ANALYSTS SAY: Buy, Sell, Hold (24 Aug)

UOB KAYHIAN

China Aviation Oil Singapore Corporation (CAO SP)
A Delayed Beneficiary Of China’s Air Travel Resumption And Oil Prices

CAO has a monopolistic position supplying jet fuel to airlines at key airports in China. Predictably, its profitability has been hit by a COVID-19-related decline in air travel; however CAO’s balance sheet remains strong with net cash of S$0.24/share as at end-1H22.

Nevertheless, it had material negative free cash flow of US$172m in 1H22 (1H21: +US$37m). The company’s valuations appear fair as it is trading at 2022 annualised ex-cash PE of 10x.

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Gabungan AQRS (AQRS MK)
2Q22: Below Expectations; Expect A Stronger Rebound In 2H22

GAQRS’ 2Q22 results are below expectations with a core net profit of RM5.9m. Net profit improved 64% yoy due to higher billings at its construction and property arms.

GAQRS is expected to see further recovery in the upcoming quarters, backed by accelerated construction billings and unbilled property sales, driven by the LRT3 project. E’Island has reached over 80% take-up rate. Its orderbook of RM1b (3x revenue cover) will support earnings until 2025. Maintain BUY. Target price: RM0.48.

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MAYBANK KIM ENG

UOB KAYHIAN

AEON Co. (M) (AEON MK)
Strong 2Q22 results

Maintain BUY with a higher TP of MYR2.35
AEON’s 2Q22 results surpassed our expectation on higher-than-expected retail operating margins. Going forward, while sequential earnings may be weaker in absence of major festivities, 4Q22 earnings are likely to be robust in tandem with year-end celebratory spending. Our earnings forecasts are raised by 8%-11%. Rolling forward valuations, we lift our TP
to MYR2.35 (from MYR2.00) on unchanged 25x FY23E PER (about mean).

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IOI Corporation (IOI MK)
4QFY22: Results Above Expectations

IOI’s 4QFY22 results came in above our and consensus expectations. 4QFY22 earnings came in higher qoq mainly due to a strong contribution from downstream operations, where margins expanded in the temporary absence of Indonesian exports. Upstream earnings came in lower qoq due to lower PK ASP. We expect weaker earnings for FY23 mainly due to softening CPO prices and margin pressure on downstream products.

Maintain BUY with a target price of RM5.15 in view of its undemanding valuation.

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AVI-TECH HOLDINGS

At $0.295, market cap of Avi-Tech is S$50.5mln, FY22 P/E is 16x, current P/B is 1x, FY22 dividend yield is 5.9% and its present net cash position of S$32.1mln equates to 63% of current market cap.

Given the high P/E ratio arising from the drop in FY22 profitability, we are
therefore downgrading our recommendation from ACCUMULATE to HOLD although we note that Avi-Tech still offers an attractive dividend yield of which we opine its dividends would be sustainable
going forward into FY23.

Malakoff Corporation (MLK MK)
A strong showing

Improved contribution from coal plants

2Q22 results were above our/consensus expectations. We believe the beat was due to better-than-expected earnings contribution by the two coal plants. Maintain HOLD with an unchanged MYR0.65 TP pending briefing updates. We see current risk-reward as being merely balanced. In the sector, we prefer Mega First (MFCB MK, BUY, CP: MYR3.56, TP: MYR4.30). 

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