Top Equity Ideas

March 2017
Equity Ideas to Grow Your Wealth

We only share with you stock ideas that we are convinced of ourselves.

What you are about to see in this publication is a distillation of the top equity calls from the research teams at OCBC Group, comprising 16 highly experienced equity analysts.

Our equity analysts offer independent research views on a wide range of equities through regular company visits and management meetings.

With good access to listed companies and key industry sources, the research team conducts fundamental, technical and quantitative analyses on companies, while regularly reviewing the stocks covered.

As you can see, we're going to great lengths to help you grow your wealth. And we hope you will find the insights we offer in this publication useful.

AIA Group Ltd
Beneficiary of growing Asia middle class segment

AIA had a good start to 2017, with strong new business value (NBV) growth in the first two months, alleviating concerns of HK sales slowing sharply due to rules to slow China capital outflows. While NBV growth could slow in full-year 2017, a robust capital position, with more than 400 per cent solvency ratio and US$10bn free surplus, allows room for further capital management. With strong Asia positioning, AIA is a strong beneficiary of the rise of Asia's middle class with higher protection and wealth accumulation needs. Prudent management, strong execution and well-trained agents drive sustainable new business growth and margin expansion from sale of higher margin products. However, AIA's margins and volume growth could come under pressure should the bancassurance channel undergo continued commoditization. Poor equity performance may also affect unrealized gains/losses, as well as assets on the balance sheet, leading to lower than expected overall investment yield.

Our 12-month forecasts
Potential Upside:
13.1%
Target Price:
HK$55.60
Dividend:
US$0.08/Share
Dividend Yield:
1.26%
About the company
Current Price
HK$49.15
Market Capitalisation
HK$598.6b
Average Daily Volume (30 Days)
24.9m
Bloomberg Ticker
1299 HK

Source: Bloomberg as at 7 March 2017

 

AIA Group Ltd. offers insurance and financial services. The company writes life insurance for individuals and businesses, accident and health insurance, retirement planning, and wealth management services.

52-Week Price Movement
52-Week Price Movement

52-Week High: HK$53.9500

52-Week Low: HK$42.4500

Source: Bloomberg as at 7 March 2017

Key financial highlights
 
2016
2017E
2018E
Net Premium & Fee Income (USD)
60,641
21,254
23,673
Total Op. Revenues (USD)
26,728
27,595
30,712
Net Profit (USD)
4,212
3,782
4,242
EPS (USD)
0.35
0.31
0.35

^ For the Financial Year ended 31 December

 

Salesforce.com Inc
A leader in the pure-play SaaS market

Salesforce.com has established itself as a leader in the pure-play SaaS -- or software-as-a-service -- market, a movement it pioneered. It has a product portfolio that spans all of the key verticals in customer relationship management, or CRM, delivered in a multitenant, public cloud environment that allows for rapid deployments, instant updates, and lower total cost of ownership for the firm's customers. As enterprises increasingly turn to cloud computing to eliminate costly IT infrastructure and maintenance costs, it paves the way for growth in each of Salesforce's product verticals. Though the firm is best known for its salesforce automation services, Salesforce.com has diversified its revenue stream into three $1 billion-plus clouds (sales, service, and applications) along with a fourth (marketing). More than 75 per cent of the firm's customers currently deploy at least three of these clouds. Salesforce.com's customer and dollar attrition rates have fallen into the single digits, indicating the robustness of the firm's applications. However, as its competitors continue to invest heavily in cloud-based services, this could stunt Salesforce.com's growth rate.

Our 12-month forecasts
Potential Upside:
19.3%
Target Price:
US$99.00
About the company
Current Price
US$82.97
Market Capitalisation
US$58.70b
Average Daily Volume (30 Days)
5.2m
Bloomberg Ticker
CRM US

Source: Bloomberg as at 7 March 2017

 

Salesforce.com, Inc. provides software on demand. The Company supplies a customer relationship management service to businesses worldwide providing a technology platform for customers and developers to build and run business applications. Clients use salesforce.com to manage their customer, sales and operational data.

52-Week Price Movement
52-Week Price Movement

52-Week High: US$82.8100

52-Week Low: US$68.4100

Source: Bloomberg as at 7 March 2017

Key financial highlights
 
2014
2015
2016
Revenue (US$m)
4,071
5,374
6,667
Net Income (US$m)
-232
-263
-47
EPS (US$)
-0.39
-0.42
-0.07
Return on Equity (%)
-8.7
-7.5
-1.1

^ For the Financial Year ended 31 December

 

The contents in this page are a summary of the investment ideas and recommendations set out in the Morningstar Equity Analyst Report.

Thai Beverage Plc
Beer segment enjoying better margins

Thai Beverage's 1QFY17 results may have been affected by a weaker consumer environment and the mourning period in Thailand. As trade activities for both the spirits and beer segments did not resume until 100 days after the suspension of entertainment activities following the death of their monarch, 2QFY17 may reflect some weakness too. Given savings of approximately THB600-700m from advertising and promotion (A&P) across all segments, promotions will now go on as initially planned, particularly as consumer sentiment improves. For 1QFY17, beer's gross profit margin was at a high of 23 per cent (vs. average of 18.8-21 per cent in the last two FY); it can be sustained going by the decent bottle return rates and lower raw material costs. Thai Bev's management is undeterred by competition and will continue to work on initiatives to maintain its market share. Thailand's fundamentals in the tourism industry are strong, as are its domestic consumption and investment trends. Against a steady economic backdrop, coupled with planned A&P, we expect overall earnings to return to stability.

