buysellhold july.23



First REIT

Forging ahead post-restructuring


• Indonesian hospital assets enjoy a long WALE of 11 years with a minimum annual rental escalation of 4.5% or a performance-based rent. FY23 rental income from Indonesia grew 7.6% in local terms, due to strong hospital revenue and performance rents.

• Capitalising on Japan’s aging population by expanding into Japan in 1Q22 by acquiring 12 nursing homes from its sponsor OUEH and a further 2 in 3Q22 from a third party. Targeting to increase the portfolio in developed markets to more than 50% of AUM by 2027, while simultaneously reducing exposure to Indonesia as a percentage of total income.

• First REIT is trading at an attractive 20% discount to NAV and a forward FY24e distribution yield of 9.6%. We initiate coverage with a BUY recommendation on First REIT with a DDM-derived target price of S$0.30.



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REITs – Singapore

The Strain From The Strong US Dollar Is Gradually Dissipating


The negative impact from the strong Singapore dollar is narrowly concentrated on the yen and is expected to dissipate going forward as the Singapore dollar could be near its peak. We have increased our DPU forecasts for CLAR by 1.0%, CDREIT by 0.3% and FLT by 1.8%. We also trim our DPU forecasts for CLAS by 1.3%, MLT by 0.8% and MPACT by 0.4%. Maintain OVERWEIGHT. BUY FEHT (Target: S$0.77), KREIT (Target: S$1.15), LREIT (Target: S$0.85), MINT (Target: S$2.78) and MPACT (Target: S$1.72). 



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BYD Electronic (285 HK)

Robust Multi-Year Growth Cycle Driven By Content Gains And GenAI Themes


BYDE is one of the best positioned names to capture GenAI opportunities in the consumer electronics space, thanks to its growing presence in the Apple supply chain, as well as long-standing relations with Android clients. With its content gains in BYD’s EV supply chain amid the ongoing import substitution trend, and its venture into the AI server ODM business, we believe BYDE will see a solid 27% earnings CAGR in 2024-26. Initiate coverage with BUY. Target price: HK$47.70.



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Technology – Malaysia

EMS: On New Avenues To Spearhead Growth


Our Johor trip suggests that the worst is behind for cEMS with sectorial risk-reward calculus tilting towards the favourable side. Besides margin improvement from higher operational efficiency, we see additional impetus stemming from: a) a higher degree of vertical integration; b) a wider market reach; c) technological advancement; and d) new prospects from trade diversion, suggesting that the sector could gain further traction even after the recent V-shaped earnings recovery. Maintain OVERWEIGHT. 



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Marco Polo Marine (MPM SP)

Opportunity to accumulate


Maintain BUY and TP of SGD0.09 MPM’s recent share price weakness (-20% since Apr 2024) does not appear to be related to its fundamentals. In fact, the outlook for MPM has improved as chartering rates continue to rise. Its first CTV was delivered to South Korea this week and is already in operation. We still expect the CSOV for Taiwan to come on stream in Oct’24, with no delays and that utilisation across its fleet will remain high. This would make up for the drop in repairs and maintenance revenue from its yard, which is now recovering. As a result, maintain BUY and TP of SGD0.09, based on 11.2x FY24E P/E. 



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Eco World Development (ECW MK)

ESG 2.0: Above average


ESG score of 69 – based on our assessment Our assessment of ECW’s ESG matters, using our proprietary ESG scoring methodology, derives a score of 69 (out of 100), making its ESG rating above average. ECW has relatively better disclosures compared to its peers especially on GHG emissions reporting. It aims to achieve Net Zero emissions by 2050. We maintain our earnings forecasts, MYR1.96 TP (on unchanged 1.1x FY25E P/B) and BUY rating. 



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