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Sembcorp Industries
Limited impact from UK capped tariff
■ The UK government rolled out an Energy Bill Relief Scheme to provide a discount on wholesale gas and electricity prices for non-domestic companies.
■ Impact on SCI could be limited as we estimate UK’s net profit to be 7-8% of group’s profit, shared among Wilton assets, UKPR and battery storage.
■ We see SCI as a value pick as it trades at 7.8x FY23F P/E vs. regional utilities peers’ 14x FY23F P/E. SCI is one of our SG top picks. Maintain Add.
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Dancomech Bhd
Leader in industrial valves and equipment
■ We initiate coverage on Danco, a leading domestic player in process control equipment as at FY21, with Add and RM0.44 TP (10x CY23F P/E).
■ We project FY21-24F core net profit CAGR of 9.8%, driven by stable and recurring earnings, exclusive tie-ups with global brands and M&A potential.
■ We think current valuations are attractive at 8.6x CY23F P/E, a 17.9% discount to its net tangible assets (NTA) with net cash of 19.2 sen/share.
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Digital Core REIT (DCREIT SP)
The Spirit Is Willing But The Market Is Weak
The timing of DCREIT announcing its maiden acquisition coincided with the Fed stating that it would be persisting with its hawkish stance. Steep rate hikes are expected to continue till end-22.
We see the positive impact DCREIT acquiring 25% of the Frankfurt facility (scenario A) being neutralised by steep rate hikes on 2 Nov (75bp) and 14 Dec 22 (50bp). DCREIT provides a distribution yield of 4.9% for 2023 (KDCREIT: 5.4% and MINT:5.3%). Maintain BUY with target price at US$0.98.
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Yinson (YNS MK)
1HFY23: Core Non-EPCIC Profits Beat Expectations On O&M Adjustments
Yinson recorded higher-than-expected O&M income, as rates were adjusted to reflect higher oil price levels in 1HFY23, even though the FPSO base rates were unchanged.
Also, as FPSO Anna Nery’s delivery remains solid, its first oil may be earlier than expected (by end of FY23). Hence we raise FY23 earnings by 13%. We also factor higher contract win potential as Yinson remains the biggest beneficiary of FPSO demand. Retain BUY with higher target price of RM3.30.
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Aurelius Technologies (ATECH MK)
2QFY23 results preview
1HFY23 CNP to make up 35%-40% of our FY est
We maintain our earnings forecasts, BUY recommendation, and TP of MYR2.03 for ATECH, as we wait for its upcoming 2QFY23 results, which are expected to be released on 29 Sep.
Our TP is based on CY23E EPS of 13.7sen, pegging on a PER of 14.8x, in-line with its EMS peers’ historical 5-years weighted average PER. We expect ATECH’s 1HFY23 core net profit to come in within 35%-40% of our full-year estimate of MYR33m.
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Ramssol Group Bhd (RAMSSOL MK)
Undertaking private placement to fund tech development
Maintain BUY
Ramssol plans to undertake a private placement of new shares to fund the development of its in-house enterprise solution for a client.
We maintain our earnings at this juncture, given limited disclosures, but applaud the group’s direction to diversify its revenue base. Maintain BUY with an unchanged TP of MYR0.60, on 12.7x FY23E PER (close to -1SD its 1-Yr mean).
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