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PHILLIP SECURITIES
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CGS
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Sea Ltd. – High growth across all businesses
Recommendation: NEUTRAL; TP S$100.00
■ 3Q24 revenue exceeded expectations, with its 30% YoY growth primarily driven by strength in Shopee (43% YoY) and SeaMoney (38% YoY).
PATMI was missed due to continuously high sales and marketing spending that ate into profitability. 9M24 revenue/PATMI was at 76%/33% of our FY24 estimates. We expect PATMI to be backloaded into 4Q24e as the ramp-up of Shopee and SeaMoney continues and the late recognition of gaming revenue.
■ All three key business segments show strong growth, driven by increased take rates in Shopee, strong loan book growth in SeaMoney, and a highly engaged user base for Garena’s Free Fire (growth reflected in user metrics due to late recognition of revenue).
■ We downgrade our recommendation from Neutral to Reduce after considering recent share price movement. We raised our FY24e revenue/PATMI by 4%/1% to account for higher Shopee and SeaMoney growth. We raise our terminal growth rate assumption to 4% (prev. 3.5%) to reflect higher long-term revenue from Shopee and SeaMoney and raise our DCF target price to US$100 (prev. US$80), with an unchanged WACC of 7.6%. The company's triple-sided growth in SeaMoney, Shopee, and Garena shows potential to deliver returns for long-term growth.
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Keppel Ltd
Gaining control over rigs to accelerate sale
■ We estimate, on a full-sale basis, KEP could get up to S$4.9bn for the assets in Rigco based on current market condition, with full control over the rigs.
■ The divestment of two data centres to KDC REIT for S$1.38bn (KEP’s share: S$280m) brings YTD asset monetisation to c.S$1bn; estimated gain: S$76m.
■ We up our SOP TP to S$8.78 (from S$8.28), factoring higher market value of asset co rigs, monetisation of Floatel and higher fund management business.
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PHILLIP SECURITIES
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MAYBANK
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- 9M24 revenue was within expectations at 74% of our FY24e. 3Q24 revenue growth of 14% YoY was led by defence (+31%) and commercial aerospace (+7%). Urban and Satcom revenue registered a 5% contraction.
- The underlying growth drivers for commercial aerospace (CA) remain intact. Rising air travel demand and delays in new aircraft are pushing the need for heavier airframe and engine maintenance work. Demand for conventional weapons and ammunition is supporting growth in defence (DPS).
- We lower our FY24e earnings by 3% to S$723mn. We revise lower CA margins from the lack of pricing power and increasing labour costs. CA and DPS are leading the growth for ST Engineering with signs of a turnaround in urban solutions from the recent US$1.73bn contract for TransCore. Our DCF TP of S$5.00 and ACCUMULATE recommendation is maintained. The company is riding on multiple growth levers, including increased demand for aircraft maintenance, growing defence budgets, rising cloud solutions and cyber security requirements, and adopting new urban transport solutions.
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ST Engineering (STE SP)
Taking a breather Mixed operating trend; downgrade to HOLD
STE reported 9M revenue of SGD8.3b, +14% YoY; 3Q revenue SGD2.8b, -1% QoQ, +14% YoY. Defense and public security anchored top-line growth while commercial aerospace and urban solutions saw slowing momentum. Order book saw a marginal dip, partly due to forex. While STE has a strong execution track record, the slowdown in its order book growth, slowerthan-expected turnaround in the USS business and strong YTD price performance of the counter nudge us to downgrade STE to HOLD.
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DBS VICKERS
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CGS |
LENOVO
• 2QFY3/25 net profit rose 44% y/y, slightly ahead, led by ongoing recovery in hardware business
• Server business sees a shift towards lower-margin storage servers, driven by growing sales from cloud service providers
• Cut FY25/26F earnings by 6%/ 3% to reflect a slower turnaround in the server business
• Maintain BUY; expect AI PC growth to accelerate in 2HFY3/25, but lower TP to HKD12.7 on reduced earnings and unchanged 13x forward P/E.
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Hongkong Land Holdings Ltd
New growth initiatives already priced in
■ HKL’s latest targets of doubling its recurring EBIT and DPS by 2035F have been well received by investors, in our view.
■ We think the company may partially dispose of its stakes in its HK Central portfolio but growing its ultra-premium projects could be a challenge.
■ Reiterate Hold with a higher TP of US$4.95 (55% disc. to NAV). We think the stock has priced in investor expectations on its value unlocking initiatives.
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