• UOB Kay Hian's monthly alpha picks continued to do well in April, rising 5.2% m-o-m on an equal-weighted basis and outperforming the STI’s 0.6% increase. • Now, the broker has added Beng Kuang Marine and Oiltek to the portfolio for their strong earnings outlook. This follows Beng Kuang Marine’s acquisition of the remaining of ASOM and Oiltek’s recent landmark RM1.4b Sustainable Aviation Fuel project win. • But the stock with the highest potential upside in the portfolio is Hong Leong Asia (see image):  • Hong Leong Asia supplies, among other things, ready-mix concrete, a key ingredient for the construction boom in Singapore. It also owns a stake in a Chinese company -- New York-listed China Yuchai -- which manufactures, among other things, power generators for the marine sector and data centres. It is planning to spin-off a subsidiary on the HKSE. All in all, Hong Leong Asia (market cap: S$2.2 billion, +22% ytd) has multiple tailwinds. • Read UOB KH's take below. For the broker's take on its other stock picks, click on the report link ..... |
Excerpts from UOB Kay Hian report
Analyst: Adrian Loh
• Robust results. Hong Leong Asia (HLA) reported 2025 results that missed our admittedly aggressive estimates but met consensus numbers.
Free cash flow more than doubled to S$481m, reflecting stronger profitability and working capital normalisation. The company declared a DPS of S$0.05 which was a 25% increase from 2024’s S$0.04. |
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• Strategic bolt-on acquisition. At end Apr-26, HLA announced that it had acquired Yong Tai Loong (YTL), a privately-owned 60+ year-old architectural building products company, for S$90.7m in cash, implying an acquisition PE of 4.3x.
According to the company, the deal is immediately accretive with pro forma 2025 EPS (assuming the deal had been completed on 1 Jan 25) rising by 18.6% from S$0.1508 to S$0.1789, excluding one-off items.
YTL is one of only five HDB-approved household shelter suppliers.
YTL has >100 construction company clients, two manufacturing facilities in Singapore, and importantly, its status as one of only five HDB-approved household shelter suppliers makes this a high-quality, defensible business, in our view.
• Recent announcement of an IPO in Asia’s hottest market. HLA’s 48.7%- owned subsidiary China Yuchai International (CYD US, Not Rated) announced that its 71.4%-owned subsidiary, Guangxi Yuchai Marine & Genset Power (MGP) has filed to list on the Hong Kong Stock Exchange.
MGP manufactures five types of power generators: marine, light-, medium-, heavyduty and large engines.
Its high-growth products, as mentioned before in prior research notes, are the heavy-duty and large engines which are used by data centres as back-up power.
 Adrian Loh, analystAfter the YTL acquisition, our SOTP-based target price for HLA rose to S$4.90.The company trades at 2027F PE and EV/EBITDA of 15.5x and 7.6x respectively. Its ex-cash PE for 2026 is even lower at 11.5x, based on our 2026 net profit estimates, while delivering an ROE of 12.4%. |
Share Price Catalyst
• Event:
a) Newsflow on MGP’s valuations as it heads towards its IPO,
b) continued strong sales performance from its powertrain solutions segment,
c) slow but steady sequential earnings recovery from its building materials segment in 2H25, and
d) further value-unlocking initiatives at both the HLA and CYD levels.
• Timeline: Six months.
→ See also: Immediately Accretive: The "Blast-Resistant" Acquisition Boosting HONG LEONG ASIA Earnings by 19%
