buysellhold july.23



United Overseas Bank Limited

Non-interest income growth offset NII decline


 1Q24 adjusted earnings of S$1,566mn met our estimates as higher fee income and other non-interest income were offset by lower-than-expected NII and higher expenses. 1Q24 adjusted PATMI was 25% of our FY24e forecast.



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Decent start to the year; DPU yield of 7.6%


Results in line with our forecasts; Maintain BUY

FY24 DPU was SGD9.36cts, -6% YoY. FY24 revenue/NPI of SGD177.28m/SGD97.8m rose 6%/7% YoY, in line with our forecasts. AAREIT achieved a strong full-year rental reversion of 24.3%, while management guidance supports our slightly tempered optimism entering FY25. The two planned asset enhancements are likely to start contributing from 2H25 to 1H26. We raise our FY25-26 forecasts as we roll forward our base year to FY25E. Our TP of SGD1.39 is unchanged. Maintain BUY for attractive FY25E DPU yield of 7.6%. 



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United Overseas Bank (UOB SP)

Steady delivery Slow, steady growth.


Limited dividend upside

UOB’s 1Q24 core-earnings were marginally ahead of MIBG/Street expectations. This was bolstered by trading income which is volatile. Operationally, we see slower growth for NII led by peaking loan yields and slow loan growth. Wealth management is a bright spot that needs to be watched as well as higher for longer interest rates keeping NIMs supported. Amidst slower growth, we see limited prospects for dividend surprises in the near term. Raise TP to SGD31.03. Maintain HOLD.


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BRC Asia ($1.97, down 1 cent) announced that during the period under review, the domestic construction sector remained on track for recovery, underpinned by the increase in construction output from the public sector, thereby boosting deliveries of the Group’s reinforcement steel solutions. In line with the favourable market demand, the Group reported a 6% y-o-y increase in revenue, reaching S$758.3 million for 1H FY2024. However, this growth was partially offset by a decline in sales volume from its international trading segment.

BRC Asia’s market caps stand at S$540mln and currently trade at 7.0x forward PE and 1.2x PB, with a dividend yield of 9.1% (assuming 6 cts interim + 6 cts final + 6 cts special dividend) representing c.65% payout ratio. Consensus target price stands at S$2.30, representing 16.8% upside from current share price. In view of the recovering Singapore construction sector and as BRC Asia continues to experience gross and net margin expansion, we recommend an Accumulate rating on BRC Asia.


AEM Holdings Ltd / AEM ($2.32, up 0.01) a global leader in test innovation, announced a voluntary update for its business performance and outlook for the three months ended 31 March 2024 (“1Q2024”). The Group achieved revenue of S$94.2 million in 1Q2024, with PBT of S$2.7 million, which includes a restructuring charge of S$2.1 million, as a result of a re-organisation the Group undertook in 1Q2024. Quarter-on-quarter revenue remained flat, due primarily to the slower than expected recovery at the Group’s key customer Intel, combined with a build-up of inventory in the life science and industrial sectors which has adversely impacted AEM’s contract manufacturing revenue for the quarter.

Comments: 1Q’24 revenue dropped 38.3% to SGD94.2m, while net profit dropped 85% YoY to SGD2.34m, both coming in significantly below consensus expectations. While management maintained their previous 1H’24 guidance of $170-200mln guidance, implying that 2Q’24 will mirror that of 1Q’24, they failed to provide 2H’24 guidance, implying that business visibility is low. More importantly, 2H’24 is expected to still be very weak and uncertain as management has pushed back recovery to only in FY2025. This implies and suggests that consensus estimates would have to be adjusted downwards significantly from current levels. We still maintain our “SELL / AVOID” recommendation despite the stock having already dropped from the $3.00 level early this year. In addition to its weaker than expected performance and also weaker than expected outlook, its key customer Intel had also dropped more than 2% last night as it lowered its outlook for 2Q’24 and 2H’24, validating AEM’s weak fundamentals. Given the weak and uncertain near-term profit visibility PE valuations methodology would likely be irrelevant and we would take reference to its NAV of $1.50-1.60 per share.



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