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Yangzijiang Shipbuilding
Order potential
■ Tradewinds and Clarksons suggest that Yangzijiang Shipbuilding (YZJ) secured order wins of 16 vessels, estimated to be worth US$2.29bn.
■ YZJ’s shipping segment could see recurring cashflow due to high bulk carrier demand and locked-in charter contracts, in our view.
■ YZJ is our SG top pick. We think share price weakness presents opportunity
to buy. Add; TP of S$1.63, based on 10x CY23F P/E (2-year average).
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Banks
Riding the continuous uptrend in OPR
■ On 8 Sep, BNM raised the OPR by another 25bp to 2.50%, the third 25bp hike in the benchmark policy rate in three consecutive MPC meetings.
■ We estimate that every 25bp hike in OPR would increase banks’ net profits by circa 2.1% (ranging from 0.2% for Affin Bank to 7.6% for Bank Islam).
■ We reiterate our Overweight call on banks as we expect banks’ net interest margins to expand in 2H22F and 2023F amid the OPR upcycle.
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Civmec (CVL SP)
FY22: Results Above Expectations; Positive Outlook For Future Growth
Civmec’s FY22 net profit of A$51m (+47% yoy) beat our expectations by 13% due to robust revenue growth across most sectors and net margin expansion. Dividend also exceeded our expectations by 20%, with a full-year DPS of 3.0 A cents (+50% yoy), representing a dividend yield of 4.7%. Civmec remains positive on its future outlook given the strong tendering opportunities across all the sectors in which it operates.
Maintain BUY with a 9% higher target price of S$1.18.
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OM Holdings (OMH MK)
Gearing Up To Capture Price Rebound Effect In 2023
Reinitiate coverage with BUY. OMH is set to achieve a multi-year profit bonanza with expanded capacity, as hydro-powered smelters’ cost advantage has significantly widened vs fossil-fuel dependent global competitors. We believe ferroalloy prices have bottomed, currently standing below some global producers’ cash costs.
Note that 1H22 core earnings surged over fourfold mainly due to strong ferroalloy prices, backed by a structural supply shortage amid global decarbonisation. Target price: RM3.53.
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Sembcorp Industries (SCI SP)
Greener than ever
Cut TP to SGD4.00; lifts ESG with sale of SEIL stake
SCI has eased ESG concerns by the sale of Sembcorp Energy India Limited (SEIL) to Tanweer Infra fund1 for SGD2.1b via a 15-year DPN.
We think that this sale is positive on a pro-forma basis given it is strategically imperative for SCI to progress towards being a greener company, while keeping earnings stable and its balance sheet strong. Our FY22/23 earnings cut by 12%/37% and SOTP TP reduced to SGD4.00 from SGD4.50.
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Inari Amertron (INRI MK)
RF segment likely to thrive in 2H22
Remains our top sector pick; maintain BUY
A selling price freeze on Apple’s recent entry-level flagship smartphone launches and the key RF segment customer’s positive 4Q guidance augurs well for INRI moving into 2H22 (historically the stronger half).
We maintain our earnings estimates, BUY call and TP of MYR4.14 (pegged to 29x FY24E PER, at +0.5SD to the LT mean). INRI remains our top M’sian OSAT pick.
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