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Hong Leong Asia
Brighter outlook for FY23F
■ We lower our FY22F EPS on weaker Yuchai engine sales expectations. But 2023F outlook looks attractive, aided by China reopening and policy support.
■ We also remain positive on its building materials unit, with SG construction activities set to grow further in FY23F with improved labour productivity.
■ Reiterate Add with TP raised to S$1.10 as we see stronger PATMI growth for HLA in FY23F as both its key segments enjoy better prospects.
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Pan-United Corp Ltd
Foundations intact
■ BCA data suggest RMC demand in Singapore improved slower vs. our expectations, likely still due to lower labour productivity.
■ Outlook for 2023F remains positive, with BCA projecting SG construction output to rise to a 7-year high and demand for RMC further growing up to 8%.
■ Reiterate Add with a lower TP of S$0.53, now pegged to 5.8x CY24F EV/EBITDA, based on the last construction upcycle (2012-14) average.
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Frencken Group (FRKN SP)
Positive Outlook For Key Customer And Improving Cost Pressure
ASML reported a strong 4Q22 earnings growth of 28% yoy on 25 Jan 23 and guided for sales growth of more than 25% yoy in 2023 as demand remains high. We expect Frencken to benefit from this guidance as ASML contributed around 30% of its total revenue as of 1H22. Also, Frencken’s gross margin should improve qoq as electricity costs in Europe are falling and Frencken had passed on cost increases to customers in 4Q22. Upgrade to BUY with a 27% higher target price of S$1.36.
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CIMB Group (CIMB MK)
Confident In Meeting ROE Targets
Management was slightly cautious on its NIM outlook in 2023. However, asset quality is holding up stronger than expected despite the higher interest rates. This has helped to underpin management’s conviction in achieving its ROE targets. Maintain BUY and target price of RM6.50 (0.96x 2023 P/B, 9.9% 2023 ROE). Valuations remain attractive at - 1SD to its historical mean P/B. The stock is also an excellent proxy to foreign inflows if interest in emerging markets was to gain traction.
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CapitaLand Investment Ltd
Potential beneficiary of China’s reopening
• View CLI as a potential beneficiary of China’s faster-than-expected reopening
• Announced total gross divestment and investment value of SGD2.9b and SGD5.1b in 2022, respectively
• Strong focus on sustainability efforts
Investment thesis
CapitaLand Investment Limited (CLI) has emerged as a more nimble and resilient entity following its strategic restructuring, and we believe it would operate with a more asset-light business model with strong focus on recurring income streams. Management has reiterated
its target of achieving a funds under management (FUM) target of SGD100b by 2024, and would continue to focus on new economy assets such as logistics and data centre properties. Although CLI’s lodging management business was adversely impacted by the
pandemic, we have started to see a more meaningful recovery, and CLI’s focus is on management and franchise contracts. CLI had 155k lodging units under management, as at 30 Sep 2022, and management aims to grow this to 160k units by 2023. Capital recycling would also remain as one of CLI’s key focuses, with an
annual divestment target of SGD3b.
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Mapletree Industrial Trust / MIT ($2.39, up 2 cents) wishes to announce that MIT’s distribution per Unit (“DPU”) for the Third Quarter Financial Year 2022/2023 from 1 October 2022 to 31 December 2022 (“3QFY22/23”) was 3.39 cents. Gross revenue and net property income for 3QFY22/23 rose 5.0% and 4.9% year-on-year to S$170.4 million and S$128.8 million respectively. This was mainly driven by the contributions from new leases across various clusters in the Singapore Porƞ olio. The distribution to Unitholders for 3QFY22/23 was S$92.3 million.
We continue to like MIT’s exposures to fast growing industrial, data- centres and e-commerce business segments. Latest set of results has shown that fundamentals remain strong amidst a hawkish interest rate
environment. We thus maintain an Accumulate rating for the longer term as the Fed ends their rate hike cycle.
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