ANALYSTS SAY: Buy, Sell, Hold (3 June)

UOB KAYHIAN

REITs – Singapore
Weighing The Odds – Upside From Reopening Against Perceived Threat From Inflation

Nascent signs of easing of inflationary pressure have emerged. The yield curve steepened again in May 22 and is currently upward-sloping, suggesting a soft landing.
Economic expansion, if sustained despite geopolitical uncertainties, is positive for SREITs. We stay invested in hospitality, retail and office REITs as reopening plays. BUY
ART (Target: S$1.25), FCT (Target: S$2.79), FEHT (Target: S$0.78) and LREIT (Target: S$0.96). Maintain OVERWEIGHT.

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STRATEGY – MALAYSIA
Alpha Picks: Positioning For A Reprieve Period

Our May 22 Alpha Picks slightly outperformed the FBMKLCI (-0.6% vs -1.9%). For Jun 22, we tweak our Alpha Picks to be more risk-balanced as we reckon that global equities have entered a window of moderate recovery, as inflation fears ease following the softening of the latest US inflation reading. We foresee trading opportunities in sold-down beneficiaries of various investment themes. Our Jun 22 picks are Genting Malaysia, Magnum, MyEG, Press Metal, Sunway REIT and VS Industry.

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MAYBANK KIM ENG

MAYBANK KIM ENG

1Q22 Results Roundup
Mixed, reopening tailwinds notwithstanding

1Q22 core profit moderates; -3% QoQ, -19% YoY
While earnings boost from economic reopening (1Q22 GDP growth picked up to +5.0% YoY, vs. 4Q21’s +3.6%) was selectively evident, especially for consumer/retail, research universe core net profit (quarters ending Feb/Mar 2022) contracted both YoY and QoQ (Fig 1), with key drags being Cukai Makmur, the Gloves sector turning loss-making (Fig 6) and broad margin pressure from rising costs. 3 sectors posted improved core profits both YoY/QoQ – Telco (primarily on TM’s strong results), REITs (recovering footfall, declining tenant support) and Oil & Gas (+28% YoY). Sectors that were weaker both YoY/QoQ were Construction, NBFIs, Auto and Shipping
& Ports. Earnings misses (relative to our forecasts) exceeded beats again (1.4x), after a brief respite in 4Q21 (0.5x), while the ratio of earnings downgrades-to-upgrades was 1.8x (4Q21: 0.8x). Per Fig 12, only 2 stocks were upgraded (4Q21: 9), both to BUY – CMS and Gas(M) – while 10 were downgraded (4Q21: 5), of which 2 were cut to SELL i.e. Bursa and LCT.

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Advanced Info Service (ADVANC TB)
Lacklustre outlook for FY22E

FY22E profit decline could disappoint consensus
We forecast FY22 core net profit to drop by 6% YoY due to weak mobile revenue (-1.3% YoY) and rising expenses. Our forecast is below the street.
We believe there is 11% downside risk to consensus FY22E as the RussiaUkraine war and intense mobile competition have dimmed the outlook for revenue growth. We initiate coverage with a HOLD rating and a DCF-based TP of THB230. 

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STRATEGY – INDONESIA
Alpha Picks: Drop SIDO And Add UNVR

Our portfolio returns came in at -4% in May 22 compared with the -1.7% return of the JCI. This was caused by a 23.6% drop in BUKA, which we had entered too early. We decide to keep BUKA as the recent share price performance has been strong. We drop SIDO as the upside is now less than 10%. We add UNVR as a recovery story and for its attractive valuation. Our picks: UNVR, BMRI, BBNI, BUKA, KLBF, ACES and MAPI. 

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PP London Sumatra (LSIP IJ)
1Q22: Results Within Expectations

1Q22 operating profit came in lower qoq, mainly affected by DMO which resulted in lower sales volume. We reckon this would continue in 2Q22 with the export ban and current reintroduction of DMO, as buyers may still have high inventory and hence purchase less from LSIP. The CPO ASP remains low with high domestic supply.
Revised earnings factor in higher CPO ASP, but 2022 earnings will be dragged by higher cost and taxes. Maintain SELL with a lower target price of Rp1,060. 

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