP HOLD 1.54 1.60 3.9 2,216.9 24.5 23.7 6.5 6.1 1.83 0.84 1.17 3.5 32.4

* Property Developers: Net Debt to Shareholder Equity * REITs: Net Debt to Total Assets Source: Bloomberg, UOB Kay Hian


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Key Sector And Corporate Updates

Residential: En-bloc sales transactions reaching S$1b mark. According toJones Lang Lasalle, collective sales transactions have hit S$975.6m in valueso far this year. Residential segment accounted for the bulk S$883.6m (90%)of the total. In contrast, there was only one successful collective sale forS$100.8m in 2009. Meng Garden is the largest collective sale so far this yearfetching S$4,137m or S$1,380psf ppr.

Residential: Government monitoring the property market carefully. PrimeMinister Lee Hsien Loong remarked that Singapores red-hot property marketwas a matter of concern and needed careful monitoring to avoid the creationof a bubble. He added that the last set of cooling measures introduced inAugust had dampened sentiment, but the government will have to watch andsee.

Office: Lloyds moving to Asia Square. According to The Straits Times,British insurance giant Lloyds is expanding its Singapore presence bycommitting to lease 65,000sf of Grade-A office space at Asia Square Tower 1.Lloyd's Asia, which now operates out of One George Street, joins Swiss bankJulius Baer, Bank Sarasin and New York law firm White & Case at AsiaSquare.

Comment: The continued rental interest for space in Asia Square fromfinancial services, legal and other services companies highlights the strengthand healthy demand for new office space.

Industrial: REC opens S$2.5b integrated solar plant. According to mediareports, REC has opened a S$2.5b solar facility in Tuas, making it one of theworlds largest integrated solar plants. In related news, Norways Metallkrafthas opened a S$100m facility to recycle RECs spent slurry, a liquid used tocut silicon wafers. The cleantech sector, identified as a major pillar of growthfor Singapore, is expected to contribute S$3.4b to GDP by 2015 whileproviding 18,000 jobs.

Comment: The opening of a queen bee global player in the green technology

sector will increase Singapores attractiveness to supporting industries in thesemiconductor, electronics and precision engineering sectors and lendsupport to the recovery in demand for industrial space.

Share Price Performance

Price Indices

020406080100120140160180200

1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

Industrial

Office

Residential

Retail

020406080100120140160180200

1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

Industrial

Office

Residential

Retail

Source: URA, UOB Kay Hian

Rental Indices

0

50

100

150

200

250

1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

Industrial

Office

Residential

Retail

0

50

100

150

200

250

1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

Industrial

Office

Residential

Retail

Source: URA, UOB Kay Hian

d Price --------- Price Performance ---------- ---- Yield ---- Price/ NetTicker Rec 4 Nov 10 5D 1M 3M YTD 1Y 50-Day 100-Day Curr Fwd Book Gearing*

(S$) (%) (%) (%) (%) (%) MA MA (%) (%) (x) (%)

FSSTI FSSTI Index n.a. 3240.31 3.5 2.6 7.9 11.8 22.3 3101.92 3010.81 2.9 3.1 1.83 n.a.Real Estate Index FSTRE Index n.a. 740.77 2.0 0.9 7.4 9.4 17.9 715.38 689.89 3.5 3.6 1.12 n.a.Property Developers Index FSTREH Index n.a. 773.96 2.8 1.7 9.1 8.3 15.5 739.04 710.88 1.9 1.9 1.16 n.a.Property REITs Index FSTREI Index n.a. 689.98 0.7 (0.5) 4.6 11.7 22.9 679.19 657.85 6.3 6.5 1.05 n.a.PROPERTY DEVELOPERSAllgreen AG SP BUY 1.20 2.6 0.0 1.7 (2.4) 2.6 1.15 1.13 2.5 2.5 0.80 35.8CapitaLand CAPL SP SELL 3.92 0.5 (5.1) (3.9) (5.4) (5.0) 4.03 3.93 1.8 1.8 1.24 27.2City Devt CIT SP BUY 13.22 2.0 6.3 5.9 14.4 33.5 12.35 11.92 0.8 0.8 1.95 45.6GuocoLand GUOL SP SELL 2.24 2.8 1.1 8.4 5.5 26.1 2.18 2.11 3.6 3.6 1.02 106.1Ho Bee HOBEE SP HOLD 1.70 1.2 2.4 (2.3) (1.7) 22.3 1.64 1.61 1.2 1.2 0.94 28.1Keppel Land KPLD SP BUY 4.79 8.9 19.2 18.0 36.9 71.1 4.16 4.06 1.7 1.7 1.98 39.1

