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Banks
Turning it up
■ Pricing in Fed fund futures of c.4.6% by mid-2023 and likely slower loan growth ahead, we estimate c.1-4% EPS upside across banks in FY22-24F.
■ Escalating funding costs (given all-time high fixed deposit rates) and weakening borrower affordability are key risks to our thesis.
■ Our stress tests using c.4.5% p.a. mortgage rates (currently c.3%) show that the average TDSR remains below 55% for those with public housing loans.
■ We think that positive Fed rate hike momentum (and stronger NIM expansion ahead) will continue to support a sector rerating. DBS is our preferred pick.
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Nanofilm Technologies Int'l Ltd
JV could create a new revenue stream
■ Nanofilm has announced a JV to coat battery-related components used in electric vehicles. The operations will be situated in Zigong, Sichuan, China.
■ Nanofilm targets for the JV to reach mass production in 2024F and will also work with its JV partners to explore global market opportunities.
■ Reiterate Add. We are positive on the potential for this JV to generate a new revenue stream for Nanofilm.
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Nanofilm Technologies International (NANO SP)
High Potential Earnings Contribution From Entry Into The EV Battery Industry
Nanofilm has formed a JV with Shenzhen Everwin to provide coating services for EVs’ battery components. Shenzhen Everwin currently supplies electroplating services to the top players in the EV industry such as CATL and Tesla. The JV aims to commence production in 1H23 and mass production by 2024. We estimate that the JV could generate at least S$200m additional revenue in 2024 (27% increase), based on the EV segment revenue of Shenzhen Everwin in 2021. Maintain BUY. Target price: S$2.72.
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Gamuda (GAM MK)
4QFY22: Record High From All Ends
Gamuda reported core net profit of RM259m (+17% qoq, +21% yoy), contributed by higher earnings from the construction and property divisions. Gamuda is among the key beneficiaries for upcoming mega projects rollout like MRT3. Its recent job wins in Australia, Singapore, Malaysia and Taiwan bode well for its regional prospects as it triples its orderbook to RM14b. The disposal of its highway concessions also will strengthen its war chest for future growth. Maintain BUY. Target price: RM4.35.
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Singapore Telecommunications (ST SP)
Fairest of them all
Highest ESG rating among Singapore telcos
We have introduced an enhanced ESG tear sheet for Singtel and assigned it an above-average overall score of 85. This is the highest ESG rating within the SG telco sector, based on the group’s aggregated quantitative/qualitative/target-based metrics. Singtel is committed to improve the group ROIC to a high single digit while protecting its ability to pay sustainable dividends. Maintain BUY and SOTP-based TP of SGD3.15.
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Gamuda (GAM MK)
Closing FY22 on a high note
Beats expectations again; maintain BUY
Earnings positively surprised for the 5th consecutive quarter; the beat came from its E&C and property ops – both topline and margin. We lower FY23E/FY24E net profit by 6%/3% on removing expressway earnings with the near completion of its tolled highways sale, mitigated by upward revisions in E&C job wins and property pre-sales assumptions. Our RNAVTP is raised to MYR4.40 (+20sen) post updating for key parameters and house-keeping. Risk-reward remains positive; maintain BUY.
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