buy sell hold 2021



Singapore Banking Monthly

Singapore interest rates stagnate


 May’s 3M-SORA was up 1bp MoM to 3.61%, 3M-HIBOR was up 82bps MoM to 4.41%. HIBOR is down 88bps this year.

 Singapore domestic loans dipped 5.86% YoY in April, below our estimates. Loans previously contracted at this magnitude was in 2016. The CASA balance dipped slightly to 18.8% (Mar23: 18.9%).

 Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive at 5.7% with upside surprise in dividends due to excess capital ratios and push towards higher ROEs. SGX is another major beneficiary of higher interest rates (SGX SP, BUY, TP S$11.71).


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Strong support from pent-up demand


■ reported 1Q23 revenue of Rmb9.2bn (+124% yoy, +83% qoq), beating our expectation, thanks to strong pent-up demand for domestic travel.

■ Non-GAAP net income was Rmb2bn in 1Q23 (vs. a loss of Rmb36m in 1Q22), beating our expectation, owing to a strong topline and effective cost-control measures.

■ Management remains positive on the growth trajectory for 2Q23F and FY23F, driven by pent-up demand for domestic travel and recovery in outbound travel capacity.

■ We expect FY23F revenue to grow 104% to Rmb41bn (beating FY19 revenue by 15%) and FY23F non-GAAP net profit margin to reach 15.4% (vs. 18.3% in FY19).

■ Reiterate Add with a higher DCF-based TP of HK$397, as we believe will benefit from the recovery in outbound travel capacity and increase in travel demand. 


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Farm Fresh Berhad

Time to reflect


■ We retain our Hold call on Farm Fresh (FFB) with a reduced target price of RM1.37 (previously RM1.60) following a review of our estimates.

■ Margin repair in 2QFY24F should offer valuation support but a clear trajectory back to higher ROEs will, in our view, be key to a significant rerating.

■ Valuations reset to GGM model (prev. 28x CY24F P/E) to better reflect future profitability – 16.5% ROE, 8.5% COE, 5% LT. growth.


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Valuetronics (VALUE SP)

FY23: Slightly Above Expectations, Conservative Amid Global Headwinds


FY23 net profit of HK$123m (+8.3% yoy/+12.6% hoh) was slightly above our forecast, forming 106% of our full-year estimate, due to a lower-than-expected revenue decline. VALUE's outlook remains conservative as it expects the ripple effect of the supply chain bottlenecks to last beyond 2023. Other uncertainties include the Russia-Ukraine conflict, US Fed rate hikes and rising inflationary pressures. Maintain HOLD with an 8% higher PE-based target price of S$0.56 ($0.52 previously). 


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ST Engineering ($3.65, up 1 cent) disclosed on 08-Jun-23 that its subsidiary, ST Engineering iDirect, a global leader in satellite communications, had announced that service provider Marlink has upgraded to the latest Dialog® 2.5.1 release to take full advantage of its global network, increasing performance and simplifying the operations of customers across several markets. 

Overall, we continue to like ST Engineering due to its:- (i) expected earnings growth forecasted for FY23 and FY24 where contributions from Transcore would start becoming more significant; (ii) attractive and sustainable dividends; and (iii) robust order book. For FY23F and FY24F, we are anticipating its net profit to come in at S$579.5mln (+8.3% yoy) and S$677.6mln (+16.9% yoy) respectively. Recommend ACCUMULATE.



HM Sampoerna (HMSP IJ)

An Encouraging Year Ahead With Potential Recovery In NPAT


2023 could be an encouraging year for cigarette manufacturers such as HMSP. This is due to: a) the excise tax increase for 2023 being mild at about 10%, b) a potential recovery in consumption volume, c) potential margin expansion as pulp and plastic packaging prices decline, and d) pricing power returning to producers. Cigarette consumption up-trading could happen in 2023. HMSP has completed the Smoke Free IQOS factory. Maintain BUY with a new target price of Rp1,300. 


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