CapitaLand Integrated Commercial Trust (CICT SP)
4Q20: Deleverage First Before Further Acquisitions
DPU declined 15.4% yoy to 2.63 S cents in 4Q20 with the merger completed on 21 Oct 20 (more than two months of contributions). We expect downtown malls to continue posing a drag on financial performance in 2021. CICT plans to lower aggregate leverage to below 40%, which entails divestment of existing properties. Future redevelopment projects could also cause disruptions. Fairly valued with 2021F distribution yield at 5.1%. Maintain HOLD. Target price: S$2.32. Entry price: S$2.12.
UMW Holdings Berhad (UMWH MK)
Toyota Corolla Cross: Better Late Than Never
After the recent run up in the share price, the risk-reward ratio no longer looks favourable. There is risk of order cancellations and consumers retaining a cautious outlook if the rampant spread of COVID-19 continues. Car sales are also expected to weaken in 3Q21 after the one-year sales tax exemption ends. However, the upcoming new model launches might help to cushion some of the impact. Downgrade to HOLD with new target price of RM3.30. Entry price: MYR2.80.
MAYBANK KIM ENG
Lotte Chemical Titan (TTNP MK)
Outlook still challenging
Product spread declining; D/G to SELL Upcoming 4Q20 results could be strong on the higher spread. However, the spread has softened since early-Jan 21 and may continue to soften on resumption of production, easing of container shortage and new supply. We raise our FY20E EPS by 16% on higher spread but maintain our FY21-22E EPS. We maintain our TP of MYR2.10 (2x FY22E EV/EBITDA; - 0.5SD to 5Y mean). Downgrade LCT to SELL (from HOLD) as share price may weaken in response to the weaker spread.
I wished I had that…
■ YTD, a flurry of corporate transactions, from tech & manufacturing (Fu Yu and CEI) to hotel operator GL Limited, has gripped the Singapore market.
■ The latest proposed deal involves small-cap O&M yard Penguin International (at S$0.65 per share, or 0.8x FY20F P/BV).
■ Cashed up buyers, low liquidity and bashed up valuations for cyclicals are the drivers.
Check out our compilation of Target Prices