CGS CIMB

STRATEGY – SINGAPORE

Alpha Picks: Adding DELFI While Removing THBEV, DBS and SIAEC

Despite overall bearish investor sentiment in Feb 23, our Alpha Picks portfolio easily outperformed the STI by 3.7ppt on an equal-weighted basis. For Mar 23, we have included newly-initiated DEFLI into our portfolio due to higher upcoming contributions from Indonesia which will boost revenue and earnings. Additionally, we have taken profit on DBS and Thai Beverage, and also removed SIA Engineering. Our Alpha Picks portfolio has beaten the STI for 11 out of the past 12 months.

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Japfa Ltd
A prolonged downturn

■ Japfa recorded core net loss of US$31.1m in 4Q22, with FY22 core net profit declining 73.9% and coming in below expectations at 45.1% of our estimate.
■ Headwinds are unlikely to subside in the next two quarters, as consumption of animal proteins remains subdued on weak purchasing power.
■ Downgrade to Reduce, with lower TP of S$0.24 (5x FY24F P/E, 1 s.d. below 5-year mean) due to oversupply resulting in subdued selling prices. 

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CGS CIMB

SEA Ltd
FY23F: Hitting profitability milestones

■ We think SE could report better-than-expected EBITDA for 4Q22F, helped by narrower losses at Shopee (e-commerce) and SeaMoney (fintech).
■ We expect SE to achieve EBITDA breakeven at the group level by 2Q23F; SeaMoney/Shopee may turn segment EBITDA positive by 3Q/4Q23F.
■ We believe SE will revert its focus to reaccelerating topline growth in FY24F after it has achieved its breakeven targets. Reiterate Add.

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Hongkong Land (US$4.63, down 2 cents) reported full year results and stated that profitability was significantly lower in 2022, primarily due to a lower contribution from the Development Properties business in the second half of the year, after a record performance in 2021. 

Hongkong Land’s market cap stands at US$10.8bln, and trades at 11.7x forward PE and 0.3x PB, with a dividend yield of 4.8%. Consensus target price stands at S$5.19, representing 12.1% upside from current share price. Share price will likely continue to be supported by share buy back which is only 11.2% completed (US$444mln to go). We like that HKL continues to distribute steady dividends and that the worst is probably over and situation should improve with China/HK opening up gradually, which should feed into HKL’s earnings and property valuations in 2023. As such, we recommend an ACCUMULATE ON WEAKNESS rating.