|Nanofilm Technologies International (NANO SP)
Expect Higher Expenditures To Fund Future Growth
We expect Nanofilm to deliver earnings of S$47m for 2H21 (vs S$18m in 1H21) with the easing of supply chain issues and seasonally stronger demand. However, we remain cautious as: a) we expect Nanofilm to incur higher costs to enhance its future growth, and b) Nanofilm’s PE multiple is reasonably higher vs its peers’, which could cap its upside in a rising interest rate environment. We trim our 2022F EPS by 13%. Maintain HOLD with a 31% lower target price of S$2.67 (22x 2022F PE).
Automobile – Malaysia
MAA’s December TIV rebounded to 65,184 units (+8.6% mom) but 2021 TIV fell 3.9% yoy to 508,911 units for the second consecutive year. Our new 2022 TIV forecast of 605,000 units implies a strong 21% growth with the continuation of the sales tax exemption extension until 30 Jun 22, production ramping up and vehicle deliveries to fulfill backlog alongside new orders. Maintain MARKET WEIGHT.
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Running with Banks
The STI is now a nose above pre-pandemic levels.
The Banks sector has led the charge rising 7-12% YTD. Expectations of Fed tightening and the predictions of 4-8 rate hikes is helping to drive momentum, we think. Indeed, analyst’s forecasts currently pencil in flat operating profits for 2022. Economies are re-opening regionally, which should drive loan demand. Net interest margins, which have been struggling due to low rates, are likely to see expansion as banks price up their loans and move excess deposits there. At the same time, higher transaction volumes could be a boon for fee income. Combined, these drivers would enable earnings upgrades. Better asset quality should support provision write-backs as well. We also see the banks using their excess capital to deepen their franchises.
UOB’s purchase of Citi’s SE Asia assets is an example, and we may see DBS following this path in North Asia. What can derail this rosy picture? Risks in the Chinese property sector need to be watched.
While the Singapore banks have only small exposure, a collapse of this sector could drive NPLs higher and trigger dips into provisions, hurting sentiment. Nevertheless, we think at current valuations, the UOB, OCBC, DBS continue to offer value.
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ARA LOGOS Logistics Trust ($0.895, up 0.5 cents) announced
that in connection with the proposed merger with ESR-REIT
($0.47, unchanged) that a supplemental letter amending and restating the Implementation Agreement (the “Amended and
Restated Implementation Agreement”) has been entered into.
This Revised Scheme Consideration by ESR-REIT represents an increase of 2.1% in cash consideration and 5.8% in
consideration units for ALOG unitholders.
At $0.895, market cap of ARA LOGOS Logistics Trust is
$1.3bln, trailing 12-mth P/E is 6.1x, P/B is 1.2x and distribution
yield is 5.4%. At $0.47, market cap of ESR-REIT is $1.89bln,
trailing 12-mth P/E is 18.6x, P/B is 1.1x and distribution yield
is 5.6%. Given the higher off er of $0.933 (which represents a increase of 5.3% over the previous offer) and after taking
into consideration the various merits of this merger, we thus
recommend shareholders to vote in favour of the new scheme
consideration pertaining to the merger of ESR-REIT and ARA