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SEATRIUM
Upside Kept In Check For Now
Seatrium has had a spate of positive announcements in the past few months, including the confirmation of its third €2b HVDC contract with TenneT and the LOI for BP’s Kaskida field. However, the announcement of a new investigation by the Singapore authorities into Operation Car Wash has capped its share price upside in the near term, in our view. Maintain BUY with target price lowered to S$2.35.
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MTR Corp (66 HK) - Entering a new capex cycle
• Steady recovery in patronage
• Ample property development profit booking in 2024
• Lowering fair value estimate
With a large development property completion this year, we expect MTR to have strong underlying profit growth in 2024. Recent abolishment of property measures would benefit MTRC given its sizeable residential landbank. MTRC is entering a new CAPEX cycle with an estimated CAPEX of HKD88b during 2024-26 on the back of more maintenance CAPEX and new HK railway projects. Slower land sales could lead to possibility of an expanding cash flow mismatch.
That said, management reiterated its steady and progressive dividend policy. Financial position remains comfortable with net gearing at 26.5% as of end 2023. 67% of the debts were fixed while average interest cost was 3.5% in 2023. Interest coverage stayed healthy at 9.8x. We lower our fair value estimate to HKD37, set at a 11% discount to the estimated net asset value (NAV), which is at historical average.
We estimate MTRC’s NAV based on the following: i) discounted cash flow (DCF) on railway business based on a weighted average cost of capital (WACC) of around 6.5% and a terminal growth rate of 2.5%; ii) DCF on China rail networks; iii) DCF on its property development business and rental capitalisation on its investment property; iv) a 15x price-to-earnings (P/E) multiple on its rail-related businesses.
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Sime Darby Bhd
Solid Malaysia outlook; attractive valuations
■ Malaysia’s construction upcycle to support industrial segment. Australian orders coming off peak levels but remain strong.
■ 5M24 Malaysian TIVs robust, albeit below 2023 peaks. Fuel subsidy rationalisation may accelerate EV/hybrid adoption; SIME is a key beneficiary.
■ Reiterate Add with a higher SOP-derived TP of RM3.22, employing 13x CY25F P/E for continuing operations and RM0.07 NAV per share for UKHE.
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ASEAN Strategy
The road ahead for data centres in ASEAN
■ We see Malaysia and Indonesia emerging as prime beneficiaries in ASEAN of strong global demand growth for new data centres amid AI proliferation.
■ Our report discusses implications for relevant sectors in the region, such as telecom, real estate, power producers, tech manufacturing and construction.
■ We prefer players involved in the value chain of data centre construction over operators as they also benefit from the surge in investment by hyperscalers.
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ST Engineering (STE SP)
Deepening DC footprint Building new 7.5MW data centre; maintain BUY
STE is constructing its fourth data centre (DC) in Singapore with installed IT capacity of 7.5MW. The green, secure, AI-ready DC will boost STE’s DC footprint to > 30MW with a cumulative investment of SGD400m. The new DC will strengthen STE’s digital business offerings.
With capex spread over three years, we view the development as augmenting group revenue while keeping enough cover for the dividend. We raise our FY25-26 estimates by 2-3% and our SOTP-based TP to SGD4.60 from SGD4.30 and reiterate BUY.
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Plover Bay Technologies (1523 HK)
Bringing Unbreakable Connectivity At 9% Dividend Yield
Plover Bay is an engineering-focused SD-WAN router provider that brings reliable connectivity with its proprietary technology SpeedFusion and the growing Peplink ecosystem. We forecast a three-year net profit CAGR of 22% in 2024-26 as Plover Bay rides on its growing customer base and rising subscription revenue. We expect a dividend yield of 7.4%/9.0% in 2024/25 respectively on solid cash flow generation and a generous dividend payout. Initiate coverage with BUY. Target price: HK$5.94.
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