SC Global SCGD SP HOLD 1.63 3.2 2.5 (5.2) (4.7) 15.6 1.59 1.60 1.2 1.2 1.27 281.7Wheelock WP SP BUY 1.97 2.1 3.1 4.2 (1.5) 11.3 1.89 1.88 3.0 3.0 0.93 (24.4)Wing Tai WINGT SP BUY 1.76 (1.1) 1.1 (3.3) (3.8) 6.0 1.73 1.70 2.8 2.8 0.82 45.1HOSPITALITY REITSAscottREIT ART SP BUY 1.25 (2.3) 5.9 7.5 6.6 20.7 1.17 1.16 6.4 6.7 0.98 7.7CDL Htrust CDREIT SP BUY 2.19 1.9 2.3 10.1 28.7 44.4 2.10 1.99 4.8 5.7 1.50 18.8INDUSTRIAL REITSAIMSAMPIReit AAREIT SP NR 0.225 0.0 2.3 7.3 14.8 (6.7) 0.22 0.21 32.9 35.1 0.73 26.7Ascendasreit AREIT SP BUY 2.08 3.0 (2.8) (4.1) (6.3) 10.1 2.13 2.06 6.3 6.7 1.32 33.7AscendasIndT AIT SP NR 1.01 (4.7) (1.9) 5.8 3.1 12.8 1.01 0.99 6.8 7.7 1.22 10.3CACHE CACHE SP NR 0.975 (1.5) 0.5 (2.5) 10.8 10.8 0.98 0.98 6.8 8.5 1.06 20.3Cambridge CREIT SP NR 0.545 0.0 0.1 9.5 22.9 22.9 0.54 0.52 9.0 9.0 0.95 28.8MapletreeInd MINT SP NR 1.1 2.8 18.3 18.3 18.3 18.3 n.a. n.a. 6.3 6.8 1.28 35.5MapletreeLog MLT SP NR 0.905 1.1 2.8 4.0 15.9 22.6 0.87 0.86 6.7 7.0 1.05 36.2OFFICE REITSCapitaComm CCT SP BUY 1.48 0.0 2.1 8.8 26.5 34.5 1.43 1.37 5.0 5.1 1.04 19.0FrasersComm FCOT SP NR 0.165 0.0 10.0 10.0 17.9 13.8 0.15 0.15 6.1 6.7 0.60 33.6Indiabulls IPIT SP NR 0.29 0.0 13.7 23.4 11.5 23.4 0.27 0.26 n.a. n.a. 0.56 12.4K-REIT KREIT SP BUY 1.38 3.0 3.0 16.0 25.5 36.6 1.30 1.23 4.6 5.2 0.94 11.8SuntecReit SUN SP HOLD 1.54 (0.6) 0.7 9.2 14.1 31.0 1.49 1.43 6.5 6.1 0.84 32.4RETAIL REITS

CapitaMall Trust CT SP SELL 1.99 1.5 (7.0) 0.5 10.6 20.6 2.02 1.98 4.7 4.8 1.31 26.1CapitaRChina CRCT SP NR 1.29 3.2 3.2 4.0 0.8 21.7 1.25 1.24 6.4 6.4 1.20 32.8Fortune Reit (HK$) FRT SP NR 4.08 2.3 5.2 11.2 30.4 46.8 3.83 3.69 5.9 6.2 3.99 3.1FrasersCT FCT SP HOLD 1.48 (1.3) (1.3) 5.7 6.3 22.0 1.49 1.43 5.5 5.8 1.14 29.0LippoMapleT LMRT SP NR 0.54 (1.8) 6.9 11.3 6.9 9.1 0.51 0.49 8.1 8.3 0.65 1.0Starhill Gbl SGREIT SP HOLD 0.615 (0.8) 3.4 7.9 17.1 7.9 0.59 0.58 6.6 6.5 0.75 26.8

*Property Developers: Net Debt to Shareholder Equity *REITs: Net Debt to Total Assets Source: Bloomberg, UOB Kay Hian


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DBS Group Holdings Singapore BUY(Maintained)

Company Results

Share Price S$14.22

Target Price S$19.10

Upside +34.3%

Company Description

DBS is a pan-Asian banking group with asignificant presence in Singapore and HongKong. It also has operations in India,Indonesia, Taiwan and China.

Stock Data

GICS sector FinancialsBloomberg ticker: DBS SP

Shares issued (m): 2,308.4

Market cap (S$m): 32,826.0

Market cap (US$m) 25,535.6

3-mth avg daily tover (US$m): 61.1

Price Performance (%)

52-week high/low S$15.58/S$13.26

1mth 3mth 6mth 1yr YTD

(1.4) (2.7) (2.9) 9.6 (7.7)

Major Shareholders %

Temasek Holdings (Pte) Ltd 27.9

FY10 NAV/Share (S$) 11.11

Price Chart

80

90

100

110

120

11.00

12.00

13.00

14.00

15.00

16.00

(%)(lcy) DBS GROUP HOLDINGS LTD Dbs Group Holdings Ltd/FSSTI Index

0

5

10

15

20

Nov 09 Jan 10 Mar 10 May 10 Jul 10 Sep 10 Nov 10

Volume (m)

Source: Bloomberg

Analyst

Jonathan Koh, CFA+65 6590 [email protected]

3Q10: Record profit, stringent cost control

3Q10 ResultsYear to 31 Dec (S$m) 3Q10 yoy % qoq % RemarksNet Interest Income 1,079 (5.4) 0.3 Affected by lower NIM.Non(Interest Income) 730 67.0 (2.4) Boosted by gains from

investments.Total Income 1,809 14.7 (0.3)Operating Expense (726) 14.3 1.3 Relatively unchanged on qoq

basis.Pre(Provision Profit) 1,083 15.0 (1.4)Provisions (195) (26.4) (4.4)Net Profit 722 28.2 0.6 Solid growth on yoy basis.EPS () 31.3 27.6 n.a.BVPS (S$) 11.18 3.9 2.8Key Ratios (%): 3Q10 2Q10 3Q09Net Interest Margin 1.80 1.84 2.03 Lower yields for housing loans.Loan/Deposit Ratio 79.8 79.4 71.2Tier(1 CAR) 13.1 13.1 12.5NPL Ratio 2.1 2.3 2.6 Lower NPLs in HK and Greater

China.

Source: DBS, UOB Kay Hian

Results DBS Group Holdings (DBS) reported a net profit of S$722m for 3Q10,

ahead of UOBKHs forecast of S$647m and consensus estimate ofS$628m.

