buysellhold july.23



City Developments Limited

Business as usual


 No financials were provided for the 3Q23 operational update. The group’s net gearing ratio (after factoring fair value on investment properties) now stands at 58% following the completion of various acquisitions in 2023.

 In Nov 2023, the group announced a proposal to buy back up to 10% of its preference shares through an off-market equal access scheme at S$0.78 in cash for each preference share.



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Petronas Chemicals (PCHEM MK)

3Q23: Falling short of expectations yet again


Cut FY23-25E EPS by 22%-30%; D/G to SELL 3Q23 results fell short and as such, we cut FY23/24/25E EPS by -22%/-27%/-30% to account for: i) lower blended plant utilisation rates; ii) lower product spreads across the board; and iii) lower EBITDA margins for both O&D and F&M segments. With that, we downgrade PCHEM to SELL with a lower TP of MYR5.75 based on FY24E PER of 16x, in line with its 5Y mean PER. We transfer coverage of PCHEM to Jeremie Yap.



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Press Metal Aluminium (PMAH MK)

3Q23: Within expectations


Maintain HOLD, TP MYR4.90

3Q23 results came in within expectations and as such, we make no changes to our FY23-25E earnings forecasts and TP of MYR4.90 – pegged to FY24E PER of 25x, -1SD to its 5-year (1-year forward) mean PER of 32x, largely reflecting our expectation of more subdued spot aluminium prices into the foreseeable future. Maintain HOLD.



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According to Bloomberg, back in 2018, a Taiwanese streaming and online-dating service made history on the New York Stock Exchange. For the first time, the shares of a company that rang the listing bell never traded. Five years later, in its new avatar as 17Live Inc., the firm is entering the annals of another market — this time as Singapore’s first-ever combination with a locally traded blank-check stock. Vertex Technology Acquisition Corp. is taking over 17Live for S$925.1 million ($692 million). The deal is expected to conclude early next month.

However, is it worth $692 million? Some skeptical brokerage analysts have recommended that investors redeem their SPAC holdings and exit. Still, Nirgunan Tiruchelvam, the Singapore-based head of consumer and internet at Aletheia Capital, reckons that even after redemption, the combined entity may be left with $160 million. “This cash will enable them to build out their franchise in Southeast Asia where livestreaming demand is going to zoom,” he says. However, the fate of more mature consumer-tech businesses from the region that combined with blank-check companies doesn’t inspire confidence. Take Grab Holdings Ltd. A $10 share of the US blank-check company that took the Southeast Asian ride-hailing and fintech giant public surged briefly to $17. But that was before the merger. Nowadays, Grab shares are available at about $3.

A similar fate befell PropertyGuru Group Ltd., another household name in Singapore, where it is a popular app for property purchases and apartment leases. After it listed on the NYSE in March 2022, investors in the SPAC never got a chance to recoup their $10 investment. Currently, PropertyGuru shares are trading at about $3.43. In three months, VinFast Auto Ltd., a Vietnamese electric-vehicle maker, has crashed from a post-merger valuation of $190 billion to $15 billion. Both Singapore and Hong Kong were late to the SPAC party


Fu Yu ($0.127, up 0.4 cents): The Business Times reported that Fu Yu Corp is projecting a brighter outlook for FY2024 with the launch of new transformation strategies to “build a much stronger business foundation, open up new business opportunities and enhance shareholder value”. The group on Tuesday (Nov 28) said it expected China’s economic slowdown, rising interest rates and geopolitical tensions to “pose challenges” for FY2023.

For the nine months ended Sep 30, Fu Yu reported a 34 per cent decline in revenue to S$104mln from S$157.6mln the year prior. Gross profit fell 67.8 per cent on the year to S$9.5mln from S$29.5mln previously, led by lower profit contributions from the manufacturing business. Fu Yu group chief executive David Seow said its customers typically give one, three and six-month forecasts for future orders.

At $0.127, market cap of Fu Yu is S$93.1mln, FY22 P/E is 6.5x (while it was loss-making in 1H23), current P/B is 0.7x, dividend yield is 4.7% and its net cash position of S$56.7mln equates to 60.9% of current market cap.




Expecting lower Dare+ spending


■ At StarHub’s Investor Day, the group announced the lowering of total Dare+ spend guidance to S$270m. It also does not expect more material delays.

■ For FY24F, StarHub intends to 1) continue driving IT transformation, 2) drive newer revenue streams, and 3) grow Ensign’s regional footprint further.

■ We raise our DCF-derived TP to S$1.19 on lower Dare+ cost assumptions. Reiterate Hold as the earnings recovery will likely remain uncertain in FY24F.



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