ANALYSTS SAY: Buy, Sell, Hold (19 May)

MAYBANK KIM ENG

Frencken Group Ltd (FRKN SP)
Supply chain challenges hurt margins

1Q22 miss due to lower-than-expected margins
1Q22 PATMI of SGD12.8m (-12.6% YoY) fell short of our and consensus estimates, reaching only c.19% of our full-year forecast, due to lowerthan-expected margins. We cut F22-23E earnings by 18-21% to factor in higher costs. Lowering TP by 27% to SGD1.80 as we reduce our target multiple from 15.5x FY22E P/E to 14x amid cost headwinds (SG peers trading at 13.7x). Retain BUY as we believe Frencken’s multi-year growth story of value-add via new products across several customers is intact.

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Netlink NBN Trust (NETLINK SP)
Resilient Core Business

FY22 results slightly below expectation
FY22 PAT and EBITDA at SGD91.3m (-3.7% YoY) and SGD266.9m (-1.2% YoY) were below MIBG/consensus expectations, accounting for 83%/98% of our FY22 forecasts. This was mainly due to a re-measurement loss of SGD12.4m relating to finance lease receivables. Excluding this loss, we calculate EBITDA rose by 4.8% YoY. We think the current rising interest rate environment will raise operational costs, lower valuations and reduce the appeal of bond-like equities such as Netlink. We believe there is also risk that the upcoming regulatory revision may lower prices and revenue.
However, dividends can be maintained through lower capex or additional financing. As such, we have reduced our FY23E earnings by 5.2% on higher interest costs assumptions. Maintain BUY with a 7% lower TP of SGD1.05 for potential total shareholder return upside of 12%.

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CGS CIMB

CGS CIMB

CSE Global
Slower path to recovery

■ 1Q22 revenue of S$119m (+6% yoy) was driven by record-high infra contribution (+57% yoy). Energy revenue saw a decline (-16% yoy) in 1Q.
■ Supply chain disruptions should continue to weigh on project executions. We cut our FY22-24F EPS by 3-11% to reflect lower segment margins.
■ Huge order book of S$344m in 1Q22 (vs. 4Q21: S$229m) should help to support earnings visibility. We keep our Add call, with a lower TP of S$0.54.

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Sembcorp Marine
Clearing headwinds

■ SMM expects 1H22 to be significantly better than 1H21 (loss: S$647m), but we think returning to profitability could take some time.
■ SMM is venturing into niche defence segment with repair jobs from the US navy, while finalising contract for a Brazilian naval petrol vessel by Jun 22.
■ Net orderbook rose 34.6% qoq from S$1.3bn in 4Q21 to S$1.75bn in 1Q22.
We project S$2bn order wins for FY22F. Reiterate Hold with a S$0.09 TP.

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