ComfortDelGro - Acquisition dependent
- 9M24 revenue was above expectation at 80% FY24e due to CMAC acquisitions. PATMI was within our expectations at 74%. 3Q24 PATMI rose 15% YoY. Profitability in Australia has suffered due to bus driver shortages collapsing margins.
- Excluding CMAC and A2B acquisition, total EBIT growth was 8% YoY, led by higher margins from repricing of UK bus operations. The largest drag was Australia, where EBIT collapsed 51% YoY after removing A2B due to bus driver shortages.
- We raised our FY24e revenue and PATMI by 9%/1% respectively. We maintain our DCF target price of S$1.63 but downgrade our recommendation from BUY to ACCUMULATE due to share price performance. Earnings growth is dependent on recent acquisitions at the expense of higher gearing. Organic growth drivers have largely stalled except for the repricing of London bus routes, which is starting to contribute materially this quarter. We believe the acquisition of CMAC and, recently, Addison Lee is earnings accretive. Both acquisitions allow the company to enter Europe’s premium point-to-point transportation and accommodation service industry. We await the potential synergies from the S$750mn worth of acquisition.
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Singapore Telecommunications - Positives in Australia and asset monetisation
- 1H25 results were within expectation. Revenue and EBITDA were 48%/51% of our FY25e forecast. Optus continued its commendable performance with EBITDA growth of 10% YoY in 2Q25 from cost savings and rising prices.
- Associate earnings fell 3% YoY to S$411mn in 2Q25. Mobile competition in Telkomsel has hurt earnings together with expanded losses at Bharti Telecom due to higher interest rates. Singtel has raised their EBIT growth guidance for FY25e from “high single digit to low double digits” to “low double digits”.
- Our ACCUMULATE recommendation and target price of S$3.44 is maintained. We reduced our FY25e associate earnings but offset by a reduction in effective tax. PATMI is unchanged. Cost-out efforts in Singapore and Australia are supporting a recovery in margin. There is no change in the strategy to monetize S$6bn of assets including Intouch, Comcentre and Bharti Airtel.
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Mermaid Maritime
Awaiting key order wins
■ 3Q24 revenue was down slightly qoq on completion of decommissioning contracts in the UK and Thailand, partially offset by stronger cable-laying.
■ We broadly maintain FY24F-26F gross margin estimates but reduce revenue forecasts on lower fleet utilisation and decommissioning order assumptions.
■ Excluding forex loss of US$2.7m, 3Q24 net profit was in line with our US$3.8m estimate. Improvement in share of SG&A was a positive surprise.
■ We reiterate our Add call, with a lower TP of S$0.16 on reduced net profit expectations. Key catalyst: announcement of new order wins.
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Beng Kuang Marine (BKM SP)
2H24 likely to be stronger
Maintain BUY with a lower TP of SGD0.27 BKM’s 3Q revenue rose 25% YoY to SGD26.8m, while PBT increased by 27% to SGD3.79m, lower than what we expected partially due to dry docking of one of its customer’s accommodation barge. As a result, we cut our FY24/25E PATMI forecasts by 28% and 39% to factor in lower-than-expected growth as well as an increase in wages. As the outlook for the FPSO sector remains strong, we maintain BUY. We roll forward our TP, based on an unchanged 9x FY25E P/E, as we remain bullish on the FPSO upcycle and for a stronger FY25E, coupled with the potential sale of Batam land.
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We see CSE Global as one of a key beneficiary of newly elected
President Trump’s policy to kick start oil and gas production in the
USA to lower oil and gas prices as well as beneficiary of Trump’s
promised tax cuts in the USA over the next 4 years. Finally, CSE will
also benefit from their key electrification customers, namely Tesla
and Amazon with their roll out of electric charging infrastructure as
well as data centres in the USA as well as globally.
At its last traded price of 43.5 cents, CSE is captialized at $308million
and trades at an attractive dividend yield of 6.3% with a forward
PE ratio of 10x. Based on Bloomberg consensus target price of 60
cents, the potential 1-year return approximates 38%. We maintain
our BUY recommendation on CSE Global.
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Lenovo Group (992 HK) 2QFY25:
Strong Set Of Results; Impending PC Replacement Cycle Set To Turbocharge Growth
Lenovo’s 2QFY25 results were decent, driven by solid revenue growth across all segments. Moving forward, the upcoming PC replacement cycle is expected to pick up from 4QFY25 onwards and Lenovo is set to be a key beneficiary. For ISG, we expect the GP servers, storage and HPC businesses to support its growth in the near term, with contributions from ESMB to drive profitability, before AI servers start playing a larger role. Maintain BUY but trim target price to HK$12.00.
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