ANALYSTS SAY: Buy, Sell, Hold (25 Oct)

UOB KAYHIAN

Singapore Strategy
3Q22F: Preparing for more negatives

■ More analysts are taking the cautious stance going into the 3Q22F results season on the back of negative sentiment on the macro front.
■ Fig 1 of this report shows the likelihood of risks/catalysts for the companies reporting. We conclude that there would be more negatives than positives.
■ Positives: UOB, DBS, OCBC, SPOST, GENS, YZJSB, SMM, JAP.
■ Negatives: REITS in general, Tech in general, KEP, IFAST, SATS, Q&M, Grab, TDCX, STE.

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Banking – Singapore
3Q22 Results Preview: Series Of 75bp Hikes Propels Accelerated NIM Expansion

The Fed has accelerated the pace of rate hikes, leading to massive NIM expansion of 29bp for DBS and 20bp for OCBC in 3Q22. DBS and OCBC grew net interest income by a hefty 41% and 31% yoy respectively. We forecast net profit of S$2,012m for DBS (+18% yoy and +11% qoq) and S$1,417m for OCBC (+16% yoy and -4% qoq). BUY DBS (Target: S$45.75) and OCBC (Target: S$16.82) for 2023 dividend yields of 5.4% and 5.2% respectively. Maintain OVERWEIGHT. 

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UOB KAYHIAN

Enviro-Hub Holdings (ENVH SP)
Pivotal Restructuring Years With Greater Potential

ENVH had undergone pivotal restructuring in 2021, streamling its operations to focus on the recycling of e-waste and healthcare segments. This led to a robust 1H22 as net profit surged 40% yoy. The group’s earnings are expected to be driven by: a) the 40% capacity expansion of its recycling of e-waste plant, and b) the contribution from the group’s healthcare segment. ENVH’s recent entry to the retail pharmaceutical business is a potential growth driver as it strives for a store count target of 90 by FY24.

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Dialog Group (DLG MK)
Storage Sentiment Bottoms, But Earnings Inflection To Take Time

Although PITSB’s FY22 earnings were worse than expected, DLG believes that storage earnings found a support due to demand for energy security. Earnings inflection will take time as supply chain issues remain, despite incoming POEC upstream earnings. Share price may remain range-bound and we adjusted SOTP for higher WACC, but value will re-emerge, alongside ESG developments and growth catalysts like PIPC’s Phase 2. Maintain BUY with a lower target price of RM2.25.

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Total Access Communication (DTAC TB)
3Q missed on weak ARPU; merger likely to finish in 1Q23

Weak quarterly trend, but eyeing New Co in 1Q23
3Q22 core net profit of THB495m missed our forecast by 26% due to lowerthan-expected ARPU (weak consumer purchasing power and intense price competition), leading us to cut FY22E core profit by 14.6%. We expect 4Q22 core profit to weaken further (-3.3% QoQ) due to flat revenue and rising expenses. Despite the weak 4Q22E outlook, we reiterate BUY on DTAC (THB55.20 TP) as we expect the merger with TRUE to complete in 1Q23. There is also 3.8% upside to DTAC’s VTO price of THB47.76/sh.

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Kasikornbank (KBANK TB)
NIM expansion outweighs higher credit cost

Rising interest rates to offset higher credit cost
We expect KBANK’s insurance business and NIM should gradually improve as interest rates rise. This should help support top line growth and more than offset the higher credit cost from rising problem loans in 4Q22. KBANK is likely to grow high-yield unsecured loans to increase revenue, and speed up NPL resolution to clean up its balance sheet, in our view.
BUY with TP of THB185 (0.86x FY22E P/BV, 9.3% ROE). Key risk is weakerthan-expected asset quality. 

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