buysellhold july.23




Briefing takeaways: positioning for growth


■ Initial capital commitment is S$400m (STT GDC), while TM JV is funded by KKR. Singtel is not changing its FY25F dividend or growth capex guidance.

■ Singtel intends to tap on STT GDC’s global growth; we estimate c.700 MW of capacity is live (mostly in the UK/SG/India), while c.1 GW is in the pipeline.

■ Reiterate Add with an unchanged TP of S$2.90. Growing DC business could position Singtel well for longer-term re-rating potential, in our view.


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LG Electronics

Business diversification to improve margin


■ We expect LGE’s 2Q24F sales/OP to beat Bloomberg consensus estimates on strong AI air conditioner and OLED TV sales.

■ We forecast LGE’s VS division OP to grow 125%/113% in FY24F/25F, driven by more diversified sales from IVI systems, e-Powertrain, WebOS, etc.

■ Reiterate Add with a higher SOP-based TP of W160k.



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Civmec Limited (S$0.82, up 0.5 cents) has provided an update in relation to the proposed change of domicile of the head company of the Group from Civmec Limited (domiciled in Singapore) to Civmec Australia Limited (domiciled in Australia).

As previously announced on 27 October 2023, the Company entered into the Implementation Agreement with NewCo in relation to the Change of Domicile through the Proposed Transactions. The Change of Domicile will be achieved through a restructuring of the Company by way of a scheme of arrangement (the “Shareholders’ Scheme”) in accordance with Section 210 of the Companies Act

Capitalized at S$414.2mln, Civmec trades at defensively low valuations of 7.6x forward P/E and 1.0x P/B. We believe that there is scope for final dividend to be higher at 3.5 A cents, up from 3 A cents last year. Including the interim dividend of 2.5 A cents, annualized div yield is an attractive 6.5%. Civmec is on track with regards to the upcoming change in domicile from Singapore to Australia and we see it as a catalyst to secure more defence contracts from the Australian government. Bloomberg consensus 1 year target price of $1.14 implies a potential upside of 39%. Maintain Accumulate rating on Civmec shares.

We highlight the key points from SIA Engineering’s ($2.33, down 1 cent) annual report that was just announced.

Amid a strong recovery in air travel demand, global air passenger traffic volume for the year 2023 was approximately 94.0% of the 2019 pre-pandemic level compared to 68.5% in 2022. In Asia-Pacific, it reached 86.0%, up from 44.1% in the prior year. In parallel with this improvement, the global aircraft maintenance, repair and overhaul (MRO) services market grew by 31.0% year-on-year, from $77.0 billion in 2022 to $101.0 billion in 2023, reaching 98.0% of its 2019 value.

SIE’s market cap stands at S$2.6bln and currently trades at 16.6x forward PE and 1.6x PB, with a dividend yield of 3.4%. Consensus target price stands at S$2.71, representing 16% upside from current share price.


Singapore Telecommunications (ST SP)

Doubling down on data centres


Two material data centre investments 1) Singtel’s data centre (DC) arm, Nxera, yesterday announced a JV with Telekom Malaysia to build a 64MW DC in Johor Malaysia. 2) Singtel to invest up to SGD684m in ST Telemedia Global Data Centres (STT GDC) through a KKR-led consortium. 



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Dyna-Mac (DMHL SP)

Robust FPSO market spurs growth


Maintain BUY with a higher TP of SGD0.52 We expect Dyna-mac’s 50% capacity expansion, high operating leverage and doubling of its orderbook to SGD896m should enable it to reap better net margins as FPSO builders and operators continue to enjoy high prices and rates. We lift our FY24E PATMI by 24.7% and FY25E by 26.9% and raise our TP to SGD0.52, based on a 15x FY24E P/E, from SGD0.46. We believe Dyna-Mac is a key beneficiary of this multi-year FPSO upcycle and it remains one of our Top Picks in the SMID space.



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