Hampered by weak Hong Kong dollar. Loan growth moderated to0.9% qoq after stupendous expansion of 8.9% qoq in 2Q10, driven bycorporate loans across the region and housing loans in Singapore.Loans expanded 3.3% qoq in Singapore but contracted 1.2% qoq inHong Kong due to the strengthening Singapore dollar. Excludingcurrency translation effect, loans would have grown 4% qoq. Netinterest margin contracted slightly by 4bp to 1.80% due to lower yieldsfrom housing loans.

Boost from gains on investments. Fees & commissions declined5.0% qoq to S$340m. The increase in fee income from investmentbanking was offset by lower contribution from loans-related activities.DBS maintained net trading income at a high level of S$235m despite amore conservative valuation reserve methodology. The change inaccounting policy reduced trading income by an estimated S$70m in3Q10. It also recorded gains of S$123m from financial instruments as ittook profits on investments.

Stringent cost control. DBS maintained cost/income ratio at 40.1%. Itkept a lid on expenses despite increasing headcount by 591 in 3Q10and rolling out new IT platforms.

Key Financials

Year to 31 Dec (S$m) 2008 2009 2010F 2011F 2012FNet interest income 4,301.0 4,455.0 4,286.3 4,497.5 5,202.4Non-interest income 1,752.0 2,148.0 2,747.9 2,495.1 2,628.9Net profit (rep./act.) 1,929.0 2,041.0 1,573.0 2,840.7 3,349.4Net profit (adj.) 2,155.0 1,944.0 2,471.0 2,840.7 3,349.4EPS (S$ cent) 118.6 80.5 105.1 118.9 141.1P/E (x) 12.0 17.7 13.5 12.0 10.1P/BV (x) 1.3 1.3 1.3 1.2 1.1Dividend yield (%) 4.1 3.9 3.9 3.9 3.9

Net int margin (%) 2.0 2.0 1.8 1.8 1.9Cost/income (%) 43.9 39.4 41.1 44.1 44.2Loan loss cover (%) 114.0 83.0 101.0 108.0 109.0Consensus net profit - - 2,212.6 2,826.4 3,253.6UOBKH/Consensus (x) - - 1.12 1.01 1.03

Source: DBS Group Holdings, Bloomberg, UOB Kay Hian


7/16



Singapore

48.5%

Hong Kong

24.3%

Rest of

Greater

China

7.5%

South &

Southeast

Asia

9.1%

Rest of the

World

10.6%

Singapore

62.1%

Hong Kong

21.3%

Rest of

Greater

China

6.8%

South &

Southeast

Asia

5.7%

Rest of the

World

4.0%

Better asset quality. The NPL ratio of DBS was reduced from 2.3% to

2.1% with better asset quality in Hong Kong and Greater China. 37.8% ofthe NPLs were still current in both interest and principal.

Stock Impact We view 3Q10 as a good set of results with good cost control despite

initiatives related to its nine strategic priorities.

While we have high regards for managements capability, DBS facesmacro headwinds in the medium term:

a) SIBOR is likely to remain depressed due to high unemployment andquantitative easing in the US, which will keep the US Fed Funds Ratenear zero for an extended period of time.

b) The Hong Kong dollar is pegged to the US dollar, which couldweaken against the Singapore dollar due to quantitative easing in theUS. Hong Kong accounted for 21.3% of the banks total income in3Q10.

Nevertheless, a good set of results for 3Q10 and clarification concerningmerger & acquisition in Indonesia could give a positive push to DBSshare price.

Earnings Revision/Risk We have raised our earnings forecast for 2010 by 3.5% due to strong

performance by its Treasury & Markets business. We have cut ourearnings forecast for 2011 by 5.2% as we expect interest rates inSingapore to remain depressed for an extended period of time.

Valuation/Recommendation We have lowered our target price for DBS from S$19.55 to S$19.10,

based on P/B ratio of 1.64x, which is derived from the Gordon GrowthModel (ROE: 11.0%, required return: 8.2% and constant growth: 3.8%).

Share Price Catalyst Higher interest rates will give DBS a huge boost due to its significant

exposure to interbank lending and huge base of low-cost currentaccounts and savings accounts. However, we expect interest rates inSingapore to be depressed for an extended period of time and to startrising only in 1H12.

DBS plans to deploy surplus deposits in Singapore to expand consumerand SME businesses, which will bolster loan growth and net interestmargin.

Loans By Geographical Region Total Income By Geographical Region

Source: DBS Source: DBS

Loans By Sector

(S$m) 2Q10 3Q10

Manufacturing 18,404 18,404

Building & Construction 20,282 20,282

Housing Loans 37,082 37,082

General Commerce 14,798 14,798Transportation & Comm 13,294 13,294

FIs, Invt & Hldg Cos 20,202 20,202

Professional & Individuals 10,480 10,480

Others 14,606 14,606

Total 149,148 149,148

Source: DBS

Fees & Commissions

(S$m) 2Q10 3Q10

Stockbroking 42 42

Investment Banking 29 27

Trade & Remittances 57 59

Loans Related 101 100

Guarantees 16 13

Deposit Related 22 21Credit Card 36 33

Fund Management 6 5

Wealth Management 34 27

Others 15 14

Total 358 341

Source: DBS


8/16



Profit & Loss Balance Sheet

Year to 31 Dec (S$m) 2009 2010F 2011F 2012F Year to 31 Dec (S$m) 2009 2010F 2011F 2012F

Interest income 6,114.0 5,692.5 6,075.4 7,182.1 Cash with central bank 22,515.0 21,999.8 22,893.1 23,822.7

Interest expense (1,659.0) (1,406.2) (1,577.8) (1,979.7) Govt treasury bills &securities

