UOB KAYHIAN

Plantation – Singapore
What Goes Up Must Come Down

CPO prices have corrected 28% since Indonesia announced the lifting of the export ban.
After this CPO price correction, we are seeing some positives emerge to prevent further price deterioration: a) it is commercially viable to increase biodiesel mandate or nonmandatory biodiesel blending, and b) demand recovery is in sight in India and China.
But Indonesia’s palm oil industry has clearly not benefitted from the high CPO prices over the last six months. Maintain MARKET WEIGHT.

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Building Materials – Malaysia
Eco-Friendly Smelters In Sarawak Set To Be Global Champions

We came away from our site visit to SIP feeling positive on the outlook of smelters there. OM Holdings and Press Metal are among the prime beneficiaries that have a significant advantage over global peers, given their access to eco-friendly low-cost
hydropower. Commodity prices may stage a reversal once the lockdowns in China are eased, which will improve demand and support prices, backed by favourable supplydemand balance. Maintain OVERWEIGHT.

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MAYBANK KIM ENG

MAYBANK KIM ENG

Malaysia Banking
The effect of rising interest rates

Rising rates generally positive on earnings
Rate hikes should generally benefit banks’ earnings and positively, the ROEs of most banks could return to over 10% in FY23 as a result.
Additionally, we think that current MGS yields seem to already reflect future rate increases and thus future MTM losses are likely to be contained, if any at all. Moreover, we believe banks have sufficient provisions to buffer against potential asset quality issues arising from higher borrowing costs. We maintain a POSITIVE on the sector with BUYs on HLBK, RHB, AMMB, ABMB and HLFG.

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Japfa Ltd
2Q22F preview: likely a slight improvement

■ Reiterate Add; we maintain our SOP-based TP of S$0.81 as we expect earnings pressure to ease in the near term amid consumption recovery.
■ Prices of proteins seem to have stabilised across the board for JAP, with the exception of DOCs in Indonesia, suggesting better market dynamics.
■ Potential export agreement between Indonesia and Singapore could catalyse JAP’s share price but we see little impact on its business.

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Astro Malaysia
No good story comes without conflict

■ Astro Malaysia’s 1QFY1/23 core net profit was in line with our expectation, making up 25% of our full-year forecast.
■ Astro’s new subscription offering has yielded greenfield subscribers, although it was not enough to reverse the subscription revenue’s slide.
■ The inclement economy may slow down Astro’s recovery story. However, the stock offers sterling CY22-23F yields of 7.6-9.3%.

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