ANALYSTS SAY: Buy, Sell, Hold (3 Sept)

CGS CIMB

CGS CIMB

CIMB Group Holdings Bhd

NIM trending up in 2Q24

■ CIMB’s 1H24 net profit was within expectations (at 51% of our full-year forecast) but the special dividend of 7 sen/share was a positive surprise.

■ We project a 6.3% yoy increase in CIMB’s 2H24F net profit, underpinned by higher net and non-interest income.

■ Reiterate Add on CIMB premised on improved outlook for its net interest margin (NIM) and potential further increase in dividend payout ratio.

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Banks
Choppy loan growth recovery

■ Banking system loan growth remained choppy, rising 0.4% yoy in Jul 24.
Domestic loan growth stood at +2% yoy; regional loans contracted 2% yoy.
■ Deposit growth was robust at +6% yoy in Jul 24. FD renewals were persistent
(+9% yoy) even as placement rates stayed largely unchanged in Jul 24.
■ Reiterate sector Neutral. Sequential earnings growth will likely be dependent
on the pick-up of fee income as US Fed fund rate cuts set in.

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UOB KAYHIAN

UOB KAYHIAN 

STRATEGY – SINGAPORE
Alpha Picks: Strong Beat; Add STM But Remove CENT, MPM And FEHT From Our Portfolio

Our Alpha Picks portfolio had a solid month in August, rising 0.8% mom on an equalweighted basis, beating the STI by 1.2ppt. The outperformance was driven by CENT, MINT and FEHT, while MPM, VMS and CVL underperformed. Our Alpha Picks portfolio has now outperformed the STI in seven out of the past eight months. For Sep 24, we add STM while removing CENT, MPM and FEHT. 

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STRATEGY – MALAYSIA

2Q24 Results Wrap-up: On A Recovery Path

The 2Q24 results season largely met expectations, and we retain both our bullish market view for 2H24 and year-end FBMKLCI target of 1,735 (slightly below 15.6x 2024F PE or - 0.5SD to mean PE). While our anticipated interim consolidation period turned out to be significantly more punishing for small and mid caps, sentiment has likely bottomed out, and we still expect the broad market to regain good momentum for the remaining 2H24. We advocate a risk-on strategy, but to still avoid concept stocks. 

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CapitaLand Investment Limited / CLI (S$2.69, down 2 cents), a global real asset manager, has entered into an agreement to divest its 50.0% interest in ION Orchard to its sponsored real estate investment trust, CapitaLand Integrated Commercial Trust / CICT (S$2.13, trading halt). ION Orchard is currently held in a joint venture with Sun Hung Kai Properties (SHKP) holding the remaining 50.0%. The proposed divestment of ION Orchard is part of CLI’s asset-light growth strategy which will grow CLI’s funds under management (FUM) by S$1.85 billion. The sale consideration of approximately S$1.08 billion can be recycled towards future growth opportunities. ION Orchard is a dominant retail landmark at the heart of Orchard Road, attracting both locals and tourists. With CICT’s predominant focus on Singapore, the proposed divestment will further enhance the quality of its portfolio. This proposed transaction is conditional upon the approval of CICT’s noninterested unitholders and is targeted to be completed in 4Q 2024. The sale consideration will be paid in cash.

CLI’s market cap stands at S$14.0bln and currently trades at 18.6x forward PE and 1.0x PB, with a dividend yield of 4.5%. Consensus target price stands at S$3.50, representing 30.1% upside from current share price. For CLI, we continue to maintain a BUY recommendation as we continue to like its efforts to unlock value following the likes of Keppel. With the negativity priced in and share buybacks in place, CLI continues to grow its stable recurring income streams, and we believe dividends at these current rates are sustainable. CLI has been consistently buying back shares in the market and have bought back 90.3mln/17.8% of their allowable buy back mandate since the beginning of this year indicating undervaluation (last bought back 2.23mln shares at S$2.61 per share on 27 Aug) and we continue to like that the funds from this sale will be recycled towards future growth opportunities. For CICT, we recommend existing shareholders to subscribe for the rights, given’s CICT’s excellent track record and portfolio management and CICT being able to post higher DPUs despite the hawkish environment.

Dyna-Mac’s ($0.54, up 1 cent) 1H24 results completely smashed our expectations with 1H24 revenue and net profit S$38.8mln forming c.63% and c.108% of our FY24 target of S$410mln and S$35.9mln respectively.

Favourable Outlook. The outlook for Dyna-Mac remains optimistic, driven by the continued buoyancy of the FPSO market. According to Fortune Business, the FPSO market is expected to grow 14.6% by 2032 and with more FPSOs expecting to start operations between 2024 to 2029, Dyna-Mac remains optimistic about its future growth opportunities.

DynaMac’s market cap stands at S$589mln and currently trades at 8.3x FY24PE. We continue to maintain a BUY on Dyna-Mac with a evised target price of $0.72, representing 32.5% upside potential.