REITs – Singapore S-REITs Bi-Weekly Update (16-30 May 22)
It is heartening to hear that Beijing and Shanghai plan to relax COVID-19-related controls after the drop in new COVID-19 cases. The Russia-Ukraine war, however, remains in a protracted stalemate. Domestically, consumption is normalising and more employees are working from their offices. Pent-up demand is seen in the surge of inbound leisure and business travellers. BUY ART (Target: S$1.32), FCT (Target: S$2.96), FEHT (Target: S$0.82) and LREIT (Target: S$1.01). Maintain OVERWEIGHT.
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SATS (SATS SP) FY22: Below Expectations; Cost Pressure Weighing On Near-term Performance
SATS’ FY22 revenue of S$1,177m and core net loss of S$8.5m were below our and consensus expectations. Core net losses excluding government reliefs widened qoq, as SATS’ revenue recovery failed to keep pace with its operating cost increase. We expect cost pressure from labour and food ingredients to continue to weigh on SATS’ financial performance in the near term. We cut FY23/24 core net profit forecasts by 54%/15% respectively. Maintain BUY with a lower DCF-based target price of S$4.75.
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AMMB Holdings (AMM MK) 4QFY22 results supported by credit cost writeback
BUY maintained, TP raised to MYR4.40 AMMB’s FY22 results were above expectations, mainly because of the write-back of management overlays in 4QFY22. Our FY23-25E net profit forecasts are raised by 3-9% but we continue to be prudent in our provisioning assumptions. As such, our FY23E ROE of 8% continues to lag management’s target of 9.3-10%. We maintain a BUY on AMMB with a higher TP of MYR4.40 (from MYR4.05), pegged to a CY23 PBV of 0.7x (CY23E ROE: 8%).
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mm2 ASIA
Awaiting deleveraging initiatives
FY22 net loss decreased to S$35.8m, but still below expectations. mm2 Asia reported net loss of S$35.8m, an improvement from the S$90.8m loss in FY21. Revenue saw a 50% y-o-y increase to S$113m, driven by the further relaxing of COVID-19 restrictions in Singapore and Malaysia. Overall, FY22 results were below expectations, as we were expecting the net loss to reduce further, to S$17.4m.
Expect strong recovery within 12 to 18 months. With the lifting of most restrictions from April 2022, business conditions are expected to improve going forward. For the cinema segment, with the release of more titles and consumers returning to the new normal, business has gradually picked up. Additionally, concert businesses in Singapore and Malaysia have been able to operate at full capacity since April 2022. The group is seeing strong demand for regional content, global cinema box office recovery, as well as expected pent-up demand for concerts and events as COVID restrictions ease.
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Oil & Gas – Malaysia Petronas 1Q22: Profit And Cash Benefit From Higher O&G Prices
Petronas’ cash flow benefitted from higher O&G prices and disposal gains, which offset production issues. While Petronas expects capex to recover and reflect 2019 levels, the sector’s valuation remains a laggard to the oil price uptrend. A key hurdle is the uncertainty of further capex ramp-up, which can improve once high-level issues are concluded, and this should benefit the local industry. We maintain MARKET WEIGHT on the sector, though value has emerged for certain stocks.
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CIMB Group (CIMB MK) 1Q22: Boosted By Lumpy Writeback
CIMB reported 1Q22 earnings that were above our estimates due to provision writebacks. The group has also delivered a positive operating JAWS qoq on solid operating cost discipline and stable NIM. Despite our earnings adjustment, we have left our target price largely unchanged as we factor in a higher COE to account for rising risk aversion on higher beta banking stocks. Maintain BUY and target price of RM6.30 (0.96x 2022/23F P/B, 9.2% ROE).
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