15,960.0 12,316.0 13,071.8 13,873.9

Net interest income 4,455.0 4,286.3 4,497.5 5,202.4 Interbank loans 22,203.0 23,452.6 24,161.4 24,161.4

Fees & commissions 1,394.0 1,396.9 1,515.1 1,648.9 Customer loans 129,973.0 151,316.1 163,791.9 177,524.3

Other income 754.0 1,351.0 980.0 980.0 Investment securities 36,988.0 37,939.5 38,413.1 38,906.0

Non-interest income 2,148.0 2,747.9 2,495.1 2,628.9 Derivative receivables 16,015.0 19,138.5 19,915.6 20,724.2

Total incom e 6,603.0 7,034.2 6,992.6 7,831.2 Associates & JVs 672.0 813.0 885.0 957.0

Staff costs (1,292.0) (1,433.4) (1,552.4) (1,754.2) Fixed assets (incl. prop.) 1,532.0 1,415.0 1,415.0 1,415.0

Other operating expense (1,312.0) (1,457.5) (1,528.6) (1,703.6) Other assets 12,786.0 14,604.3 14,995.1 16,199.1

Pre-provision profit 3,999.0 4,143.3 3,911.7 4,373.4 Total asset s 258,644.0 282,994.8 299,542.0 317,583.6

Loan loss provision (1,515.0) (859.3) (243.3) (35.1) Interbank deposits 9,108.0 20,008.3 21,657.6 23,442.9

Other provisions (37.0) (1,067.0) 0.0 0.0 Customer deposits 178,448.0 181,497.2 192,634.5 204,455.3

Associated companies 66.0 96.0 72.0 72.0 Derivative payables 16,406.0 19,124.4 19,900.9 20,708.9

Pre-tax profit 2,513.0 2,313.0 3,740.4 4,410.3 Debt equivalents 8,115.0 8,717.0 8,717.0 8,717.0Tax (285.0) (521.6) (635.9) (749.8) Other liabilities 17,068.0 23,229.3 24,654.7 26,167.6

Minorities (187.0) (218.5) (263.9) (311.1) Total liab il iti es 229,145.0 252,576.2 267,564.8 283,491.8

Net pro fit 2,041.0 1,573.0 2,840.7 3,349.4 Shareholders' funds 25,373.0 26,318.1 27,612.8 29,416.3

Net profit (adj.) 1,944.0 2,471.0 2,840.7 3,349.4 Minority interest -accumulated

4,126.0 4,100.5 4,364.4 4,675.5

Total equity & liabil ities 258,644.0 282,994.8 299,542.0 317,583.6

Operating Ratios Key Metrics

Year to 31 Dec (%) 2009 2010F 2011F 2012F Year to 31 Dec (%) 2009 2010F 2011F 2012F

Capital Adequacy Growth

Tier-1 CAR 13.1 12.9 12.9 13.0 Net interest income, yoy chg 3.6 (3.8) 4.9 15.7

Total CAR 16.7 16.2 16.0 15.9 Fees & commissions, yoychg 9.4 0.2 8.5 8.8

Total assets/equity (x) 10.2 10.8 10.8 10.8 Pre-provision profit, yoy chg 17.7 3.6 (5.6) 11.8

Tangible assets/tangible commonequity (x)

12.9 12.9 12.9 12.7 Net profit, yoy chg 5.8 (22.9) 80.6 17.9

Net profit (adj.), yoy chg (9.8) 27.1 15.0 17.9

Asset Quality Customer loans, yoy chg 3.3 16.4 8.2 8.4

NPL ratio 2.9 2.1 1.9 1.8 Customer deposits, yoy chg 9.2 1.7 6.1 6.1

Loan loss coverage 83.0 101.0 108.0 109.0 Profitability

Loan loss reserve/gross loans 2.2 1.9 1.9 1.8 Net interest margin 2.0 1.8 1.8 1.9

Increase in NPLs 98.0 (18.2) 0.0 0.0 Cost/income ratio 39.4 41.1 44.1 44.2

Credit cost (bp) 118.4 61.1 15.4 2.1 Adjusted ROA 0.8 0.9 1.0 1.1

Reported ROE 9.0 6.1 10.5 11.7

Liquidity Adjusted ROE 8.6 9.6 10.5 11.7

Loan/deposit ratio 74.5 85.0 86.7 88.4 Valuation

Liquid assets/short-term liabilities 32.3 28.6 27.9 27.0 P/BV (x) 1.3 1.3 1.2 1.1

Liquid assets/total assets 23.5 20.4 20.1 19.5 P/NTA (x) 1.7 1.5 1.4 1.3

Adjusted P/E (x) 17.7 13.5 12.0 10.1

Dividend Yield 3.9 3.9 3.9 3.9

Payout ratio 66.0 85.2 47.1 39.7


9/16



Sembcorp Marine Singapore HOLD(Maintained)

Company Results

Share Price S$4.74

Fair Price S$4.40

Downside -7.2%

Company Description

Sembcorp Marine is among the top fiveoffshore oil & gas heavy engineering shipyardgroups in the world.

