ANALYSTS SAY: Buy, Sell, Hold (15 Nov)

UOB KAYHIAN

Sembcorp Industries
Acquisition of another 1.38GW of renewable assets
SINGAPORE | ENERGY | UPDATE

 Sembcorp Industries (SCI) announced the acquisition of 1.38GW of renewable assets in China and India.
 The acquisition of BEI Energy and Vector Green will be accretive to earnings upon completion in 1Q23 as it will be funded by debt and internal cash

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ComfortDelGro Corporation (CD SP)
3Q22: Slightly Below Expectations; Better Fundamentals Dragged By Higher Costs

Despite reporting higher 9M22 revenue (+8% yoy) and PATMI (+31% yoy), CD’s 9M22 results were slightly below our expectations as margins start to compress. The Public transport services segment reported higher revenue but rising wage costs and lower bus service revenue impacted profitability. With the relaxation of most COVID-19 measures in Singapore, pent-up demand and taxi commissions gave taxi revenue and earnings a boost. We maintain BUY but with a lower target price of S$1.59.

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UOB KAYHIAN

Sembcorp Industries (SCI SP)
Full Steam Ahead With Two Renewables Acquisitions

SCI announced the acquisition of 390MW of net solar assets in China and a portfolio of 583MW of solar and wind assets in India. On a gross installed capacity basis, this would increase the company’s capacity from 7.2GW to 8.5GW which is not far from its 2025 target of 10GW. SCI disclosed that these assets were bought at “low teens PE multiples” which we view as fair. Maintain BUY. Target price: S$4.10.

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First Resources (FR SP)
3Q22: Results Beat Expectations

FR’s 3Q22 results beat expectations on strong ASPs, lower costs and lower effective tax rates. Downstream margins may not have been as strong as we expected but would remain healthy supported by lower feedstock prices. 4Q22 earnings are likely to remain strong as FR’s CPO ASPs may be higher than the industry’s, and also due to FR’s larger inventory drawdown and lower cash cost. Downgrade to HOLD with a higher target price of S$1.85. Share price went up by 16% since our last upgrade, and we reckon the good results have been priced in. 

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UOB KAYHIAN

Yangzijiang Shipbuilding (Holdings) (YZJSGD SP)
Valuations Starting To Look Stretched; Downgrade To HOLD

YZJ’s 3Q22 update showed solid project execution with continued timely delivery of its customers’ ultra-large containerships. After its strong share price performance, the company’s valuations now appear stretched – and with its yard capacity full until at least 2H25, further new-order wins may not drive YZJ’s share price higher. We believe much of the good news has been captured and thus downgrade YZJ to HOLD. We roll forward our valuation year to 2023, resulting in a fair value of S$1.55.

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First Resources (FR SP)
An outstanding 3Q performance

4Q22 results likely weaker QoQ
3Q22 core PATMI beat expectations on strong output, forward sales with higher CPO ASP locked-in previously, export levy exemption since mid-July, and lower-than-expected unit cost of production. 3Q’s stellar performance is unlikely to be repeated in 4Q although some forward sales remain. BUY with a new TP of SGD1.79 on 11x FY23 PER, its -1SD of 5Y mean (previously SGD1.62 on 10x FY23E PER at -1.5SD of its 5Y mean) on reduced regulatory risk. BUY for its attractive valuation and dividend yields. 

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