ANALYSTS SAY: Buy, Sell, Hold (31 May)

UOB KAYHIAN

City Developments (CIT SP)
1Q22: Positive Outlook As Operating Performance Remains Resilient

CDL reported a resilient operating performance in 1Q22 supported by healthy hospitality occupancy rates. However, its Singapore residential segment saw a 41% yoy fall in units sold due to uncertainty after the Dec 21 property cooling measures. It would appear that CDL’s outlook remains reasonably strong for the rest of 2022 given its back-end loaded residential launches in Singapore as well as continued recovery in its hospitality segment. Maintain BUY. Target price S$9.20.

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My EG Services (MYEG MK)
1Q22: Delivers Another Record-high Net Profit

MYEG posted a record-high net profit of RM85m (+11% yoy) for 1Q22, anchored on resilient healthcare and concession-related services. Moving forward, we continue to expect MYEG’s immigration and road transport segments to post a meaningful recovery amid the economic reopening, cushioning the eventual fall of the healthcare segment’s earnings. Other imminent catalysts include Zetrix’s monetisation and e-testing’s
commercial rollout in 2H22. Maintain BUY. Target price: RM1.30.

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UOB KAYHIAN

UOB KAYHIAN

Press Metal Aluminium Holdings (PMAH MK)
1Q22: Within Expectations; Favourable Dynamics To Further Catalyse Earnings

PMetal’s results came in within expectations. While LME aluminium prices have normalised to US$2,844/tonne, they are still higher yoy (2021: US$2,475/tonne) and comfortably above our conservative assumption of US$2,500/tonne in 2022. Besides systemic catalysts leading to favourable price and cost dynamics, the 42% additional smelting capacity is set to supercharge a two-year net profit CAGR of 43% from 2021 even after the record year. Maintain BUY. Target price: RM7.50.

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RHB Bank (RHBBANK MK)
1Q22: NIM Weakness

RHBBANK’s 1Q22 results were below expectation due to lower-than-expected fee income and NIM. Despite the marginal earnings miss, we continue to like RHBBANK as its solid CET1 ratio allows the group to sustain an attractive dividend yield of 6%/7% for 2022/23. NIM should also start to display a positive reversal once the OPR hike kicks in with RHBBANK being among the strongest beneficiaries. Maintain BUY with a lower target price of RM6.60 (0.88x 22/23 PBV, 9.5% ROE) after our earnings revision. 

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Singapore REITs
Shifting Focus

Earnings/TPs trimmed on interest rate and cost rises
Funding cost concerns have gained prominence with the Fed’s steepening rate hike path. While balance sheets are strong, interest costs for S-REITs are set to rise after 1Q22. We factor in a more aggressive interest rate growth profile, and our DPUs/TPs fall by 2-8% as a result (Fig 1). Interest rate volatility remains high, with DPUs for industrial REITs better cushioned from further rate increases than office and hospitality. Sector fundamentals are improving into 2H22, with rents accelerating from demand growth and benign supply. We see capital recycling gaining pace, as fast-tracked divestment programs support acquisition pipelines. Our top BUYs are AREIT, CICT, CDLHT, and SUN as they trade at 5-6% yields and could deliver 5-22% DPU growth.

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ST Engineering (STE SP)
Flightpath to recovery

Leading engineering conglomerate; initiate with BUY
We initiate coverage with a BUY rating and DCF-based target price of SGD4.75, offering 17% upside potential at 7.5% WACC and 2% TGR. With borders re-opening, the aerospace landscape is improving. STE’s recent acquisition of TransCore holds growth promise in smart city solutions and rising defence spending could increase international sales at a robust pace. Significant contract wins with a record-breaking FY21 order book of SGD19.3b (+25% YoY) have provided good revenue visibility and promises sustainable dividend yields of 2.5%. The strategy to better integrate STE’s various divisions could surprise with revenue and cost synergies.

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