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Venture Corporation (VMS SP)
Remains On Track For Growth
VMS continues to see healthy near-term demand from majority of its customers and has an experienced task force to manage the recurring component shortages. Also, its strong R&D capabilities have enabled it to redesign products to reduce dependency on parts that are in shortage. Despite the higher inflationary environment, VMS strives to maintain its net margin in the historical range of 9-10%. Maintain BUY and target price of S$22.80 (pegged to +1SD, 19.5x 2022F PE).
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REITs – Singapore
Strength Of Balance Sheet Being Stressed And Tested
The rapid surge in interest rates affects S-REITs who have not adequately hedged their cost of borrowings. We cut DCREIT’s 2023 DPU by 15% but upgrade the S-REIT to BUY after the recent 35% sell-off. MLT has only 11% of its borrowings exposed to rising interest rates. Stay invested in hospitality, retail and office REITs as reopening plays.
BUY ART (Target: S$1.31), FCT (Target: S$2.74), FEHT (Target: S$0.77) and LREIT (Target: S$0.95). Maintain OVERWEIGHT.
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Nanofilm Technologies Int'l Ltd
Reflecting 1H22F concerns
■ We think Covid-19 lockdowns in China in 1H22F led to a temporary spike in operating costs; we are also concerned about demand slowdown.
■ We lower our revenue and margin forecasts and raise our operating cost assumptions, leading to EPS downgrades.
■ Our TP falls to S$3.07 from S$3.50 previously, reflecting the EPS downgrades. |
OCBC
NIM expansion setting in
■ Quicker NIM expansion (c.9bp) and benign credit cost (c.12bp) could be 2Q22F’s bright spots amid modest market-related wealth mgmt. and treasury.
■ We watch out for updated guidance on FY22F NIMs and credit growth as well as insights to asset quality in view of heftier borrower loan repayments.
■ Reiterate Add. Current valuation of 1.0x FY22F P/BV offers an attractive entry point as NIM expansion progresses. Recession is a key downside risk
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Malaysia Banking
5% loan growth in May
Stable loans growth
Loan growth was stable at 5% YoY in May. What stood out during the month was the faster pace of credit card financing, while loan applications continued to slow. Asset quality continued to deteriorate slightly but remained relatively under control. We maintain our POSITIVE on the sector with BUYs on HLBK, RHB, AMMB, ABMB and HLFG.
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Aurelius Technologies (ATECH MK)
1QFY23 results within expectations
Results in-line; Maintain BUY
We maintain our BUY call and TP of RM2.03 for ATECH, based on its CY23 EPS of 13.7sen pegging to a PER of 14.8x, in-line with its EMS peers’ historical 5-years weighted average PER. 1QFY23 results came in at 16% of both ours and consensus full-year estimates. We consider that to be inline with expectations as we anticipate a stronger 2H, underpinned by (i) the ramp-up in production of higher-margin multicomponent integrated circuits (MCICs) for Customer F; (ii) recovery from operational disruptions stemming from component shortages; and (iii) seasonal impact, as bulk orders are usually placed after end of festive season (ie. Chinese New Year), coupled with fewer working days in 1H.
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