Thilan WickramasingheThilan Wickramasinghe"In today’s markets, you got to have faith and you got to have conviction. In that spirit, we challenged our heads of research to name their top 3 picks on both counts."

Thus wrote Thilan Wickramasinghe, Maybank Kim Eng's Head of Research Singapore, in an investor note today.

"Notable for Malaysia and Singapore, there was a complete refresh from our last exercise a year ago."


Picks were largely focused on green transition, diversification and laggard performers:
• Malaysia: CTOS Digital, MAHB, Yinson and
• Singapore:
Comfort, Frencken, CICT (more below).

Indonesia and Vietnam focus is biased towards banks and consumption, while Thailand is dominated by energy.

On the other hand, Philippines is tilted towards consumption.

Read Idea of the Week for more details.

Back in Singapore, with living costs up, demand for co-living would increase.

LHN stock

32 c

P/B (FY24F)

0.6

PE ratio (FY24F)

5.6

Dividend yield (FY24F)

6.3%

Source: Maybank

This is positive for LHN (target price: 45 cents), where analyst Li Jialin is keeping her BUY rating.

She expects strong co-living revenues, cheap valuations and high dividend yields.

"The third quarter results were a bit of a disappointment, but this was mostly due to interest costs and not operations. The co-living revenues actually came in ahead of forecast and that's set to grow even faster next year," says Mr Wickramasinghe.

"The group is working on reducing their overall leverage ratios, they're selling non-core assets plus if interest rates to start coming off next year that will also ease some of the pressure as well."


As for Singapore banks, well, Maybank Kim Eng has been neutral on them for a while now.

Below are Maybank's take on three SG stocks that it has "faith and conviction" in ......

ComfortDelgro (CD SP, BUY, TP: SGD1.55)

• We believe CD’s public transport EBIT is at an inflection point and is likely to tread a recovery trajectory in 2024, supported by improving margins for its public bus and rail operations.

400taxis• The Taxi & Private Hire segment should also see upside as demand for point-to-point trips remains firm despite the introduction of Zig platform fee in Singapore. Inbound tourism to Singapore, especially from China is a key catalyst.

• With solid balance sheet with net cash of SGD500m, the Group is able to sustain its dividend payout ratio of at least 70% of underlying net profits.

• Medium term, CD seeks to build new capabilities especially in smart & green mobility, while looking for growth opportunities in overseas and adjacent segments. This may catalyse accretive M&A going forward.

Most recent report: ComfortDelGro - Staying on track

Frencken Group (FRKN SP, BUY, TP: SGD1.39)

• Frencken offers comprehensive, original designs, original equipment, and diversified integrated manufacturing solutions for world-class multinational companies in the automotive, healthcare, industrial, life sciences, and semiconductor industries.

• The Group’s earnings have been gaining momentum sequentially since 1Q23, and we believe this trend is likely to persist. Further, operating margins should also continue to improve as factory utilisation rates increases in FY24E.

• Margins and volumes are supported by rising European and Asian sales as excess semiconductor inventories built during Covid runs off. Management expects 2H23E semiconductor revenues to outstrip 1H23. Further, its key customer in Europe is trying to move some production to Malaysia – which is positive for the Group as it is facilitating this move

• We forecast Frencken’s Automotive segment to see earnings pick up strongly in the medium term as they are launching new product innovation (NPI) for EVs for popular German brands. This segment has significant upside risks to revenues if NPIs are smoothly executed in FY24E.

Most recent report: Frencken Group - Rock bottom hit: recovery on track.

CapitaLand Integrated Commercial Trust (CICT SP, BUY, TP: SGD2.15) 

 
Largest SREIT by AUM and market cap. Proxy to Singapore commercial real estate with presence across CBD Grade-A offices, city-centre and sub-urban malls and integrated developments. More than 90% of revenue from asset located in Singapore.

 Diversified tenant base with no single tenant contributing more than 5.4% of gross rental income. Provides a good mix of growth and stability. Mid-to-high single digit rental reversion in retail portfolio provides growth. Relatively longer lease expiry of office and integrated developments provides income stability.

 Existing buffers to navigate high interest rate environment: 3.3x interest coverage ratio, 78% borrowing in fixed rate, 93.3% unencumbered assets. Scale and size offers access to capital partners and deal network, which in turn helps in capital recycling.

 Reasonable valuation of 5.7% dividend yield and 12% discount to book.

Most recent report: CapitaLand Int. Comm. Trust - Stable performance


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