buysellhold july.23



ST Engineering (S$3.79, down 2 cents) recently disclosed that its subsidiary ST Engineering Marine Ltd. has secured a contract with the Ministry of Defence (MINDEF) for the mid-life upgrade of its Formidableclass Frigates for the Republic of Singapore Navy (RSN).

At $3.79, market cap of ST Engineering is S$11,774mln, FY23F P/E is 20.3x, current P/B is 4.8x, FY23F dividend yield is 4.5% and its net debt position of S$5.78bln (as of end-1H23) equates to net gearing of 236%. Nevertheless, we believe that its gearing position should be lowered by 4Q23 given that its net debt has been on a decreasing trend since 4Q22.

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.



Tiong Woon Corporation / TWC ($0.455, unchanged) has announced that it will form a strategic alliance with Mammoet Asia Holding B.V. (“MAM”, together with its subsidiaries, “Mammoet”) to expand its footprint in Thailand, enhance the Group’s ability to cater to the evolving needs of existing customers in the region, and significantly broaden its service offerings to existing as well as new customers, particularly within the heavy lift and haulage market in Thailand.


TWC’s market cap stands at $105.7mln and currently trades at 5.6x forward PE and 0.4x PB, with a dividend yield of 2.2%. With this new strategic alliance with Mammoet and acquisition of Mammoet’s various assets, TWC will be able to expand its geographical reach and penetrate further into the Thailand market. We think this is a great achievement as it shows once again that TWC can and has successfully competed head to head with the titans of the heavy lift industry. We continue to be positive on TWC given the continued upswing in the petrochemical and construction sectors within the region but yet still trading at significantly undervalued levels. We continue to maintain a BUY on TWC with a target price is $0.88, representing 93.4% upside to current share price.



Malaysia 2024 Outlook & Lookouts

Rising Momentum


Why are we writing this & recommended action 2024 should be a better year for Malaysia on several fronts. It will be a year of execution of the macro blueprints launched in 2023, as well as a year of delivery especially in fiscal reforms, to bring the country’s balance sheet back on stronger footing. Hard work and staying-the-course are thus pivotal in Malaysia’s economic transformation, to eventually drive and support the longer-term sustainability agenda. 


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Singapore Banks: To exit or
double down?


Investment summary
Are Singapore banks too expensive? From the pandemic lows in March 2020 till now, Singapore banking stocks have recovered almost 70% on average – a credible performance over a period of less than four years. This could possibly explain why banking stocks are at times deemed to be too expensive versus the Straits Timex Index, which recovered 39% from the pandemic low to current level or when compared to the MSCI Singapore Index which rose only 8% over the same period.

In 2023, banking shares were largely able to hold their grounds, but share prices have taken a hit recently. This is based on the FTSE ST All-Share Financials Index (FSTFN), which fell from 1162.07 on 15 Sep 2023 to a recent low of 1079.17 on 7 Dec 2023, or a decline of 7.1% in the past three months. DBS took a bigger hit and fell about 10% from the Sep 2023 high of SGD34.49 (on 18 Sep 2023) to a recent intra-day low of SGD31.01 (on 15 Dec 2023). Is this an early sign to reduce holdings ahead of slowing macroeconomic growth and
challenging conditions in 2024 or is it time to increase holdings as share prices tend to reflect known uncertainties?

A return to pandemic share price lows seems unlikely at the current moment, as we are not expecting a worst-case scenario of a hard landing for the US economy. Our base case is for a mild recession in 2024 and that interest rates will start to ease off.


Keppel DC REIT

Too soon to speculate on Bluesea fall out


■ KDC has sent a letter of demand to Bluesea for c.S$9.1m in arrears (four months of rent) and S$6m for security deposit top-up.

■ We estimate 6.4%/16% downside to our FY23F/24F DPU if Bluesea does not fulfill its rent obligations from Sep 23 to end-FY24F.

■ Reiterate Add; 4.8% FY24F DPU yield if Bluesea remains in arrears still palatable, in our view. 



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