Stock Data

GICS sector Industrials

Bloomberg ticker: SMM SP

Shares issued (m): 2,077.2

Market cap (S$m): 9,845.7

Market cap (US$m): 7,659.1

3-mth avg daily t'over (US$m): 16.0


52-week high/low S$4.76/S$3.31


15.0 18.5 17.3 40.7 29.3


Sembcorp Industries 61.2


FY10 Net Cash/Share (S$) 1.16

Price Chart

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(%)(lcy) SEMBCORP MARINE LTD Sembcorp Marine Ltd/FSSTI Index

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Source: Bloomberg

Analysts

Nancy Wei+65 6590 [email protected]

Stella Tan+65 6590 [email protected]

3Q10: Lumpy profit from CJ-70 rig and forex settlement

3Q10 ResultsYear to 31 Dec 3Q09 9M09 3Q10 9M10 3Q10 9M10 Remarks

(S$m) (S$m) (S$m) (S$m) % yoy % yoy Turnover 1,520.4 4,381.5 1,114.7 3,572.0 (27) (18) Declining orderbook

kicks inEBITDA 197.2 535.6 319.9 741.9 62 39 Lumpy profit from

CJ70Pre-tax Profit 182.6 512.8 354.6 764.3 94 49 Plus S$52.6m FX

settlementTax (31.1) (88.6) (52.4) (127.0) 69 43MI (7.0) (21.3) (6.3) (16.4) (10) (23)Net Profit 144.6 402.9 296.0 620.9 105 54 Lumpy profit & FX

settlementEBITDA Margin(%)

13.0 12.2 28.7 20.8 15.7ppt 8.5ppt Lumpy profit fromCJ70

By Segment:Rig Building 910.7 2,700.4 768.2 2,392.1 (16) (11) Declining orderbook

kicks inOffs. & Conv. 426.5 1,108.0 150.8 668.5 (65) (40) Declining orderbook

kicks inRepair 176.5 545.4 189.0 488.1 7 (11) Sequential recoveryOthers 6.7 27.7 6.7 23.3 - (16)Turnover 1 ,520.4 4,381.5 1,114.7 3,572.0 (27) (18)Source: SMM, UOB Kay Hian

Results Sembcorp Marines (SMM) 3Q10 net profit more than doubled to

S$620.9m. The record quarter benefitted from a lumpy profit from theCJ-70 jack-up rig and a S$52.6m settlement from Societe Generalerelating to earlier disputed forex transactions.

Jurong Shipyard (JSPL) resold the CJ-70 rig then 50% completed toSeadrill for US$356m in 3Q10 with delivery scheduled no later thanend-Apr 11. The rig was originally ordered by Petropod, which had in2009 gone into liquidation. JSPL terminated the contract in Sep 09when no further payments were received from Petropod. US$221m ofthe original contract value of US$442m had already been collected.JSPL will now effectively be collecting US$577m(US$221m+US$356m). Prior to the rig resale, JPSL had recognisedonly the turnover, not the profit of the CJ-70 rig. Thus, there was lumpyprofit recognition after the rig resale in 3Q10. EBITDA margin improvedby 15.7ppt to 28.7% in 3Q10 from 13.0% in 3Q09.

3Q10 turnover declined 27% yoy due to a lower orderbook compared toa year ago. Offshore and conversion turnover contracted 65% yoywhile rig building turnover fell 11% yoy.

Key FinancialsYear to 31 Dec (S$m) 2008 2009 2010F 2011F 2012FNet turnover 5,063.9 5,724.7 4,669.0 4,160.5 4,820.3EBITDA 541.7 937.0 1,079.8 564.3 572.8Operating profit 471.0 861.8 996.8 479.3 482.8Net profit (rep./act.) 429.9 700.1 828.0 463.0 467.0Net profit (adj.) 429.9 700.1 828.0 463.0 467.0EPS (S$ cent) 20.8 33.8 39.9 22.3 22.5P/E (x) 22.8 14.0 11.9 21.2 21.1P/BV (x) 7.4 5.2 4.1 3.7 3.4EV/EBITDA (x) 13.9 8.0 7.0 13.4 13.2

Dividend yield (%) 2.3 3.2 2.7 2.7 2.7Net margin (%) 8.5 12.2 17.7 11.1 9.7Net debt/(cash) to equity (%) (139.0) (104.6) (100.1) (95.2) (89.7)ROE (%) 28.7 43.7 38.6 18.4 17.0Consensus net profit - - 680.0 574.3 572.3UOBKH/Consensus (x) - - 1.22 0.81 0.82

Source: SMM, Bloomberg, UOB Kay Hian


10/16



EBITDA Margin Orderbook

Source: SMM, UOB Kay Hian Source: SMM, UOB Kay Hian

Stock Impact Orderbook decline halted in October. SMMs orderbook currently stands

at S$4.7b vs S$4.3b a quarter ago because of strong contract wins ofS$1.3b in October. SMM has secured S$2.3b worth of new contracts(2009: S$1.2b; 2008: S$5.6b). We have assumed S$3.0b worth ofcontract wins for 2010.

Earnings Revision/Risk Earnings forecasts raised by 17% to 37%. We raise our 2010, 2011

and 2012 earnings forecasts by 37%, 17% and 23% respectively. 2010

revision is due to 3Q10s lumpy gains. Our contract wins assumption ofS$3b for 2010 is maintained, but we raise our contract win forecast for2011 from S$4b to S$9.4b to include a package of seven drill ships fromPetrobras pending 28-rig tender. The outcome of the rig tender remainsa risk. SMM has granted Atwood Oceanics and Seadrill options for seven jack-up rigs, exercisable within a year from Oct 10. We estimate theserigs at a total contract value of about S$1.5b. Our 2012 contract winassumption is maintained at S$4b. We have also recently raised ourearnings forecasts for COSCO Shipyard Group (CSG) (30% owned bySMM) by 22-29%.

Below-consensus margin assumptions. Our below-consensusearnings forecasts are due to lower margin assumptions. Management

expects operating margin to normalise to 15%. We have assumed 14%margin for 2011 and 12% for 2012. We are getting mixed guidance fromshipyards. Keppel Corps management had earlier cautioned that 2010shigh margins of 15% and above unsustainable as they are due tolucrative contracts secured in 2007-8. Today, competition for new jobs iskeen. Moreover, we expect Petrobras contracts to earn lower margins.Elsewhere, merchant shipbuilding shipyards are also guiding lowermargins from new contracts, again because of keen competition.

