ANALYSTS SAY: Buy, Sell, Hold (1 Sept)

CGS CIMB

Japfa Ltd
Recovery in ASPs could bode well

■ Rising feed costs have impeded JAP’s recovery since 3Q21 when Covid-19 hit key operating markets such as Indonesia and Vietnam.

■ However, we see improving ASPs across key proteins, such as poultry and swine, supporting normalised profitability across all business segments.

■ We reiterate our Add call with an unchanged SOP TP of S$0.81 as we see improved profitability as ASPs recover and raw material prices peak.

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Singapore Strategy
Aug wrap-up: Singapore in 5

■ The FSSTI closed Aug at 3,221.67pts, up 10.11pts mom (+0.31%).

■ Growth moderating; inflation hit a 14-year high.

■ Post- 2Q/1H22 earnings season, we maintain our end-2022F FSSTI target of 3,475pts (-1 s.d. forward P/E of 12.5x).

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UOB KAYHIAN

Singapore Technologies Engineering (STE SP)
A More Solid BUY With Palatable Valuation

We believe STE’s recent share price weakness was triggered by the core profitability miss of its 1H22 results. With STE now trading at 19.5x FY24 PE (based on our more conservative FY24 EPS estimate at 15% below consensus’) which is 1.0 SD below historical mean, we think further downside risks of earnings should have been largely priced in.

The sustainable dividend yield of 4.3% should provide some support to STE’s valuation. Maintain BUY with a lower DCF-based target price of S$4.07.

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Oil & Gas – Malaysia
Petronas 1H22 Report Card: High FCF To Support Doubling Of Dividends

Petronas announced to double dividend payouts to RM50b, on the back of fat FCF and more disposal proceeds to come. With the conclusion of the dividend issue, we believe capex will ramp up, focusing on maintenance and production towards 2H22.

Petronas is also open to higher rate renegotiations. Both are positive for the sector, and we note there is value now in sector valuations. Hence, upgrade the sector to OVERWEIGHT. We also highlight Petronas subsidiaries as potential trades.

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CIMB Group Holdings (CIMB MK)
2Q22 results within expectations

Upgrade to BUY
We raise FY22-24E net profit forecasts by 3-10% to factor in lower credit cost assumptions. Our FY22E ROE of 9% is nevertheless still at the lower end of management’s target of 9-10%. Prospects have improved and we expect CIMB to be able to achieve a higher ROE of 10.4% in FY23.

Our TP is correspondingly raised to MYR6.20 from MYR5.70, pegging on a higher FY23E PBV of 1x (FY23E PBV of 0.9x, ROE: 9.8% previously). Upgrade to BUY, 4.8% FY22E dividend yield is decent.

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Hong Leong Bank (HLBK MK)
A very decent FY22

Fundamentals robust
Normalizing earnings for Cukai Makmur, HL Bank’s FY22 core net profit would have jumped 26% YoY to MYR3.6b. Fundamentals remain robust and we upgrade FY23-25E earnings by 5-6%.

Management’s FY23 ROE target of
11% is conservative and we estimate it to be higher at about 12%. BUY maintained with a slightly higher TP of MYR24.90 (+20sen) (unchanged CY23E PBV of 1.4x, ROE: 11.8%). 

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