Nanofilm Technologies Int'l Ltd A look at ESG
■ Nanofilm released its second Sustainability Report (SR) on 20 May 2022. ■ Some Environment, Social and Governance (ESG) data points for FY21 were revealed and 2030 goals were set for certain ESG factors. ■ Reiterate Add. Its Sydrogen (clean, renewable energy exposure) business segment offers exposure to the E pillar in the ESG framework.
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VS Industry Bhd Long-term growth prospects intact
■ We see a stronger FY23F from an alleviation of supply chain disruptions and a ramp-up of box-built assembly for newly-secured product models. ■ While near-term sentiment could be weak due to concerns over demand slowing down, we believe VSI’s long-term growth prospects are intact. ■ We continue to like VSI for its diversified clientele and as it is a key beneficiary of manufacturing diversions by OEM/brand owners.
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STRATEGY – SINGAPORE
Alpha Picks: Add ComfortDelGro, DBS And Yangzijiang, Remove OCBC
Our Alpha Picks outperformed the STI in 2Q22, declining by 3.1% vs the market’s 9.0% fall. For June, however, we marginally underperformed the STI by 0.5ppt. For Jul 22, we add ComfortDelGro due to the potential for better business conditions in 2H22, and also Yangzijiang as we like its very inexpensive valuations and its defensive business for at least the next 12-18 months. We have taken out OCBC and replaced it with DBS as the latter is the most sensitive to interest rates in the Singapore banking sector
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SECTOR UPDATE REITs – Singapore
S-REITs Bi-Weekly Updates (16-30 Jun 22) S-REITs outperformed the STI by 3.3% in June despite fears of elevated inflation and a slowdown in economic growth. The sector was able to outperform the broader market due to its defensive characteristics and stable cash flows. The underlying real estate also serves as a hedge against inflation. Focus on recovery from 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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First Resources (FR SP) Upgrade to HOLD as negatives largely priced-in
Govt. achieved its target to bring down CPO price We cut FR’s TP to SGD1.62 on lowered 10x FY23 PER, its -1.5SD 5Y mean (previously SGD1.94 on 12x FY23 PER, its -1SD 5Y mean) due to Indonesia’s regulatory risk. Nonetheless, we believe FR’s recent share price sell-off has largely priced in the regulatory risk relating to continuing uncertainty with regards to its export policy. As the government has achieved its target, this should limit further downside risk from hereon. With current stock price in line with revised TP, we upgrade FR to a HOLD (from SELL)
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UEM Sunrise (UEMS MK) Earnings recovery could be hit by sector headwinds
Growing risks in the sector; D/G to SELL UEMS has been focusing on rectifying internal issues over the last one year and it has come out with several strategies. These include the divestment of non-core assets and improvement of cost structure. We maintain our earnings forecasts. As we see more headwinds in the sector that will likely linger into 2023, we raise the discount on PBV for property stocks under coverage. We now value UEMS at MYR0.27 (or 0.2x FY23 PBV, vs. 0.3x before) as we roll over our base year for valuation. D/G to SELL.
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