Valuation/Recommendation Fair value raised from S$3.85 to S$4.40, on higher sum-of-the-parts

valuation based on higher earnings forecasts and our recently-upgradedfair values for CSG and COSCO Corp (S).

Share Price Catalyst Sizeable contract wins and margins.

SOTP Valuation

S$m Yardstick

SMM's ownshipyard biz

6,073 PE 15x 2012NPAT

COSCO ShipyardGroup

933 PE 15x 2012NPAT

111.4m COSCO(S) shares

256 Market value

Net Cash 1,970 Estimated

Total Value 9,232

No of shares (m) 2,075SOTP/share (S$) 4.45

Source: UOB Kay Hian

12.4

8.49.4

6.8 6.98.1

9.9

7.3

13.5

6.27.8 7.9

9.28.0 7.8

11.811.1

8.9

12.912.3

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(%)

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(S$m)

0.8

2.02.3

3.4

5.0

5.75.3

6.8

6.06.05.5

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8.37.9

7.06.6

9.6

9.9

9.08.4

7.9

6.7

5.55.0

4.34.7

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2.00

4.00

6.00

8.00

10.00

12.00

1Q04 4Q04 3Q05 2Q06 1Q07 4Q07 3Q08 2Q09 1Q10

(S$b)


11/16




Year to 31 Dec (S$m) 2009 2010F 2011F 2012F Year to 31 Dec (S$m) 2009 2010F 2011F 2012F

Net tu rno ver 5,724.7 4,669.0 4,160.5 4,820.3 Fixed assets 678.4 645.3 747.8 885.3

EBITDA 937.0 1,079.8 564.3 572.8 Other LT assets 491.3 550.4 627.8 705.5

Deprec. & amort. 75.2 83.0 85.0 90.0 Cash/ST investment 1,978.5 2,412.4 2,517.2 2,586.2EBIT 861.8 996.8 479.3 482.8 Other current assets 1,539.3 1,185.6 1,167.1 1,363.9

Total other non-operating income (3.0) (43.0) 8.0 8.0 Total assets 4,687.5 4,793.7 5,060.0 5,540.9

Associate contributions 25.4 59.0 77.4 77.7 ST debt 0.0 0.0 0.0 0.0

Net interest income/(expense) 23.5 26.5 28.9 28.9 Other current liabilities 2,635.3 2,202.0 2,213.6 2,435.8

Pre-tax pro fit 907.6 1,039.3 593.6 597.4 LT debt 8.0 8.0 8.0 8.0

Tax (150.9) (188.7) (110.6) (110.4) Other LT liabilities 83.9 83.9 83.9 83.9

Minorities (56.6) (22.7) (20.0) (20.0) Shareholders' equity 1,884.1 2,400.8 2,635.5 2,874.2

Net pro fi t 700.1 828.0 463.0 467.0 Minority interest 76.3 99.0 119.0 139.0

Net profit (adj.) 700.1 828.0 463.0 467.0 Total liabi liti es & equit y 4,687.5 4,793.7 5,060.0 5,540.9

Cash Flow Key Metrics

Year to 31 Dec (S$m) 2009 2010F 2011F 2012F Year to 31 Dec (%) 2009 2010F 2011F 2012F

Operat ing 413.7 785.8 511.4 515.5

Pre-tax profit 862.4 893.2 479.3 482.8 Growth

Tax (57.9) (188.7) (110.6) (110.4) Turnover 13.0 (18.4) (10.9) 15.9

Deprec. & amort. 75.2 83.0 85.0 90.0 EBITDA 73.0 15.2 (47.7) 1.5

Working capital changes (518.8) (36.2) 20.8 16.2 Pre-tax profit 66.6 14.5 (42.9) 0.7

Non-cash items (75.2) (83.0) (85.0) (90.0) Net profit 62.8 18.3 (44.1) 0.9

Other operating cashflows 128.0 117.5 121.9 126.9 Net profit (adj.) 62.8 18.3 (44.1) 0.9

Inves tin g (60.6) (37.0) (174.5) (214.5) EPS 62.3 18.0 (44.1) 0.9

Capex (growth) (67.0) (50.0) (187.5) (227.5) Profitability

Investments (13.4) 0.0 0.0 0.0 EBITDA margin 16.4 23.1 13.6 11.9

Proceeds from sale of assets 7.1 0.0 0.0 0.0 Pre-tax margin 15.9 22.3 14.3 12.4Others 12.8 13.0 13.0 13.0 Net margin 12.2 17.7 11.1 9.7

Finan cin g (428.7) (315.0) (232.0) (232.0) ROA 15.1 17.5 9.4 8.8

Dividend payments (232.7) (311.3) (228.3) (228.3) ROE 43.7 38.6 18.4 17.0

Issue of shares 10.0 0.0 0.0 0.0

Proceeds from borrowings 445.6 0.0 0.0 0.0 Leverage

Loan repayment (647.9) 0.0 0.0 0.0 Debt to total capital 0.4 0.3 0.3 0.3

Others/interest paid (3.8) (3.8) (3.8) (3.8) Debt to equity 0.4 0.3 0.3 0.3

Net cash infl ow (outfl ow) (75.5) 433.8 104.8 69.0 Net debt/(cash) to equity (104.6) (100.1) (95.2) (89.7)

Beginn ing cash & cash equivalent 2,054.0 1,978.6 2,412.4 2,517.2

Ending cash & cash equivalent 1,978.6 2,412.4 2,517.2 2,586.2


12/16



Singapore Airport Terminal Services Singapore BUY(Maintained)

Company Update

Share Price S$2.90

Target Price S$3.07

Upside +5.9%

Company Description

Airline Gateway Services Provider.

