ANALYSTS SAY: Buy, Sell, Hold (6 Oct)

UOB KAYHIAN

Yangzijiang Shipbuilding (Holdings) (YZJSGD SP)
After The Containership Boom, LNG Carriers May Be The New Hope

We highlight that YZJ could announce over US$2.4b worth of shipbuilding orders in the near term. In addition, we believe that it is in the running for a large LNG carrier order after it obtained a licence for membrane technologies. While construction of LNG carriers may lead to a mild erosion of gross margin in the medium term, the structural tailwinds, market size and potential growth are difficult to ignore, in our view. Maintain BUY. Upgrade target price to S$1.44.

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Banking – Malaysia
1H22 Financial Stability Report: Optimistic Of A Recovery

BNM has released its 1H22 financial stability report. Despite inflationary pressure on businesses and households, BNM remains optimistic that banks are still expected to register improving profitability trends. Even in a simulated severe shock scenario, the banking system’s CET1 ratio remains well above the minimum requirements. Maintain OVERWEIGHT given attractive valuations and earnings recovery.

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CGS CIMB

ST Engineering
Factoring in higher interest rates

■ Aggressive rate hikes likely to negatively impact STE’s commercial paper yield in FY23-24F upon rollover. As of end-1H22, STE had S$2.8bn of CPs.
■ We raise our FY23F weighted average interest rate assumption to 2.9% (vs. 2.2% guided by management in 1H22), and cut our FY23-24F EPS by 6-8%.
■ STE’s S$23.6bn order book and 18% FY23-24F EPS growth could be key drivers for STE’s share price to a recessionary environment. Maintain Add.

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Offshore & Marine
S$18.6bn orderbook for the combined entity

■ Both SMM and KEP secured the P-82 and P-83 FPSO contracts at US$3.05bn and US$2.8bn respectively. We think P-81 may be in the pipeline.
■ With the above, we estimate SMM’s orderbook to be at S$6.77bn and KOM’s at S$11.8bn. Together, the combined entity orderbook could be at S$18.6bn.
■ We believe this fortifies the potential merger of KOM and SMM as both yards aggressively build up order momentum. Stay sector Overweight.

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Carlsberg Brewery Malaysia (CAB MK)
Positive outlook intact

Maintain BUY with unchanged DCF-TP of MYR27.80
We believe that the outlook for the brewery industry as a whole remains positive in tandem with the reopening of the economy and the relatively high degree of product stickiness that the industry enjoys. Further sales recovery should also arise once international tourism picks up. Hence, we maintain BUY on CAB with an unchanged DCF-TP of MYR27.80 (WACC: 8%, LT growth: 3%).

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United Tractors (UNTR IJ)
Capex cycle peaked

Maintain HOLD with higher TP of IDR32,000
We raise our TP by 12.3% to IDR32,000 as we adjust our FY22E/23E EPS by 15.3%/15.6% but maintain HOLD on UNTR as we see limited upside on the stock. We believe the heavy capex cycle has passed, and earnings growth will turn negative in FY23E-25E (-19% CAGR). We also see risk for UNTR if the new proposed levy schemes are implemented. We prefer Bukit Asam (PTBA, CP IDR4,160, BUY, TP IDR5,200) due to its large domestic exposure. 

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