buysellhold july.23



Hong Leong Bank

Rolling up its sleeves to raise ROE


■ HLB aims to raise its ROE from 11.8% in FY6/23 to 12.0-12.5% in FY24-25F and above 12.5% in FY26F.

■ If HLB hits its ROE targets, its FY24-26F net profit would be 7-13% higher than our forecasts, translating into an FY23-26F net profit CAGR of 10.8%.

■ Reaffirm Add on HLB, given its attractive CY24F P/E of 10x (vs. 5-year average of 12.2x), despite having one of the best fundamentals in the sector



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Aviation – Singapore

Visa-free Scheme With China A Key Positive, Raising Sector Outlook From 2024


Singapore’s air traffic is set to rise further in 2024, propelled by the implementation of the new visa-free arrangement with China. Air cargo volume has been stabilising and we see hopes of a moderate pick-up in growth by mid-24 backed by the US’ inventory restocking needs.

We expect SIA’s FY25 earnings to be lower yoy, driven by moderation of pax yields, while SATS and SIAEC should see earnings rise yoy on better business volume. Maintain MARKET WEIGHT. Top picks: SATS and SIAEC. 



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Westports Holdings (WPRTS MK)

WPRTS 2 Concession Sanctioned, But More Factors Need To Be Ironed Out


The long-awaited CT10-17 terminal expansion has been sanctioned. WPRTS 2 will boost capacity from 15m TEUs to 27m TEUs, and the concession period until 2082. Our target price has partially factored in the expansion, but in our view it is still not immune to political risks (exposed to projects like ECRL and Pulau Carey). Key terms (like tariff, capex and funding) are still being finalised, but without this guidance, it is not possible to project a realistic IRR and DCF upside for now. Maintain BUY. Target: RM4.10.



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Dyna-Mac (DMHL SP)

Over-correction represents opportunity


Maintain BUY with SGD0.51 TP In the past 2 months, O&G stocks locally have corrected 30-50% from their highs, including Dyna-mac which dropped about 40%. We believe that the correction is overdone and represents an attractive opportunity for investors to ride on the floating production storage and offloading (FPSO) uptrend.

Our channel checks show FSPO rates are still trending upward and there will be even more projects next year up for grabs, especially in 1H24. We expect Dyna-mac to secure another SGD200-350m of orders by 1H24. As of Oct 2023, its orderbook totalled SGD631m with project delivery into 2025 covering close to 100% of our projected FY24E revenue. With SGD128.5m net cash, we expect more dividends at FY23E results in Feb 2024. With sound fundamentals, exciting growth prospects at least until FY25, and a strong balance sheet, we maintain BUY on Dyna-mac. 



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A visit to Seri Alam LNG tanker in the Land of the Hornbill


Maintain BUY. SOP-TP unchanged at MYR7.65

MISC hosted a group of sell-side analysts to visit its Seri Alam LNG tanker in Bintulu, Sarawak. Post-visit, we maintain BUY on MISC with an unchanged SOP-based TP of MYR7.65. We continue to like MISC for its: defensive nature from its LT LNG charters which provide recurring cash flows; and ii) decent dividend yields of ~5% for an investible, stable and solid blue-chip name. 



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Keppel Corp ($6.77, up 7 cents) announced that through its Infrastructure Division, and AM Green, which is wholly owned and controlled by the founders of Hyderabad-based Greenko Group, have signed a Memorandum of Understanding (MOU) to jointly explore opportunities to produce biogenic carbon-based sustainable fuels, such as bio and green methanol, second-generation (2G) ethanol and sustainable aviation fuel (SAF). 

Keppel Corp’s market cap stands at S$11.3bln and currently trades at 7.5x forward PE and 1.1x PB, with a dividend yield of 5%. Consensus target price stands at S$7.52, representing 12.7% upside from current share price. We continue to like Keppel’s green initiatives and it’s move towards being a global organization, which would help to minimize country/ region risk going forward. We continue to maintain an Accumulate rating on Keppel given its attractive 17% potential upside to consensus target price of $7.52 and over 5% dividend yields (not counting specials such as distribution in species of Keppel REIT and Semb Marine).

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