Stock Data

GICS sector Industrials

Bloomberg ticker: SATS SP

Shares issued (m): 1,105.3Market cap (S$ m): 3,205.3

Market cap (US$m): 2,497.5

3-mth avg daily t'over (US$m): 5.1


52-week high/low S$ 2.96/S$ 2.37


(1.7) 1.8 4.7 17.4 5.8


Temasek Holdings 43.4


FY11 Net Cash/Share (S$) 0.17

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Analyst

K. Ajith+65 6590 [email protected]

Corporate luncheon - Key takeaways

We hosted a luncheon with Singapore Airport Terminal Services (SATS),which was led by Mr Clement Woon, CEO, Mr Lim Chuang, CFO and MsSandy Leng, AVP Investor Relations. The highlights of the briefing are:

SATS is unfazed by competition from a third ground handler. ChangiAirport Group is scheduled to make an announcement on the new thirdground handler in the next few weeks. There was concern that if SIAEngineering (SIAEC) secures the licence, it could impact SATSpositioning at Changi Airport. Management did not appear too concernedand cited the example of Swissport, which exited Singapore afterincurring substantial losses. SATS also indicated that any new entrantwould need substantial manpower to perform the full spectrum of groundhandling services. The licence for the third ground handler does notmandate that the new entrant perform the entire gamut of groundhandling services, but those that were tendered for. In SIAECs case, allof its technical ramp functions, except for aircraft interior cleaning, arealso performed by SATs. SIAEC of course does not provide apron,handle passenger or cargo handling, nor perform inflight catering.

SATS has already commenced technical ground handling. SATS hasreceived the licence to perform technical ramp handling (aircraft pushback services, parking, towing, lavatory cleaning, power supply and aircooling) in the middle of the year and has secured contracts from HainanAirlines, Mandala Airlines and Lion Air as well as serving private jets. Itwill gradually target other narrow bodied aircraft before venturing intowide-bodied airlines.

Jilin Food zone is expected to be operational in two years. The hogbreeding farm broke ground in September and the objective is toenhance food safety and security for Singapore. SATS has a 30% stakein the JV and food zone will focus on disease free farming as well as safeand healthy food processing. Currently, Singapore consumes 4,000 hogsdaily and management sees the demand rising to 5,000 hogs.

Key Financials

Year to 31 Mar (S$m) 2009 2010 2011F 2012F 2013FNet turnover 1,062.1 1,538.9 1,698.8 1,812.7 1,910.9EBITDA 235.5 275.2 287.9 305.6 335.3Operating profit 170.9 184.4 196.4 214.6 244.9Net profit (rep./act.) 146.8 181.2 202.0 220.7 248.4Net profit (adj.) 146.8 181.2 202.0 220.7 248.4EPS (S$ cents) 13.6 16.6 18.3 19.7 22.0P/E (x) 21.3 17.5 15.9 14.7 13.2P/BV (x) 2.2 2.1 2.1 2.0 1.9EV/EBITDA (x) 13.0 11.1 10.6 10.0 9.1Dividend yield (%) 3.4 4.5 4.5 4.5 5.3Net margin (%) 13.8 11.8 11.9 12.2 13.0Net debt/(cash) to equity (%) (1.9) (11.7) (11.7) (16.7) (21.7)Interest cover (x) n.a. 58.6 76.8 79.0 95.6

ROE (%) 10.6 12.6 13.3 13.8 14.8Consensus net profit - - 201.5 220.8 246.6UOBKH/Consensus (x) - - 1.00 1.00 1.01

Source: Singapore Airport Terminal Services, Bloomberg, UOB Kay Hian


13/16



Raw material cost push through easier in Singapore. Raw materialcosts rose 9.5% qoq vs a 9.6% qoq rise in revenue at food solutionssegment. Management indicated that it was easier to pass on the costs inSingapore due to its scale of operations. In UK, retailers were moresensitive to cost increases in 2QFY11. However, management hadearlier indicated at an analyst briefing that they were in discussions withretailers to pass on some of the cost increases. Daniels Group has alsosecured new product lines for pudding, drinks and soups from two majorUK retailers and was also recently awarded the Best start up for desertsby Sainsbury.

Hospital meal catering is another avenue of growth. SATS alreadycaters to seven hospitals in Singapore but this accounts for just 11% ofthe market. With growing demand for hospital beds and an agingpopulation, it makes commercial sense to outsource patient meals. Tothis end, SATS is increasing its capacity at its healthcare cateringproduction unit with the aim of providing 10,000 daily meals. It currentlyprovides 4,000 meals to the hospitals. It is also experimenting with

gourmet hospital dining at NUH.

No immediate compulsion for M&A, but outside of Singapore focuswill be towards aviation business. Management indicated that it wascomfortable with raising its debt level to twice its annual EBITDA orS$500m.

No specific dividend policy but associates payout 100%.

Stock Impact We continue to favour SATS for its leading positioning at Changi, its

status as the largest gateway services provider in Asia and leadershipposition in various food categories in the UK.

Earnings Revision. None.

Valuation/Recommendation We reiterate our BUY recommendation and S$3.07 price target.

Share Price Catalyst SIA Engineering fails to secure the third ground handling licence.


