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UOB KAYHIAN |
UOB KAYHIAN |
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Kimly (KMLY SP)
FY24: Strategic Expansion Amid Intensified Competition And Cost Pressures
Kimly’s FY24 results were below expectations, with both revenue and core PATMI at 97%/90% of our forecasts respectively. Its higher total dividend of 2.0 S cents per share translates to a 75% payout ratio. Revenue increased marginally from new store openings, offset by underperforming existing stores. Rising operational costs continue to hurt margins, but management continues to expand its outlet network and improve efficiency. Maintain HOLD with a trimmed target price of S$0.34 (S$0.35 previously).
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Gaming – Malaysia Not The Best Year, But Most Negatives Priced In
Several factors such as KLCI exclusion for the Genting group, NFOs’ flattish ticket sales, and the broad market’s impressive returns have caused fund flows to divert away temporarily from the Malaysian gaming sector, due to valuations being de-rated. Nevertheless, the sector’s appealing valuations, earnings growth and lush dividend yields still resonate well with our investment foundations. We expect a meaningful turnaround in 1H25. Maintain OVERWEIGHT. Top picks: GENM, RGB.
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UOB KAYHIAN |
LIM & TAN |
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Property – Malaysia 3Q24 Results Largely In Line; Catalytic Themes Shaping 2025
The sector’s 3Q24 core net profit growth met expectations, with two companies exceeding and one falling short. Looking ahead to 2025, we expect the sector’s core net profit growth (+17% yoy) to outpace revenue growth (+10% yoy), backed by higher margin land sales and industry properties. Top picks: Lagenda and IOIPG. We also like developers with data centre exposure, such as Mah Sing and Eco World.
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Bloomberg reported that China’s central bank expanded its gold reserves in November, ending a six-month pause in purchases after prices for the precious metal rose to a record.
The strength in gold prices will be beneficial for CNMC Goldmine (S$0.255, unchanged), a gold mining company with operations in the state of Kelantan, Malaysia. CNMC’s market cap stands at S$104 mln and currently trades at 8.8x annualized PE and 1.8x PB, with a dividend yield of 4-5%. CNMC is currently on track to report their best performance since 2016, with net profit back then coming in at US$9.1mln vs 1H24’s net profit coming in at US$4.4mln with an average realized gold price at US$2,266/oz. Given gold now sits above US$2,600/oz and that CNMC sells its gold at the spot rate, we believe the higher average realized gold spot rate can contribute significantly to their bottom line, assuming the gold volume extracted remains constant. With CNMC increasing their production capacity that will be funded internally and coming online by 1H25, CNMC should be able to maintain its earnings growth momentum assuming gold price remains stable. Maintain BUY on CNMC. |
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LIM & TAN |
MAYBANK KIM ENG |
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The Straits Times reported that global ratings agency S&P has placed Singapore Post (S$0.575, down 1.5 cents) on CreditWatch negative, following a change in its future strategy and the sale of its Australian business. On Dec 2, the postal service provider said it has entered a share purchase agreement to divest its Australian business at an enterprise value of A$1 billion (S$870 million). Singapore Post’s market cap stands at S$1.3bln and currently trades at 20x forward PE and 0.9x PB, with a dividend yield of 2%. Our target price stands at S$0.64, representing 11.3% upside from current share price. Proceeds will be used to pare off their heavy debt, reducing interest expense and a portion of the proceeds may also be used to pay special dividends. We continue to await the review and reset of SingPost strategy following the completion of this sale. We maintain an “Accumulate on Weakness” rating on SingPost.
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Singapore Post Ltd (SPOST SP) BUY on weakness – debt rating irrelevant
Maintain BUY with a TP of SGD0.77 We believe that the recent S&P move to place SingPost on CreditWatch negative following the sale of its Australia business is irrelevant, as we believe that further non-core assets will be monetised and debt likely pared down in the near term following further asset sales. With the sale of its Australia business coupled with its existing cash position, SingPost’s cash position will be bumped to SGD1.3bn, more than the existing SGD1.1bn debt which could be paid off if needed. We believe the focus should be on further monetisation with special dividends as the reward.
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