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Sembcorp Marine
A visit to the Tuas Boulevard Yard
■ Today, we visited SMM’s Tuas Boulevard Yard, the largest integrated yard in Singapore. SMM has three yards in Singapore: Admiralty, Pandan, and Tuas.
■ We expect revenue from order wins secured in FY22F to be reflected by FY23F and yard capacity to return to c.70% as supply chain issues ease.
■ Reiterate Add and TP of S$0.19 based on our 1.6x FY23F P/BV (the average trading band since the oil price crash in 2015).
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Singapore Economics
3Q Final GDP Downgrade; Maintain 2023 GDP Forecast at +1.5%
3Q GDP Downgraded to +4.2%; MTI Forecasts 0.5%-2.5% in 2023
Final 3Q GDP growth (+4.1%) came in lower than advance estimate (+4.4%), due to downgrades in both manufacturing and services. GDP expanded by +4.1% in 3Q22 from a year ago (vs. +4.5% in 2Q). On a quarter-on-quarter seasonally adjusted basis, GDP rose by +1.1% (vs. -0.1% in 2Q), the fastest increase in 3 quarters.
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Baidu Inc (9888 HK / BIDU US) - Muted near-term advertising outlook; look for recovery in next few quarters
As with its peers, Baidu’s 3Q22 results beat mainly due to tight cost control by the company. Core advertising business is still experiencing weak trends, while its new businesses such as AI Cloud is driving growth momentum in the near-term.
Margin improvement was significant in this quarter, growing 730 basis points (bps) year-on-year (YoY) and 360 bps quarter-on-quarter (QoQ), which led to a 10% beat on net income. Advertising revenue trends have declined in Nov 2022 after improving in Oct 2022 as the resurgence of Covid-19 in major cities such as Guangzhou and Beijing have restricted economic activities again.
Management highlighted that Baidu is well-positioned to benefit from a macro recovery as many of its advertisers are small medium enterprises (SMEs) that have been badly affected by Covid-19 control measures and will benefit from a relaxation of these measures eventually. Management also shared positive growth and profitability metrics on the AI Cloud business and sees this as a significant growth driver for the company going forward. Following increases to our estimates in FY23 and FY24, our FV rises from HKD176 to HKD184 (9888 HK) / USD181 to USD190 (BIDU US). BUY.
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UOL has a market cap of S$5.5bln and trading at 15.6x forward PE and 0.5x
PB with a 2.3% yield. We continue to favour UOL as one of the hoteliers
who should benefit from the industry upturn with their luxurious Pan
Pacific and Parkroyal offerings.
While the industry continues to recover, UOL remains a Singapore centric value laggard hotelier as its latest results only captures the first 2-3 months of Singapore’s full reopening in April 2022.
We also think that 2H22 should reflect the full recovery of UOL’s hotel segment, thereby presenting an opportunity for the stock to rerate upwards. As such, we continue to maintain a BUY recommendation on UOL with a target price of $8.56, representing a 32.5% upside potential.
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Sembcorp Marine (SMM SP)
Yard Visit Reinforces Our Positive View On SMM For 2023
It was evident from a bird’s eye tour of SMM’s yard that its integrated design allows the company to carry out projects more efficiently and thus save on time and cost. This was also helped by the implementation of solar and robotic initiatives. We continue to like SMM given its strong potential for new order wins in 2023, especially for production assets. In the longer term, PSA’s move to Tuas will have positive spillover effects on SMM’s repairs & upgrades segment. Maintain BUY. Target price: S$0.156.
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Tenaga Nasional (TNB MK)
3Q22: Results In Line, Gearing Inches Up To 51%
3Q22 core net profit rose 26% yoy and 13% qoq to RM1,533m, driven by: a) higher hydro generation mix, and b) higher allowance for doubtful debt. 9M22 core net profit of RM4b is within expectations. The government paid TNB RM4.8b out of the RM5.8b owed for the 2H22 ICPT under-recovery. Receivables from the government now stand at RM15.5b, still a hefty amount to recover. Maintain SELL but raise our target price to RM7.70 given the marginal cash flow improvement.
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