Sensitivity analysis by DBS indicates that the latest SIBOR rise, if sustained, will lift the NIM earnings for UOB and OCBC by 1% and 2% respectively.
"We expect the re-rating on Singapore banks to continue on the back of accelerating loan growth, upside potential to NIM and lower provisions. We raised OCBC target price to $14.00 and UOB’s target price to $29.50," says analyst Yeo Kee Yan in a Friday report.
The US congress recently gave the final approval for sweeping tax reforms that included a corporate tax cut to 21% from 35%. As Singapore does not have a tax treaty with the US, the tax cut benefits Singapore companies with operations in the US.
"For stocks under our coverage, ST Engineering, Cityneon and Venture Corp are beneficiaries," adds Yeo.
See also: SAC Capital initiates ‘buy’ on Sanli Environmental after $105.3 mil contract win from PUB
Yeo also sees interest uptick for the services sector stocks. The latest 4Q GDP flash estimates reinforced DBS's view that the recovery in Singapore’s economy is broadening to the services sector.
Among the three key sectors, services is the only one that registered positive growth on a y-o-y (+3%) and q-o-q (+7.5%) basis.
OCBC picks are Genting, mm2 Asia, Cityneon, OCBC and UOB.
See also: CGSI downgrades Grab to ‘hold’ ahead of 2QFY2025 results, expects consumer spend to slow in 2H2025
DBS Research turns more positive on OCBC
Better loan growth traction and NIM uplift to drive UOB topline
"We peg near-term support at 3,420. Our base-case STI year-end objective is 3,688, pegged to 13.89x FY19 earnings with a ‘bull-case’ objective of 3,800 pegged to 14.3x FY19 earnings."
Shares in ST Engineering, Venture Corp, Genting Singapore, mm2 Asia, Cityneon, OCBC and UOB are trading at $3.32, $21.65, $1.33, 54 cents, 97 cents and $26.93 respectively.
