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Frencken Group (FRKN SP) 2H20: Positive Operating Leverage from Semiconductor To Continue
2H20 results were in line with expectations, with earnings of S$23.8m (+5.2% yoy) taking full-year net profit to S$42.6m (+0.5%). The semiconductor sub-segment (+60.7%) drove positive operating leverage in 2020 on accelerating demand for lithography systems. We expect the growth to be sustained on the continued development of 5G technology and the global chip shortage. Reiterate BUY on Frencken with a higher target price of S$1.72 after raising our valuation peg.
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Gamuda (GAM MK) Gearing Up In The Land Down Under
Gamuda, together with its partners, has been shortlisted for three mega projects jobs in Australia. Each package has a contract value of RM6.3b-8.3b. The rollout of local infrastructure projects ie MRT3 and PTMP is another key catalyst. Weakness in share price is an opportunity to accumulate ahead of its tender submission for MRT3 as well as the award of potential Australia mega projects contracts from mid-year onwards. Maintain HOLD with a higher target price of RM3.70. Entry price: RM3.20.
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DBS VICKERS |
DBS VICKERS |
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Ascendas India Trust A tiger with wings!
Investment Thesis Sprinting ahead of its S-REIT peers. We maintain our BUY call on Ascendas India Trust (AIT) with TP unchanged at S$1.85, implying 1.25x P/adjusted NAV. After a quiet 2020, the REIT has accelerated its acquisition pace in 1Q21 and coupled with stable SGDINR rate, we see catalysts to bring the stock higher. AIT is projected to deliver a robust DPU CAGR to accelerate to 8% in FY21-22F, driven by acquisitions. BUY!
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Fu Yu Corp FY21F Ex-cash PE of 5.6x
Investment Thesis: Attractive entry opportunity – ex-cash PE of 5.6x with improving core earnings. We believe FY20 was the bottom for Fu Yu’s core earnings as its operations were disrupted in 1H20. With the low base effect in FY20 and an improving economic situation, we are expecting core earnings to increase in FY21F. Expansion in operating margins. Fu Yu has been undertaking steps to improve its gross profit margin through the consolidation of its production facilities in China, as well as increased use of automation to improve operational efficiency. A potential catalyst that could further improve its gross profit margins is the completion of the redevelopment of its Singapore factory at end-2021. High cash level and attractive dividend yield. As at 31 December 2020, Fu Yu had a cash balance of S$106.6m, representing 48.8% of its market capitalisation. The stock is also currently trading at a FY21F dividend yield of 5.5%. Valuation: Maintain BUY with a higher TP of S$0.35. We raise our valuation peg to 13.0x (+0.5SD) FY21F earnings, from 11.8x previously as we are positive on Fu Yu’s margin expansion. Fu Yu is currently trading at 10.9x FY21F earnings, below its 4-year historical mean, and at an FY21F ex-cash PE of 5.6x
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Check out our compilation of Target Prices
