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City Developments (CIT SP)
Reasonably Solid 2023 Outlook Given Strength In Some Business Segments
CDL appears to be reasonably well placed to build upon its share price momentum in 2022, with the hospitality and office segments leading the way in 2023, in our view. After the sale of Millennium Hilton Seoul in 1H22, CDL has launched a strategic review of its global hospitality portfolio which could result in further monetisation initiatives. Recent sales strength of its Copen Grand EC bodes well for its next EC launch at Bukit Batok over the next 12 months. Maintain BUY. Target price: S$9.87.
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STRATEGY – MALAYSIA
1H23 Outlook: Positioning For Winter And Spring
We expect 2023 to be a warmer and less turbulent year for Malaysian equities, having rejoined global equities’ uptrend that is expected to last through early-23. However, the market should cool off in 1Q23 and warm up before 2H23. Appealing investment themes include trade diversion, the green agenda, economic reopening, blockchain and rising ROIs for O&G offshore asset owners. We are OVERWEIGHT on the aviation, building material, gaming, technology and O&G sectors.
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Top Glove (TOPG MK)
1QFY23: Record Losses
Earnings disappointed as operational earnings fell into losses. Aside from already softening ASPs, utilisation rates tanked as volume demand dipped. This was further compounded by higher gas costs. Positively, demand appears to have improved with excess inventory now nearing depletion. Top Glove continues to face near-term industry headwinds. However, downside appears to be increasingly priced. Maintain HOLD but with a lower target price of RM0.74.
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STRATEGY – INDONESIA
JCI Could Underperform MXAP In 2023
After the JCI’s strong outperformance in 2022, investors believe that the index is likely to underperform in 2023 against the MSCI Asia Pacific. We view 2023 as a stock picking
environment for investing in the JCI. The ban on premarital sex is a step back for Indonesia. Investors are intrigued by the potential presidential candidacy of Ganjar Pranowo. We disagree with the hypothesis that China relaxing its zero-COVID policy will cause commodity prices to rise further. Our top five BUYS are BBRI, TLKM, ROTI, SMGR and MAPI. Top SELLs: ADRO and ITMG.
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Singapore Strategy
Reflections 2022
2022 was bad. It also had silver linings
For many investors, 2022 was an annus horribilis. Dislocations brought about by invasion, interest rates and inflation drove volatility and torpedoed valuations. Nevertheless, underneath these headlines there were notable positive developments that promise to drive long-term earnings and valuations higher. These largely fell into three categories: (a) enablement through technology; (b) reorganization amidst deglobalisation; and (c) constructive policy shifts. In the long term, we believe AEM, BAL, CD, CIL, DBS, FCT, FR, RFMD, SCI, ST, STE, UMS, VMS could be key beneficiaries from these trends.
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A year of two halves
We think that 2023F could be a year of two halves for SREITs, with any share price weakness in 1H23F representing potential buying opportunities to ride into the slowing rate hike environment. We believe that the market has factored in 40-665bp additional rate hikes into current share price valuations. Our stress test indicates that a 50-100bp reversal in peak spot interest rates could lighten interest burden and lead to forward sector DPU stabilisation.
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