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Sembcorp Industries
1st solar development in Middle East
■ We estimate SCI’s award of a 500MW solar venture in Oman to add c.S$8m10m of net profit p.a., assuming ROE of 8-10%.
■ This is an 80%-20% venture with Jinko Power Technology, a Chinese solar PV solution company with presence in the Middle East.
■ The venture is awarded a 20-year PPA with Oman Power and Water Procurement Company to build, own and operate the Manah Solar II project.
■ This brings SCI’s gross renewable energy capacity to 10.3GW beating its target of 10GW by 2025F. Reiterate Add and TP of S$5.12.
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Hong Leong Asia
Revving up for a better FY23F
■ FY22 core PATMI of S$44m (-11% yoy) disappointed on weaker building materials margins, while Yuchai was hurt by Covid-impacts in China.
■ Tailwinds are in place for a cyclical rebound for Yuchai in FY23F, in our view. We are also cautiously optimistic on stronger earnings for BMU segment.
■ Reiterate Add and TP of S$1.10 as we expect HLA to enjoy strong PATMI growth in FY23F, with both key segments enjoying better prospects.
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China Yuchai International
Revving up for a better FY23F
■ FY22 net profit of Rmb219m (-20% yoy) was in line with expectations. Weak topline was cushioned by margin expansion.
■ We believe tailwinds are in place for a cyclical rebound with China’s Covidpolicy pivot and potential stimulus measures to support economic recovery.
■ We expect margins to also recover further on better scale. Maintain Add.
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Sembcorp Industries (SCI SP)
Energised For The Next Phase Of Growth
SCI has provided a bullish business outlook for 2023 and beyond. Near-term share price catalysts include further M&A for renewables assets and an upward adjustment of the company’s targeted gross installed capacity for its renewables segment. Hydrogen was a topic of discussion with SCI’s current assets in the Middle East potentially providing a good base from which to grow in this space. Maintain BUY. Upgrade target price to S$4.64.
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Oil & Gas – Malaysia
Petronas 2022: Capex Still Needs To Play Catch-up; Opex Is A Risk
Petronas’ 2022 capex still fell short of the target by RM10b, partly due to the expensive energy transition capex allocation. Overall this implies >RM40b of O&G upstream/maintenance capex gap to catch up. We remain bullish on the sector outlook, as Petronas’ 2023 capex may exceed the RM60b target. However, sector valuations have priced in this expectation, but not the risk of rising opex. We suggest a narrower trading range, or invest in stocks with strong execution/earnings catalysts.
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Bermaz Auto (BAUTO MK)
9MFY23: Above Expectations, Strong Momentum To Continue In 4QFY23
BAUTO’s 3QFY23 earnings exceeded our and consensus expectations. The positive variance was mainly attributed to stronger-than-expected earnings due to higher sales volume. Despite the end of SST exemption, order backlog remained robust, peaking at 7,000 units as of Mar 23, and new bookings returned to pre-pandemic levels (1,300 units monthly). Raise FY23-25 earnings forecasts by 18-31% to reflect higher car selling prices. Maintain HOLD. Target price: RM2.30.
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