buy sell hold 2021




Oversea-Chinese Banking Corp (OCBC SP)
2Q22: Higher CASA Ratio Enhances Sensitivity To Rising Interest Rates

OCBC demonstrated heightened sensitivity to rising interest rates with NIM growing 16bp qoq to 1.71% in 2Q22 aided by: a) strong pass-through from the Fed’s rate hikes to domestic interest rates, and b) strengthened funding franchise with CASA ratio improving 13ppt to 60.9% over the past three years. This is the second consecutive quarter of excellence in execution with ROE above 10%. OCBC provides dividend yield of 4.7%/5.2% for 2022/2023. Maintain BUY. Target price: S$16.18.


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Building Materials – Malaysia
Benefitting From Spillover Of Commodities Rally

Aluminum, ferroalloy and tin players are expected to post strong earnings in 2Q22, which offer an attractive trading catalyst. This is due to the improved production yoy after the lockdown and spillover of record-high prices from 1Q22, benefitting from
structurally favourable supply-demand dynamics. We believe prices for the selected commodities have bottomed as current spot prices could be below some of the global producers’ cash production costs. Maintain OVERWEIGHT. Top pick: Press Metal.


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Fraser & Neave Holdings (FNH MK)
3QFY22: Malaysian Operations Support Decent Growth

3QFY22 was supported by Malaysian operations. Well-sustained demand amid price adjustments and opex discipline lifted margins. Contrastingly, Thailand’s ASP revision saw a mixed performance as earnings were weighed further by a weakening Thai baht.
Downside appears more than priced in with valuations now trading below -2SD to its five-year mean PE. Maintain BUY on F&N with a higher target price of RM25.60.
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North-South winner?

Shifting supply chains, rising NIMs to drive growth

OCBC’s 1H22 earnings were ahead of expectations. A strong uptick in NIMs contributed and we expect further improvements to flow through in 2H22.
While asset quality remains benign so far, slowing macro conditions and higher borrowing costs could raise provisioning risks going forward, we believe. Nevertheless, the Group’s gearing towards North-South supply chains and wealth flows provides medium term growth visibility, whilst a China re-opening could be a near-term upside catalyst. Raise TP to
SGD14.39. Maintain BUY.


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Asset quality staying resilient

■ Wealth management could remain lacklustre in 2H22F, but NII growth will likely offset this. We expect c.25bp yoy NIM growth in FY22F.
■ Lowered FY22F credit cost guidance is a key positive. Onshore Mainland China real estate book (<1% of loans) is stress-tested and resilient.
■ Reiterate Add with higher GGM-based TP of S$15.50 as we factor in the more aggressive NIM expansion. Attractive entry point at c.1.1x FY22F P/BV


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Fraser & Neave Holdings
3QFY22: Hit by weak sales from Thailand

■ 9MFY9/22 core net profit of RM304.6m (-12.1% yoy) was below estimates, due to higher-than-expected input costs and weak dairy sales in 3QFY22.
■ F&N should continue to see margin pressure in 4QFY22, mainly from higher commodity prices and increase in operating costs.
■ Reiterate Add, with a lower DCF-based TP of RM25.00. 


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