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First-leg of a re-rating


Re-rating thesis playing out; maintain BUY Our initiation thesis on 16 Aug ’21 was based on a confluence of three key factors that would drive a re-rating, the first of which has been realised. ESR-REIT (EREIT) was included within the FTSE EPRA Nareit Global Developed Index effective 6th Sept '21. The market’s strong reaction postannouncement (on 1 st Sept ’21) reaffirms our view that EREIT is ripe for a re-rating, with its units breaking the key SGD0.480 resistance level the day after. Overall, we see this event as a step in the right direction. That said, we maintain our view that it alone is insufficient to drive a convincing rerating. Focus is now on 2H21/2022 earnings, where we will be looking out for confirmation of strong industrial tailwinds translating into fundamental growth (via rental reversions and occupancies). We maintain our estimates and reiterate BUY with street-high DDM-based TP of SGD0.55.


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Dairy Farm International

Holdings (DFI SP) Incrementally Better Data And Newsflow


While 2021 will remain challenging for DFI given margin pressures, we point to incrementally positive newsflow that should benefit the company in the medium term. These include higher vaccination numbers in DFI’s key markets, the opening up of Hong Kong to mainland travelers, and the stabilisation of retail spending in Hong Kong. Maintain BUY. Target price: US$4.53.


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Technology – Malaysia

Valuations Pricing In Strong Expectations; Yet Still Focus On Bright Spots


The sector is still thriving on a twin supply-demand shock while additional impetus will come from supply chain reconfiguration amid US-China trade diversion. While industry risk-reward is less compelling with valuations pricing in strong earnings expectations, structural revolutions are sustaining growth, rendering eye-catching performances. We like INARI and Greatech for their unique value proposition and alpha growths, and Pentamaster for its laggard performance. Maintain OVERWEIGHT.


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Del Monte (S$0.365, up 1 cent) announced that it had achieved another strong quarter of profitability with an EBITDA of US$75.0mln, a 77% increase from US$42.4mln. Net profit reached US$18.3mln, reversing the US$3.2mln loss in the prior year’s same quarter. The Group significantly improved its margins by 600 basis points to 28.9% from better sales of higher-margin branded products in the USA and lower costs.

Barring unforeseen circumstances, the Group expects to generate higher net profit in FY2022. During the COVID-19 pandemic, the Group has partnered with over 400 non-government organizations and local government units to provide food to marginalized communities and frontliners in around 60 medical facilities. At $0.365, market cap of Del Monte is $1177mln, trailing P/E is 8.1x and its dividend yield is 4.5%.

LionelLim8.16Check out our compilation of Target Prices

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