PHILLIP SECURITIES

China Sunsine Chemical (CSSC SP)
Cautious Outlook As ASPs Trend Downwards

Sales volume is falling as a result of lower consumer confidence, amid lower ASPs for rubber accelerators expected in the coming term. However, capacity expansion efforts are still ongoing by Sunsine. We have lowered earnings expectations for 2022-23, due to the macroeconomic uncertainties. Maintain BUY with a lower target price of S$0.453.

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Singapore Exchange Limited
Growth = derivatives volumes + pricing + treasury income
SINGAPORE | FINANCE | UPDATE

 Securities volume softening while derivatives volumes trending at 10% growth rate, and derivatives pricing climbing to record levels.
 Pick up in treasury income to accelerate in FY23 as higher interest rates kick in. We estimate Treasury income to rise at least 8% YoY in FY23. 

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CGS CIMB

Sector Note [ REIT │ Overweight (no change) ] 

A year of two halves

 We think that 2023F could be a year of two halves for SREITs, with any share price weakness in 1H23F representing potential buying opportunities to ride into the slowing rate hike environment. We believe that the market has factored in 40-665bp additional rate hikes into current share price valuations. Our stress test indicates that a 50-100bp reversal in peak spot interest rates could lighten interest burden and lead to forward sector DPU stabilisation. 

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Malakoff Corporation (MLK MK)
Favourable risk-reward

A trade on elevated coal prices
FY22 is shaping up to be a strong year for earnings and thus dividends as Malakoff’s coal plants benefit from exceptionally high fuel margins. We see current risk-reward as being favourable given potentially elevated earnings in the upcoming quarters. Upgrade to BUY (from HOLD) with a higher MYR0.75 TP (+7%) post our earnings upgrades. 

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SECTOR UPDATE
Consumer – Malaysia

Palatable Valuations And Improved Earnings Visibility Underpin OVERWEIGHT Call

Margin compression tied to inflationary pressure and lofty commodities prices has
appeared to have bottomed out. Given the margin compression and moderating
commodities prices, we expect the eventual improved earnings visibility to potentially
catalyse the sector, anchoring our OVERWEIGHT call on the sector. The sector is also trading below its -1SD to its five-year mean while offering resilient and attractive growth. Top picks for the sector are F&N, Heineken Malaysia and Mr. DIY.

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AIA Group
Remember the good old days?

■ We raise our FY23F–24F VONB by 5-21%, primarily driven by HK and China, as we factor in Covid-zero policy changes and border re-openings.
■ Margins and premium volumes are tailwinds that can drive FY24F–25F VONB growth, in our view, with FY24F’s 29% growth the fastest since FY11.
■ We assess 21–76% further valuation upside can exist under various scenarios (see Figs 15–16).
■ TP raised to HK$104. Remains our top sector pick. Reiterate Add rating. We also see upside from an upward rebasing of investment return assumptions. 

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