buysellhold july.23



First Resources (FR SP)

3Q23 Preview: Strong Earnings Coming Through


Upgrade to BUY with the same target price of S$1.65 given the softer share price performance. We recommend investors to BUY with the CPO uptrend in 4Q23-2024 as we expect FR’s 3Q23 earnings to come in strongly at US$70m-80m. This is on the back of higher upstream margins, thanks to high production, sales volume and lower fertiliser costs. Refining and processing margins may be at breakeven with better pricing and good sales volume.



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Resilient In The Face Of Challenges


Management remains fairly optimistic of the group’s overall outlook despite the potential negative impact of inflationary pressure and normalisation in interest rates on asset quality. This stems from the group’s large stock of pre-emptive provisions. Meanwhile, strong loans growth momentum and potential cost optimisation could provide potential earnings tailwinds. Maintain BUY and target price of RM6.00 (0.93x 2023F P/B, 9.8% 2023 ROE). 



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Globetronics Technology (GTB MK)

9M23: Below Expectations; Trudging Across Choppy Waters


We expect a soft 4Q23 performance amid weaker seasonality in Dec 23 alongside the sluggish ramp-up in its sensor segment. Cut 2023/24 earnings by 18%/8%. The company is rationalising its lower-margin business and pursuing new programmes with its existing and new customers. While Globetronics is still not fully out of the woods yet, the game changer could be the fruition of its active engagements with potential Chinese and Taiwanese customers. Maintain HOLD. Target price: RM1.52. 



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YTL Power International

S’pore to revamp gas procurement framework


■ Singapore’s Energy Market Authority (EMA) plans to create an entity (Gasco) that will centrally procure and supply gas for the power sector.

■ EMA believes that this would ensure sufficient and secure gas supply and offer a long-term solution to the recent spikes in Singapore’s electricity prices.

■ We see limited near-term earnings impact to YTLP from this change, but longer-term margins could normalise from the current elevated levels



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Frasers Centrepoint Trust / FCT ($2.12, up 0.07), is pleased to report a DPU of 6.020 Singapore cents for the six-month period from 1 April 2023 to 30 September 2023 (“2H23”). This brings total DPU for financial year ended 30 September 2023 (“FY23”) to 12.150 Singapore cents, coming in line with expectations.
Mr Richard Ng, Chief Executive Officer of FCAM, said, “FCT delivered a strong set of financial results in FY23, underscored by improved financial and robust operating performances. During the year, we made five key announcements which are the acquisition of the 25.50% effective interest in NEX, the acquisition of the additional 10.00% interest in Waterway Point, the Asset Enhancement Initiatives (“AEI”) at Tampines 1, the divestment of Changi City Point and the divestment of FCT’s interest in Hektar REIT. The aggregate value of these transactions and initiatives is about S$1.1 billion, demonstrating our proactive portfolio management despite challenging market conditions. These strategic steps enable FCT to recycle its capital effectively, bolster its financial position and portfolio strength while reinforcing its leading market position in the Singapore suburban retail sector. While the macroeconomic environment is challenging, we remain positive on the outlook of the suburban retail sector in Singapore, based on several factors such as Singapore’s population growth, sustained healthy consumer spending on essentials, healthy demand for prime suburban retail space and tight supply in the retail market. We believe FCT is well-positioned to benefit from these factors going forward.”
At $2.12, FCT is capitalized at $3.6 billion and trades at 5.7% dividend yield and 0.9x book value. Bloomberg consensus target price of $2.35 implies a moderate upside of 10%, hence we maintain HOLD.


We highlight 3 key investment thesis for Tiong Woon Corp / TWC ($0.505, up 0.5 cents):


1. TWC is a regional heavyweight in the heavy lift industry, currently trading at a significantly undervalued level.

TWC is a lifting powerhouse that has competed successfully against the likes of international competitors such as Mammoet and Sarens by winning contracts against them. However, the market has failed to recognize TWC and has unfairly punished TWC’s share price.

2. There exists a notable perception gap between the market’s perception and reality regarding TWC’s capabilities, which are on par with international industry giants, yet remain relatively unknown. This presents a strong potential for a re-rating.


Despite profits at a record high since its last downturn in FY17, TWC is far from the cycle peak and trading at distressed valuations. We thus continue to maintain a BUY on TWC with a target price of S$0.88, pegged to 40% discount to peers EV/EBITDA. We think that this is the appropriate method to value TWC given it’s consistent cash flows. A 40% discount is ascribed due to TWC’s small market cap and low trading liquidity. We believe the time for a sector rerating is imminent and Tiong Woon remains the cheapest and the biggest laggard in the construction industry, which should translate into supernormal gains for investors in time to come.

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