buy sell hold 2021



IHH Healthcare Bhd

Convincing plans in place for organic growth


■ We increase our SOP-based TP to RM7.70 on upgraded FY23-25F EPS forecasts of 12.8-24.7% given positive takeaways from IHH’s analyst briefing.

■ IHH’s plan to open 2,000 beds over FY23F-25F represents a c.17% increase in capacity from its c.11.8k operational beds as of FY22.

■ Its expanded healthcare service offerings to include higher value services, such as proton therapy, will also allow IHH to drive revenue intensity.


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Alpha Picks: Add RFMD And THBEV; Remove AZTECH, ST And FEH


In the face of a 3.4% mom decline in the STI, our Alpha Picks portfolio proved resilient in May 23, outperforming by 3.6ppt on a market cap-weighted basis. On an equal-weighted basis, our portfolio surpassed the STI by a heftier 4.9ppt. The top performing stocks in May 23 were Delfi (+18.7% mom), Sembcorp Industries (+17.5% mom) and Civmec (+3.6% mom). For June, we add RFMD and THBEV and remove AZTECH, ST and FEH. Our Alpha Picks portfolio has now beaten the STI in 14 out of the past 15 months.


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Alpha Picks: June Conviction Calls


After a steeper-than-expected pullback in May, MSCI China‘s and HSI’s 12-month forward PE have fallen to a relatively attractive 9.7x and 8.7x respectively. As the nonmanufacturing PMI remains in expansionary zone, we expect better macro data ahead to provide the catalyst for a rebound. Overall, we increase exposure to oversold sectors, ie consumer and TMT; add COSCO Shipping Port, KE Holdings, Kuaishou and Kweichow Moutai to our BUY list and Great Wall Motor to our SELL list. 


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SATS LTD - Acquisition costs and cargo weakness overshadow recovery

  • FY23 revenue grew 49.4% YoY, which included a full-year contribution from 65.4%-owned HK cargo handler AAT. However, operating loss rose 12.7% YoY, dragged down by cost escalation (+48.1% YoY), S$44mn in M&A expenses, and weak performances from AAT, Malaysia ground handling and Saudi Arabia cargo handling. Net loss would be S$77.6mn if government relief were excluded.
  • Staff costs surged by 62.0% YoY, a combination of inflationary pressure and restoration to full capacity ahead of the recovery in flight volume. As at March 2023, the number of flights at Changi Airport was 25% below pre-pandemic level.
  • Balance sheet has turned into net debt, with net gearing at 0.33x. Consolidation of Worldwide Flight Services (WFS) could raise FY24e net gearing to 0.84x, we estimate.
  • Maintain NEUTRAL with a lower target price of $2.51 (prev. $2.92). We see multiple headwinds ahead: 1) Slowdown in air cargo volume; 2) higher interest expense from the acquisition cost and debt at WFS; 3) air travel demand might plateau from 2H24e with rising recessionary risks.

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Sasseur REIT - Riding on robust consumption

  • 1Q23 tenant sales jumped 17.9% YoY. We expect FY23e tenant sales to rise by 25% given the re-opening in China, 18 days of closure a year ago and the shift in consumption towards bargains in outlet malls. 1Q23 DPU of 1.849 cents was highest since listing.
  • Stable income base guaranteed by the sponsor with 3% annual rental escalation provides a cushion 5.4% dividend yield from this fixed component alone. Potential accretive acquisition of Xi’an asset drive DPU up by 4%.
  • We initiate coverage with a BUY recommendation on Sasseur REIT and a DDM-based target price of S$0.90. Accretive inorganic growth, the better-than-expected tenant sales growth are potential re-rating catalyst and attractive yield of 8.7% paid quarterly.

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We highlight UOB’s ($27.84, down 11 cents) latest investor’s presentation that was held recently, where UOB highlighted their strengths by stating that it had strong Common Equity Tier 1 capital adequacy ratio of 14.0% as at 31 March 2023. It also boasts diversified funding and sound liquidity, with 83.3% loan/deposit ratio. UOB has strengthened it’s coverage, with general allowance on loans (including RLAR) covering 1.0% of performing loans. Currently as a holistic regional bank, with full control of overseas subsidiaries, UOB has entrenched domestic presence and deep local knowledge to address needs of their targeted segments and will focus on profitable niche segments and intra-regional flows.


UOB’s market cap stands at S$46.9bln and trades at 8.1x forward PE and 1x PB. We continue to favour UOB (and by extension OCBC) as it’s valuations are much cheaper than DBS comparatively. On P/B terms, UOB and OCBC at 1x is more attractive than DBS’ 1.4x. UOB has also restarted buying back shares(72K a day) together with OCBC (400K a day) recently around current market prices but not DBS. On dividend yields, while OCBC is most attractive at 6.5%, UOB at 5.8% is still higher than DBS at 5.5%. Lastly, UOB’s growth rate at 26% for FY23 should be the fastest amongst the 3 banks as a result of the integration of their acquisition of Citigroup’s SE Asian franchise. Based on these few factors, we thus maintain our preference for UOB & OCBC over DBS.

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