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China Yuchai International
Charging towards an electrified future
■ Despite strong engine unit sales growth of +34% yoy in 1H21, China Yuchai International’s (Yuchai) 1H21 net profit fell 17% yoy, below our expectations.
■ We see temporary topline weakness in 2H21F post strong pre-buying in 1H, but margins should start improving with N6 engines’ better production scale.
■ Reiterate Add on attractive valuations and sustainable dividend yields of 6.3%. Downside risk is capped by net cash per share of US$12.50.

Keppel Pacific Oak US REIT (KORE SP)

Benefitting From In-migration And Growth At Magnet Cities


KORE benefits from in-migration to Texas and Washington where there is no state-level personal income tax. Americans are also relocating to Super Sun Belt (Atlanta, Dallas and Houston) and 18-hour (Seattle, Austin, Denver and Nashville) cities, which accounted for 19.0% and 71.4% of AUM respectively as of Aug 21. The in-migration has accelerated due to the Tax Cut & Jobs Act of 2017. KORE provides an attractive distribution yield of 8.6% for FY21. Initiate coverage with BUY. Target: US$1.10.


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Frencken Group (FRKN SP)

2Q21: Semiconductor Industry Component Shortage Spurring Growth


Frencken’s 2Q21 results were a strong beat with earnings of S$16.6m (+80.2% yoy), bringing 1H21 net profit to 63% of our full-year estimate. Revenue for the semiconductor segment (+62.1%) was led by strong demand for front- and back-end equipment, contributing to positive operating leverage. The strong demand outlook in the semiconductor segment is expected to remain through to 2022. Maintain BUY and increase target price to S$2.52.


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Singapore Technology

Not Yet


Too early to switch out of chip shortage beneficiaries

We continue to be POSITIVE on the Singapore Tech sector on the back of robust end-demand. We continue to prefer beneficiaries of chip shortages (UMS, FRKN, and now AEM) over contract manufacturers with diverse endmarkets (Aztech, VMS, VALUE) as chip shortages still appear a key earnings risk for the latter. Moreover, rotation from the former into the latter appears to have not yet begun. Our top picks are UMS and Frencken on a 3-6 months horizon, and AEM and VMS on a 12 months horizon.


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LionelLim8.16Check out our compilation of Target Prices

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