| CGS CIMB |
PHILLIP SECURITIES |
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Sembcorp Industries Renewable energy compounder
■ We added SCI to our country top picks given its stable earnings visibility (backed by long-term PPAs) while compounding RE capacity growth. ■ SCI added c.19% of gross renewable energy (RE) capacity since its Investor Day in Nov 23, with the latest global portfolio at 14.3GW. ■ This includes the latest addition of 440MW Inter State Transmission Systems connected wind-solar hybrid power project from Indian SJVN Limited. ■ The stock trades at c.9.8x CY24F P/E (peers: 13x), which we deem undemanding. Recent share price weakness presents buying opportunity.
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Resources Global Development Riding on Indonesia’s energy demand
RGD engages in coal trading and shipping of hard commodities in Indonesia. It owns a fleet of 22 Indonesian-flagged vessels to operate trans-shipment services or chartered outto third parties. FY23 gross profit split was 90.5%/9.3% for shipping/trading. Trading volume dwindled due to the depletion of output from the coal mines.
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LIM & TAN |
OCBC SECURITIES |
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Keppel Ltd. (S$7.18, up 2 cents) will work exclusively with Mitsui Fudosan for an acquisition of a data centre in Japan. Keppel Ltd. (Keppel) has signed a Memorandum of Understanding (MOU) with Mitsui Fudosan Co. Ltd. (Mitsui Fudosan) to jointly explore data centre development and investment opportunities in Japan and Southeast Asia. The MOU brings together Keppel’s strong customer relationships with global cloud service providers and internet enterprises as well as expertise in developing and operating innovative and sustainable data centres, with Mitsui Fudosan’s strong track record in sourcing land and delivering turnkey solutions for the real estate market in Japan. At Keppel’s last share price of S$7.18, it is capitalized at S$12.7bln and trades at 13.2x PE, 1.2x Price to Book, 4.7% div yield. Based on Bloomberg consensus target price of S$7.99, upside potential is 11.3%. We maintain Accumulate rating on Keppel.
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Singapore: The economics of environment sustainability Investment summary In his Budget 2024 statement, Singapore’s Deputy Prime Minister (DPM) and Finance Minister Lawrence Wong emphasised that Singapore will “make no apology for pursuing growth”. While he acknowledged that embracing sustainability will entail the imposition of additional costs on businesses, going green can also be a competitive advantage, and it is important that local companies are “sustainability-ready”. • Economic growth and environment sustainability need not be at odds with each other • The cost of environment sustainability is too large for either the public or private sector to bear alone; instead, the government can provide catalytic funding and work with corporates to achieve national decarbonisation targets • Companies under our coverage that are contributing to the transition include Sembcorp Industries [SCI SP; FV: SGD6.83]; Keppel Ltd [KEP SP; FV: SGD8.60]; Keppel Infrastructure Trust [KIT SP; FV: SGD0.60]; ST Engineering [STE SP; FV: SGD4.60]; Singapore Airlines [SIA SP; FV: SGD8.00]; ComfortDelGro [CD SP; FV: SGD1.40]; DBS Group Holdings [DBS SP; FV: SGD39.00]; and United Overseas Bank [UOB SP; FV: SGD32.50] |
| LIM & TAN | MAYBANK KIM ENG |
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Yangzijiang Financial Holding / YZJFH ($0.32, down 0.5 cents) has announced that it has cancelled excess and unutilised treasury shares to enhance shareholders’ value. The number of treasury shares cancelled is 276,611,100, effectively reducing the number of treasury shares held before cancellation from 410,249,900 to 133,638,800 after cancellation (as of 7 March 2024). At S$0.32, Yangzijiang Financial is capitalised at S$1.1bln and trades at undemanding valuations of 5.8x P/E, 0.3x P/B and 6.9% dividend yield. YZJFH’s cancellation of treasury shares is seen as a positive, permanently reducing the total number of shares and uplift earnings and book value per share. While investor sentiments continue to look for a recovery in China’s real estate sector, share price may see support in YZJFH’s S$1.4bln cash pile, greater than its current market cap. Based on Bloomberg consensus target price of 45 cents, potential upside from its last traded price of 32 cents is about 40%.
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Globetronics Technology (GTB MK) Inks deal with Indian IoT device CM
Neutral on deal owing to uncertainties; SELL. We are neutral on GTB’s latest tie-up. Despite the deal effectively guaranteeing GTB a contribution of MYR10.9m over 3Y, we are less upbeat over the deal’s “re-investment” portion owing to (i) its counterpart’s OSAT inexperience, (ii) lack of established customers, and (iii) uncertainties over exit valuation guarantees. Our FY24-26E forecasts and TP of MYR1.05 (pegged to 21x FY25E PER) remain unchanged; maintain SELL.
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