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

UOB KAYHIAN

STRATEGY – SINGAPORE
Alpha Picks: Add ST, KEP, FR, VMS and remove NANO

Our Alpha Picks marginally outperformed the STI index in Oct 22, declining by 1.0% on a market cap-weighted basis vs the STI’s 1.2% decline. For Nov 22, we add Singtel and First Resources as we expect their upcoming results to act as catalysts for a re-rating. We also add Keppel for its pending transition into a more asset-light business. In the technology sector, we switch out of Nanofilm and into Venture for exposure to a largercap stock in an uncertain environment.

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SIA Engineering (SIE SP)
2QFY23: Results In Line; Recovery Gaining Traction But Cost Pressure Remains

SIAEC’s core net profit continued to improve, reaching S$17.3m in 2QFY23 (1QFY23:
S$4.2m). While the business recovery is taking good shape, cost pressure from workforce ramp-up and material prices was slightly higher than our expectations. Overall, we expect SIAEC’s profitability to increase further in 2HFY23 as business recovery continues. We trim our FY23-25 EPS forecasts by 7.3-9.0% to reflect the higher cost pressure. Maintain BUY with a slightly lower target price of S$2.60.

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CGS CIMB

Japfa Ltd
No reprieve from margin compression

■ 3Q22 core net profit of US$11.4m brought 9M22 core net profit to US$66.6m, below expectations at 68.9%/66.6% of our/consensus FY22F estimates.
■ 3Q profitability was dragged down by APO, with resurgence of African Swine Fever (ASF) affecting ASPs, compounding the challenging cost environment.
■ Reduce FY22-24F EPS by 14-21% on lower APO margins. We reiterate Add and cut our SOP-basedTP to S$0.72, with value locked behind AAG’s IPO.

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Manulife US REIT
Outlook challenging, but likely priced in

■ Portfolio occupancy dipped in 3Q22 but reversions improved qoq to +4.3%.
■ Near-term focus is on portfolio repositioning and capital management.
■ Reiterate Add with a lower TP of US$0.69. 

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SIA Engineering
Promising pace of recovery

■ SIE’s 1HFY3/23 net profit of S$32m (+30% yoy) was above expectations due to stronger JV contribution (+213% yoy) from more engine inductions.
■ Core business and JV/associates recovering faster than expected, but expect high staff costs to persist. Management maintained its cautious guidance.
■ Our TP is raised slightly to S$2.44, pegged to 1.6x CY23F P/BV. Net cash healthy at c.25% of current market cap.

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DBS Group
Rate hikes taking effect

■ DBS’s 3Q22 net profit of S$2.24bn (+23% qoq, +32% yoy) was 9% above our and consensus S$2.05bn estimates.
■ The beat was due to higher-than-expected NIM expansion (+32bp qoq in 3Q22 vs. our expected +30bp) and very strong treasury income.
■ 2023 outlook: mid-single-digit loan growth guidance, double-digit fee income growth, NIMs to reach 2.25% by mid-2023, CTI below 40%, ROE above 15%.
■ Reiterate Add. We see positive share price movement given the beat, although this could be offset by negative sentiment post-Fed meeting today

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