buysellhold july.23



Mermaid Maritime (MMT SP)

Positioned For Growth With Orderbook Expansion And Higher Margins


MMT’s subsea and offshore services market has traditionally been in Asia; however, it has successfully expanded into the Middle East, West Africa and the North Sea in the past few years. Profitability has grown materially over the past three years with management guiding for EBITDA margin expansion in 2024 and 2025. In 2H23 alone, the company doubled its orderbook to finish 2023 at US$734m.



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Dialog Group (DLG MK)

Midstream Catalyst Is Still Ongoing


Although the storage terminals may continue to enjoy peakish utilisation and rates, the midstream segment offers another earnings catalyst via the Jubail Supply Base, that is benefitting from a sustainable elevated demand for O&G activities in Saudi Arabia and energy transition. In terms of expansion/growth, Dialog remains as a Pengerang beneficiary, but may also see new growth from upstream (Baram Junior) and Jubail. Retain BUY, with adjusted target price of RM3.10. 



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We highlight the key points from Innotek Ltd’s ($0.51, up 1.5 cents) FY23 annual report:

Innotek’s FY2023’s net profit nearly doubled to S$4.4 million, on 10% growth in revenue of S$205.6 million. This marks our eighth consecutive year of profitability, a remarkable record when we look back at the challenging period during and immediately after the pandemic. The improved performance was the result of decisive and proactive measures to move up the value chain and extend our reach and capabilities. Under the leadership of our CEO Mr. Lou Yiliang, we ventured beyond our traditional domain of automobiles (“Auto”), office automation (“OA”) and TV displays. We have penetrated emerging industries, such as graphics processing units (“GPU”) servers used for Artificial Intelligence (“AI”), gaming machines, medical equipment, and financial equipment. Notably, the recent rise of generative AI unleashed strong demand for advanced GPU servers. Indeed, many hardware players are racing to introduce equipment and products to support this trend sweeping across the IT landscape.

We believe Innotek is expected to benefit from its new growth segments, especially from the AI GPU server customer as it ramps up from an insignificant contribution a year ago. We are expecting profits to double again to $10mln for FY24, translating to a forward PE of 12x. Yield is 4%. Maintain Accumulate.

We highlight the key points from Broadway Industrial Group ($0.127, up 0.7 cts) FY23 annual report:

In 1H2023, our Group’s sales volume declined 40.6% year-on-year and total revenue fell to S$126.3 million as compared to S$228.3 million in the first half of 2022 (“1H2022”). The situation was expected to continue for the remainder of FY2023. The Management then acted swiftly and adjusted its strategy and plans by aligning the Group’s build volume according to the market conditions and managing working capital and operating and manpower costs prudently. Towards the end of FY2023, the HDD industry saw early signs of a rebound driven by HDD vendors receiving slightly larger customer orders due to the growth in hyperscale cloud demand to support rising data storage needs.

At 12.7 cents, Broadway is capitalized at $58mln and trades at an estimated forward PE of about 6x based on consensus forecast of $10 mln profits for FY24. Based 0.5 cents dividend per share, div yield is 4% while price to book is 0.65x. Its strong net cash position of $34mln translates to almost 60% of its current market cap. If management’s optimistic view were to materialize in FY24, we see Broadway being undervalued and recommend an “Accumulate” rating on the stock.



Expanding co-living capacity


Upper Bukit Timah tender win; maintain BUY LHN was awarded the former Bukit Timah Fire Station site to develop a mixed-use project with 60 serviced apartment units on levels 2 & 3, and a ground floor commercial F&B and retail operation. Refurbishment capex is estimated at around SGD7m. Meanwhile, LHN is also teaming up with Ching Chiat Kwong (CEO of SGX-listed Oxley Holdings) and his son in a 50:50% JV partnership to acquire Wilmer Place. LHN will invest up to SGD24m for its share of the Wilmer venture. We leave unchanged our forecasts and TP of SGD0.45 (pegged at 8x FY24E P/E) for now. BUY.



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