Our 12-month forecasts
Potential Upside:
7.45%
Target Price:
S$1.01
Dividend:
S$0.024/Share
Dividend Yield:
2.55%
About the company
Current Price
S$0.94
Market Capitalisation
S$23.48b
Average Daily Volume (30 Days)
28.9m
Bloomberg Ticker
THBEV SP

Source: Bloomberg as at 7 March 2017

 

Thai Beverage Public Company Limited produces a wide range of branded beer and spirits and has expanded its business to the non-alcoholic beverage and food sectors .

52-Week Price Movement
52-Week Price Movement

52-Week High: S$1.0550

52-Week Low: S$0.7150

Source: Bloomberg as at 7 March 2017

Key financial highlights
 
FY2016
FY2017F
FY2018F
Revenue (S$b)
5.59
7.61
8.04
ROA (%)
10.3
13.9
14.5
EPS (THB)
0.8
1.0
1.1
PER (x)
29.0
23.2
21.1
Net Profit Margin (%)
13.7
13.9
13.9

^ For the Financial Year ended 30 Sep
FY16 comprises of 1 Jan- 30 Sep

 

Visa Inc.
Likely to flourish as global consumer spending grows

The increasing use of mobile technologies will usher in a new payment paradigm at some point but Visa is king of the hill in the digital payment market and will not be easily toppled. Visa accounts for about half of all credit card transactions and an even higher percentage of debit card transactions, according to the Nilson Report. As consumer spending around the world grows and digital methods continue to take share from cash, it should enable Visa to continue to flourish for years to come as an effective toll booth on global spending. Visa's first-quarter 2017 results support the positive outlook, with the US$101 fair value estimate being maintained. The company has not been immune to the direct and indirect influence of growing merchant bargaining power, and expects client incentives to consume 20.5-21.5 per cent of gross revenue during the year. However, underlying growth in total payment volume, cross-border transactions, and transaction processing count outweighed the slight pricing pressure experienced by the company.

Our forecasts
Potential Upside:
13.4%
Target Price:
US$101.00
About the company
Current Price
US$89.06
Market Capitalisation
US$206.68b
Average Daily Volume (30 Days)
8.54m
Bloomberg Ticker
V US

Source: Bloomberg as at 7 March 2017

 

Visa Inc. operates a retail electronic payments network and manages global financial services. The company also offers global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities.

52-Week Price Movement
52-Week Price Movement

52-Week High: US$89.0600

52-Week Low: US$70.2200

Source: Bloomberg as at 7 March 2017

Key financial highlights
 
2014
2015
2016
Revenue (US$ m)
12,702
13,880
15,082
Net Income (US$ m)
5,438
6,328
5,991
Earnings Per Share (US$)
2.16
2.58
2.48
PER (X)
41.2
34.5
35.9
Return on Equity (%)
20.0
22.1
21.0

For the Financial Year ended 31 December

 

The contents in this page are a summary of the investment ideas and recommendations set out in the Morningstar Equity Analyst Report.

The Walt Disney Co.
Disney offers investors good long term value

Disney excels at monetizing its world renowned characters and franchise across multiple platforms – movies, home video, merchandising, theme parks, and even musicals. The addition of the Star Wars franchise is another avenue to remain engaged with children and adults. Fiscal 2017 first quarter results were mixed with revenue missing but EBITDA in line with projection, as cost controls improved margins at the parks and resorts division. Its Shanghai resort has served more than 7 million guests and more than 10 million are expected by its first anniversary in June. Other major theme parks are in the pipeline as well, with Florida's Avatar Land opening in May this year. In the media networks segment, ESPN is the crown jewel and a dominant player in U.S. sports entertainment. Besides ad revenue, it also generates the highest subscriber fees for any cable channel. In fiscal first quarter, the media networks reported lower-than-expected operating income as ad revenue dipped. Despite worries about the decline in pay television subscribers, affiliate fee growth remains strong. However, increases in the cost of popular programming such as sports events and television series could adversely affect margins. The stock may offer an attractive entry point for those with a longer term investment horizon.

Our 12-month forecasts
Potential Upside:
20.9%
Target Price:
US$134.00
About the company
Current Price
US$110.86
Market Capitalisation
US$175.29b
Average Daily Volume (30 Days)
6.79m
Bloomberg Ticker
DIS US

Source: Bloomberg as at 7 March 2017

 

The Walt Disney Company is an entertainment company that conducts operations in media networks, studio entertainment, theme parks and resorts, consumer products, and interactive media. The company produces motion pictures, television programs, and musical recordings, as well as books and magazines.

52-Week Price Movement
52-Week Price Movement

52-Week High: US$111.3000

52-Week Low: US$90.8300

Source: Bloomberg as at 7 March 2017

Key financial highlights
 
2014
2015
2016
Revenue (US$ m)
48,813
52,465
55,632
Net Income (US$ m)
7,501
8,382
9,391
EPS (US$)
4.26
4.90
5.73
PER (X)
26.0
22.6
19.3
Return on Equity (%)
16.6
18.7
21.4

For the Financial Year ended 31 December

 

The contents in this page are a summary of the investment ideas and recommendations set out in the Morningstar Equity Analyst Report.

^ Go to Top