buysellhold july.23



Singapore Airlines

Good quarterly profit, but below expectations


■ 3QFY3/24 core net profit of S$628m was below our 9 Jan preview of S$800m as cargo yields failed to materially rise qoq as we had expected.

■ We cut our earnings estimates to reflect this, and downgrade from Add to Hold as SIA’s share price has risen strongly over the past three months.

■ Our TP is raised to S$7.30, based on SIA’s 2023 peak P/BV multiple of 1.3x, up from 1.2x previously (2 s.d. above P/BV mean since 2011).


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Sembcorp Industries (SCI SP)

2023: Strong Results With More Capacity Growth In Renewables To Come


SCI reported strong 2023 results with net profit before exceptional items up 45% yoy to over S$1b — a historical high for the company. Equally impressive was its free cash flow of nearly S$2b which implies a P/FCF of 5.2x. Both conventional energy and renewables saw impressive profit growth in 2023 with capacity additions for the latter segment likely to be a key share price driver in the next 12-18 months, in our view. Maintain BUY. Target price: S$7.49



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Digital Core REIT (DCREIT SP)

Scaling Up Presence Overseas While Lowering Leverage


DCREIT continues to expand overseas by acquiring an additional 4.9% stake in a Frankfurt data centre and a 10% stake in Osaka data centres. The acquisitions funded by private placement are accretive to pro forma 2023 DPU by 1.8%. This reduces aggregate leverage by 6.7ppt to 33.8% after factoring in the divestments of two Silicon Valley data centres. DCREIT provides 2025 distribution yield of 5.8% (KDCREIT: 5.3% and MINT: 5.7%). Maintain BUY. Target price: US$0.79.


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Sembcorp Industries (SCI SP)

Driving energy transition Strong finish to the fiscal year, BUY


Transferring coverage to Krishna Guha, SCI reported FY23 net profit of SGD970m, +11% and marginally ahead of MIBG/street. 2H profit of SGD426m grew 15% YoY. Revenue for 2H fell 14% YoY due to lower power prices; this was partly offset by higher revenue from renewable and other business segments. Bottom-line growth was driven by higher EBITDA across conventional energy and renewables. Renewables capacity is halfway towards its 2028 target of 25GW. While near-term earnings have likely peaked, the green transition theme is intact with a de-risked revenue profile. We reiterate BUY with an unchanged SOTP-based TP of SGD6.30. 



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