buysellhold july.23



Palm oil – Separate the wheat from the chaff


• We remain constructive on the long-term supply-demand fundamentals of the palm oil sector. Against a backdrop of robust demand and declining yields, our long-term pecking order for plantation stocks under our coverage is as follows: Bumitama Agri [BAL SP; FV: SGD0.79] (most preferred) > Golden Agri-Resources [GGR SP; FV: SGD0.27] > Wilmar International [WIL SP; FV: SGD4.22] (least preferred). In the near term, however, we think Wilmar International (Wilmar) could be an interesting name that is leveraged to China’s consumption recovery.

• As El Niño recedes, we could now be gearing up for La Niña in the second half of the year. The impact of La Niña on crude palm oil (CPO) prices will be dependent on the strength of the event: weak La Niña conditions are likely to boost palm oil yields, while prices are supported by a lower supply of alternative vegetable oils; a strong La Niña event, however, could trigger flooding, disrupting the harvesting, collection, and transportation of palm fruits and placing pressure on supply.

• Traceability challenges surrounding smallholder supply could result in a split supply chain as palm oil importers comply with the European Deforestation Regulation (EUDR). This may potentially alienate smallholders from the supply chain and discourage them from adopting sustainable practices.


Grand Banks Yachts / GBY (S$0.43, down 0.5 cents) remains attractively priced despite the recent run up in share price, backed by a favourable yachting industry and strong 9MFY24 results. Its peer Ferretti Group has also reported solid results and we continue to maintain our view that Grand Banks trades at undemanding valuations and is poised for continued share price re-rating. 

At S$0.43, GBY is capitalized at S$79.4mln and trades at 6.2x forward P/E, 1.8x EV/EBITDA and 1.1x P/B. Forward dividend yield stands at 3.5%. As GBY continues its momentum in ramping up production and sale of luxury boats, we would not be surprised if GBY ends FY24 on a strong note. Peer comparisons of Ferretti’s valuations of 11.9x forward PE, 5.0x EV/EBITDA and 1.3x P/B reinforce our view that GBY remains an attractive counter to watch. Maintain BUY on Grand Banks Yachts with a TP of S$0.54. (GBY’s share price has done very well since our last BUY recommendation in Feb’24 when the stock price was only trading at 30 cents).



Kotra Industries

Lacks near-term growth catalysts


■ We downgrade Kotra to Reduce, with a lower GGM-based TP of RM3.70 as we cut FY24F/FY25F/26F core net profit estimates by 18.6%/22.4%/27.4%.

■ In our view, normalising sales post Covid-19 and effective tax rate could lead to Kotra’s core profit declining in FY24F-25F before rebounding in FY26F.

■ After ROEs received a boost in FY22 due to Covid-19, we expect Kotra’s ROEs to fall to 14% by FY26F, supported by a dividend payout ratio of 75%.


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Klinique Medical Clinic

Attractive defensive play with high growth


■ KLINIQ plans to have 100-120 branches in Thailand by end-27F, up from 65 at end-1Q24, by moving into mass market segments and offer more services.

■ We expect it to register an EPS CAGR of 20% during FY23-26F.

■ We initiate coverage on KLINIQ with an Add and THB58.0 target price, based on FY25F P/E of 29.4x, which is the sector average



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