ANALYSTS SAY: Buy, Sell, Hold (4 Jan)

CGS CIMB

Japfa Ltd
Post-AAG listing update

■ JAP’s subsidiary AustAsia Group (AAG, 2425.HK, Non-rated) was listed on the Hong Kong Exchange (HKEX) on 30 Dec 2022 at HK$6.40 per share.
■ Eligible JAP shareholders will be entitled to a dividend-in-specie (DIS) of 200 AAG shares for every 1,000 JAP shares owned (c.S$0.23/share in value).
■ Reiterate Add, with a lower TP of S$0.42, pegged at 8x FY24F P/E (historical mean), after removing value of AAG’s DIS from JAP from FY23F.

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Magnum Bhd
Factoring in impact of Kedah outlet closures

■ Kedah has ordered the closure of all NFO outlets in the state from 1 Jan 2023 onwards following its prior directive in Nov 2021.
■ We cut Magnum’s FY23-24F core EPS by 5% to reflect this and the reduction in the number of special draws from 11 to 8 p.a. from 2023.
■ This news may exacerbate already weak sentiment on the stock (top NFO pick), at least in the near term. Reiterate Add with lower RM1.70 TP.

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CGS CIMB

Sports Toto
Kedah outlet closures negative for sentiment

■ Kedah has ordered the closure of all NFO outlets in the state from 1 Jan 2023 onwards following its prior directive in Nov 2021.
■ We cut SPTOTO’s FY23-25F core EPS by 2-5% to reflect this and the reduction in the number of special draws from 11 to 8 p.a. from CY23.
■ We believe this news will further dent already weak sentiment on the stock, at least in the near term. Reiterate Add with a lower TP of RM1.90.

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STRATEGY – SINGAPORE
1H23 Market Strategy

A Safe Harbour In A Stormy Sea
While the China reopening story may see a short-term bullish reaction in the market, we
believe that recessionary risks persist nonetheless. For 2023, we forecast 6% EPS
growth for the large-cap stocks under our coverage, and from a top-down basis, our
2023 year-end target of 3,520 for the STI implies 8% upside from current levels.
Importantly, the index’s valuations are not stretched at present, trading at 2023F PE and
P/B of 10.7x and 1.0x respectively, and paying a yield of 4.5%.

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SECTOR UPDATE
Oil & Gas – Malaysia

PAO In 2023: A Year Of Catch-up And Energy Transition
Local O&G activity may remain strong, especially large platforms and rigs, and sector valuations may have largely priced in strong rig/maintenance demand, with Velesto and
MMHE (re-rated after CPP wins) as examples. We foresee future project decisions may not only require high O&G prices, but also the increasing importance of other factors like the returns of heavy capex green/carbon capture projects. We still see opportunities in FPSOs, ESG beneficiaries and recovery plays.

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STRATEGY – MALAYSIA
Alpha Picks: Focus On China Reopening Beneficiaries

Our Alpha Picks underperformed the FBMKLCI (-1.3% vs +0.9%) in Dec 22, having not benefitted from 2022’s year-end window dressing. Our January Alpha Picks comprise direct and indirect beneficiaries of China’s economic and border reopening theme: Genting Malaysia, Malaysia Airports, My EG Services, Press Metal and Yinson. High yielders with back-ended or special dividends should appeal as market sentiment is expected to remain cautious. These include Hap Seng Plantations and TIME dotCom. 

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