buysellhold july.23



Banking – Singapore


Donald Trump Will Be Re-elected;

BUY Banks Banks deserve to be re-rated due to their attractive 2025 dividend yields, which stood at 6.3% for DBS and 5.9% for OCBC, despite the recent run-up. The basis of the latest spike is, however, questionable as it assumes the re-election of Donald Trump would invariably lead to higher treasury yield. Maintain OVERWEIGHT. BUY OCBC (Target: S$18.35), followed by DBS (Target: S$41.40).



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2H24 Strategy: Looking For Turning Points


Given our slightly more bullish earnings expectation of a 5.6% growth for 2024 (vs 2.4% six months ago), we have upgraded our 2024 year-end target for the STI to 3,380. The index’s current valuation remains inexpensive at 2024F PE and P/B of 10.5x and 1.1x respectively. Our top picks for 2H24 are CLI, GENS, KEP, MINT, OCBC, SCI, STE, VMS and YZJSGD, with CSE, FEHT, FRKN, MPM and VALUE rounding up the small/mid-caps sector.



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DBS ($37.96, up 0.86), OCBC ($14.98, up 0.18) & UOB ($32.27, up 0.62) share prices have been performing strongly on a year to date basis, having risen 25%, 15% and 14% respectively, significantly outperforming the STI’s 5% year to date rise. In fact, the robust performance of the 3 banks have seen their weightage increase to 45% of the STI Index versus less than 40% at the end of last year. We believe their robust share price performance reflects the delayed rate cuts by the US federal reserve as coming into 2024, the US Federal reserve dot plots as well as consensus were pricing in 5 to 6 twenty-five basis point rate cuts in 2024, starting from May-June’2024. However, on a year to date basis, there has been zero rate cuts in the USA and just last night, Jay Powell commented that the US Federal Reserve can still afford to be patient in reducing interest rates in the USA as core inflation in the USA of 2.6%-2.7% is still above their target of 2%. This is despite the USA unemployment rate having risen to the 4% level last month from 3.5% earlier this year.

Based on Bloomberg consensus target price of $39 for DBS, upside is only 3%, OCBC target price of $15.30, upside potential is only 2.1%, UOB target price of $33.60, upside potential 4.1%. While including the attractive yields of 5.3%-5.7%, the upside potential for the 3 banks would be close to 10%, we prefer to “HOLD” Singapore banks at current levels given expectations that the US Fed reserve will likely start to reduce rates starting sometime in 2H’24 and accelerating the rate cuts going into 2025/2026 to combat the slowdown in the US economy and also the rising unemployment rate as inflation rates come close to their 2% targets.


We highlight the annual report of Bukit Sembawang ($3.40, down 7 cents) which was just released last night: The Group’s revenue for FY2024 was $562.0 million, an increase of 185%, compared to $197.1 million for FY2023, and profit before tax increased by 120% to $82.6 million, mainly due to higher profit recognised on development projects. In FY2024, profits were recognised mainly from the sales of LIV @ MB, The Atelier and Pollen Collection.

Bukit Sembawang’s market cap stands at S$880.3mln and currently trades at 12x PE and 0.6x P/B, with a dividend yield of 4.7%. Consensus target price stands at S$5.92, representing 74% upside from current share price. We maintain an Accumulate rating on Bukit Sembawang.


Solarvest Holdings (SOLAR MK)

Healthy earnings visibility


Awaiting CGPP EPCC projects; maintain BUY and TP Solarvest’s MYR242m outstanding orderbook as at end-FY24 provides earnings visibility into FY25E and this can extend into FY26E from potential CGPP EPCC works which could lift its orderbook by another c.MYR1b. We maintain our earnings forecasts, having already imputed MYR1b job wins in FY25E. No change to our SOP-TP and BUY call. We remain upbeat on Solarvest’s prospects in growing its orderbook and asset base amid strong demand for RE in medium to longer term.



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Healthcare – Malaysia

Defensive Position Is Unappealing For Now


Maintain MARKET WEIGHT on the healthcare sector. Despite tepid inpatient volume growth, hospitals' positive operating leverage is expected to boost earnings by 12.4% and 10.9% in 2024-25 respectively, though current valuations are lofty at 32.5x PE. Alpha IVF, with its impressive regional expansion, and Duopharma, poised for recovery after a challenging 2023, present more alluring prospects. However, amid a risk-on environment, we TACTICALLY UNDERWEIGHT healthcare, anticipating relative underperformance. Our top picks are Alpha IVF and Duopharma. 



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