14/16




Year to 31 Mar (S$m) 2010 2011F 2012F 2013F Year to 31 Mar (S$m) 2010 2011F 2012F 2013F

Net tu rno ver 1,538.9 1,698.8 1,812.7 1,910.9 Fixed assets 594.4 589.4 594.2 575.8

EBITDA 275.2 287.9 305.6 335.3 Other LT assets 829.0 832.0 843.3 857.9

Deprec. & amort. 90.8 91.5 91.0 90.4 Cash/ST investment 196.4 205.5 296.0 392.4EBIT 184.4 196.4 214.6 244.9 Other current assets 289.3 345.5 344.6 353.5

Total other non-operating income 1.4 1.8 1.9 2.9 Total assets 1,909.1 1,972.4 2,078.1 2,179.6

Associate contributions 41.9 57.7 63.0 68.0 ST debt 13.5 12.2 12.3 12.3

Net interest income/(expense) (4.7) (3.7) (3.9) (3.5) Other current liabilities 263.8 250.9 281.9 317.7

Pre-tax pro fit 223.0 252.2 275.6 312.3 LT debt 10.0 10.0 10.0 10.0

Tax (40.9) (49.2) (53.7) (62.5) Other LT liabilities 121.7 117.5 115.5 112.5

Minorities (0.9) (1.0) (1.2) (1.4) Shareholders' equity 1,481.8 1,563.5 1,639.5 1,708.4

Net pro fi t 181.2 202.0 220.7 248.4 Minority interest 18.3 18.3 19.0 18.6

Net profit (adj.) 181.2 202.0 220.7 248.4 Total liabi liti es & equit y 1,909.1 1,972.4 2,078.1 2,179.6

Cash Flow Key Metrics

Year to 31 Mar (S$m) 2010 2011F 2012F 2013F Year to 31 Mar (%) 2010 2011F 2012F 2013F

Operat ing 254.2 168.8 247.5 258.0

Pre-tax profit 223.0 252.2 275.6 312.3 Growth

Tax (44.5) (51.9) (62.4) (74.2) Turnover 44.9 10.4 6.7 5.4

Deprec. & amort. 90.8 91.5 91.0 90.4 EBITDA 16.9 4.6 6.2 9.7

Associates (41.9) (57.7) (63.0) (68.0) Pre-tax profit 21.5 13.1 9.3 13.3

Working capital changes 24.2 (67.6) 3.7 (5.1) Net profit 23.4 11.5 9.2 12.6

Non-cash items 0.0 0.0 0.0 0.0 Net profit (adj.) 23.4 11.5 9.2 12.6

Other operating cashflows 2.6 2.3 2.7 2.6 EPS 21.9 10.2 8.1 11.4

Investi ng (14.7) (31.1) (21.9) (17.6) Profitabi lity

Capex (growth) 0.0 0.0 0.0 (6.0) EBITDA margin 17.9 16.9 16.9 17.5

Capex (maintenance) (64.1) (65.0) (60.0) (55.0) Pre-tax margin 14.5 14.8 15.2 16.3Proceeds from sale of assets 23.5 0.0 0.0 0.0 Net margin 11.8 11.9 12.2 13.0

Others 25.9 33.9 38.1 43.4 ROA 9.2 10.4 10.9 11.7

Finan cin g (318.1) (127.7) (132.2) (139.0) ROE 12.6 13.3 13.8 14.8

Dividend payments (118.9) (141.8) (144.1) (146.1)

Issue of shares 28.0 17.0 16.0 11.2 Leverage

Proceeds from borrowings 3.4 0.0 0.0 0.0 Debt to total capital 1.6 1.4 1.3 1.3

Loan repayment (229.7) (1.6) (1.6) (1.6) Debt to equity 1.6 1.4 1.4 1.3

Others/interest paid (0.9) (1.4) (2.5) (2.5) Net debt/(cash) to equity (11.7) (11.7) (16.7) (21.7)

Net cash infl ow (outfl ow) (78.6) 10.0 93.5 101.4 Interest cover (x) 58.6 76.8 79.0 95.6

Beginn ing cash & cash equivalent 275.7 195.8 205.5 296.0

Changes due to forex impact (1.3) (0.3) (3.0) (5.0)

Ending cash & cash equivalent 195.8 205.5 296.0 392.4


15/16



Corporate

DBS: 3Q10 profit up 28% yoy. The bank posted 3Q10 net profit of S$722m, up 28% yoy on lower bad debt chargesand higher trading income. DBS quarterly results beat expectations as it managed to grow its loan portfolio aggressively

to offset the fall in interest margins. (Source: The Business Times)

Hong Leong Group: Sold freehold Price Centre for S$103m or S$1,415psf based on existing net lettable areaof about 72,800sf. The buyer, ERC, a private commercial school operator said to be planning to renovate the propertyfor use as an educational hub and hotel. (Source: The Business Times)

SIA: Resumes A380 flights, after completing technical checks following a second Qantas plane experienced enginefailure. Airbus had earlier advised all airlines operating A380s with Rolls-Royce engines to send their planes forinspections. (Source: The Business Times)

Z-Obee: 2Q10 profit up 6% yoy, revenue down 14.3% yoy. Reduced production cost and fair value gains offsetlower revenue recorded and raised Z-Obees 2Q10 net profit by 6% yoy to US$1.5m from US$1.4m. The China-focusedhandset maker saw 2Q10 revenue reduced by 14.3% yoy to US$32.6m from US$38m due to the downsizing of its

distribution and marketing segment. (Source: The Business Times)

Sector

Aviation: Missing turbine part key to understanding nature of engine failure. The Australian TransportSafety Bureau appealed to residents of Indonesians Batam islands to find the missing chunk of a turbine disc. Thebureau said that the missing chunk is crucial to understanding the nature of the engine failure and may haveimplications for the prevention of future similar occurrences. (Source: The Business Times)


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UOB Kay Hian - Singapore Banks 8 Nov 2010

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