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REIT
Tailwinds for retail SREITs
■ November 2022’s RSV growth slowed to 8.8%, but still above 2019 levels.
■ 2023F retail sales likely to buck negative growth trend seen in previous GST hike, riding on tourism recovery, stronger F&B and home furnishing trades.
■ China’s earlier-than-expected reopening should accelerate recovery for downtown malls. Top beneficiaries are MPACT, PGNREIT, CICT and LREIT.
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Yangzijiang Shipbuilding (Holdings) (YZJSGD SP)
Upgrading To BUY As Risk-Reward Looks Attractive
YZJ’s stellar share price performance since the demerger of its debt investments arm in Apr 22 has led to recent profit-taking on the stock. With the potential for a doubling of dividends that could be announced at end-Feb 23 plus a potential US$400m new order win on the cards, we upgrade YZJ to BUY. Target price remains unchanged at S$1.55.
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UMS Holdings (UMSH SP)
A safe-haven amid uncertainty
Positive FY23E outlook
UMS’s 6-month outlook remains robust with a large order backlog from its key customer. Management said that a slightly weaker forecast by its key customer is unlikely to impact its performance. It also plans to ramp up production from the middle of 2023 at its new Penang factory with orders from a second key customer. As a result, we expect a strong 4Q22E and raise our PATMI estimates by 3% for FY23E, resulting in a higher TP of SGD1.47 (from SGD1.34) pegged to a higher 8.5x (from 8.0x) FY23E P/E, similar to our peg for its semicon peer AEM.
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Civmec Ltd (CVL SP)
Order book boost
Secured new order valued >USD330m; retain BUY
Civmec has clinched a major contract worth >AUD330m (represents more than 1/3 of our order win assumption) for the Rio Tinto Western Range Project at Rio’s Paraburdoo site in the Pilbara region of Western Australia. This lifts the group’s order book above AUD1.15b, and will provide clear revenue visibility for at least the next 12 months. We retain our Buy rating and 12-month TP of SGD0.94, still pegged at an undemanding 10x FY23E P/E. Key re-rating catalysts are stronger-than-expected order wins and continued margin expansion.
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Sembcorp Marine ($0.135, up 0.1 cent) marked the sailaway of the final unit of three identical fully battery-operated roll-on/roll-off passenger (“Ropax”) ferries, following the vessel’s handover to Norwegian ferry operator Norled AS (“Norled”). The vessel, Leikanger, marks the third and final Ropax unit built for Norled by the Group, following the handover of the sister vessels Hella and Dragsvik, which sailed off in March and July last year.
Sembcorp Marine’s market cap stands at S$4.2 bln, is loss making, and currently trades at 1.1x PB. SMM does not pay dividends and consensus
target price stands at S$0.14, representing 3.7% upside from current share price. With limited upside, we rate SMM: At Best A “HOLD”.
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Civmec Ltd (S$0.575, up 0.5 cents) announced that it has secured the award of a major contract worth more than A$330 million for the Rio Tinto Western Range Project at their Paraburdoo site in the Pilbara region of Western Australia. The iron ore project includes
Greenfields and Brownfields scope with the construction of a new Run of Mine (ROM) pad, primary crushing facility, overland conveying circuit and modifications to the Coarse Ore Stockpile (COS) and downstream conveying system.
At 57.5 cents, Civmec is capitalized at S$289 million and trades at an attractive 6x historical PE, dropping to 5.5x based on consensus
forward earnings estimates of $55 million. Dividend which has been rising steadily to 3 cents last year yields a decent 4.8%. The
addition of permanent facilities in Port Hedland and Gladstone to be developed over the next 8-14 months will allow Civmec to expand its service offerings with major energy and resources players in the region. Outlook remains strong while tendering activity across its key sectors continue to remain buoyant in FY23. We believe there is scope for earnings and dividends to surprise the market in 2023, thereby acting as a positive catalyst for its
share price moving ahead, and hence maintain a “constructive” view on Civmec as it remains amongst one of our “Alpha” picks in our stock model portfolio. (Bloomberg consensus target price of $1.06, implies a potential upside of 86%)
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