5 December 2022: Keppel Corp Ltd (KEP SP), Fuyao Glass Industry Group Co Ltd (3606 HK)
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Keppel Corp Ltd (KEP SP): Reviving infrastructure expansion in the post-COVID era
- Entry – 7.50 Target – 8.30 Stop Loss – 7.10
- Keppel Corporation is a Singaporean conglomerate headquartered in Keppel Bay Tower, HarbourFront. The company consists of several affiliated businesses that specialises in offshore & marine, property, infrastructure and asset management businesses. It is increasingly focused on transition energy and renewables, and is pivoting to renewables for a more sustainable future.
- Merger Votes. On 8 December, the group held its extraordinary general meeting to vote on the proposed merger of its offshore and marine (O&M) unit with Sembcorp Marine online.
- Keppel Infrastructure. The investing unit of Keppel Corp is investing about 30 million euros (S$42.6 million) to take a 49.9 percent stake in a new joint venture (JV) with Swiss-based energy company Met Group. The JV will be called Keppel MET Renewables. The company will pursue renewable energy projects across Western Europe. It targets to “scale up rapidly” to at least one gigawatt of operating and ready-to-build renewable energy projects. Additionally, Keppel New Energy, a subsidiary of Keppel Corporation’s infrastructure arm, will be collaborating with Pertamina Power Indonesia and Chevron New Energies International to explore the development of green hydrogen and green ammonia projects using renewable energy in Indonesia.
- New contract. Keppel Offshore & Marine, through its wholly-owned subsidiaries, has entered into new bareboat charter contracts with ADES Saudi Limited Company for two KFELS B Class jack-up rigs, Cantarell III and Cantarell IV. The new bareboat charters will be for a period of five years, expected to commence in the first half of 2023, and projected to generate total revenue of about $155 million for Keppel O&M, which includes modification works to prepare the rigs for deployment.
- Updated market consensus of the EPS growth in FY22/23 is -4.5%/-1.8% YoY respectively, which translates to 14.2x/15.2x forward PE. Current PER is 11.9x. Bloomberg consensus average 12-month target price is S$9.18.
(Source: Bloomberg)
Banyan Tree Holdings Ltd (BTH SP): Strong traveling demand
- RE-ITERATE BUY Entry – 0.275 Target – 0.305 Stop Loss – 0.260
- Banyan Tree Holdings Ltd is a global hospitality group that has grown in its roots in Southeast Asia and is currently operating in 23 countries. The group’s headquarters is in Singapore, allowing it to have easy access to the majority of its properties located in Southeast Asia. BTH currently manages over 60 hotels and plans to continue expanding, with this number being forecasted to increase to 109 hotels in 2025. Among its holdings, Thailand and Maldives are the most prominent.
- Pent-up demand. As the pandemic measures begin to ease globally, we expect tourism rates to return to the pre-covid numbers or even higher. The global hotel industry continues to navigate challenges stemming from the pandemic as well as more recent headwinds from labour shortages, inflation, and geopolitical concerns. The hotel business has been recovering smoothly as more countries gradually open their borders for cross-border travel.
- Focus on wellness. With wellness being an important brand value for BTH since its inception, BTH differentiates itself from its competitors by focusing on well-being of its associates and guests. Last year, the company launched Wellbeing Sanctuaries, combining club floors or resort wings, dedicated dining options, spas, and multifunctional practice spaces into an exclusive journey. All the executive club floors have been converted into well-being sanctuaries.
- Expansion. Instead of conforming to the norm of expanding the ecosystem by going upscale, most of Banyan Tree’s new brands are in the mid-tier segments of the market. In response to the emerging markets of Asia exploding post-covid, BTH now is focusing on regional and midscale tourism; it unveils new concept hotels that will diversify its portfolio of guests, appealing more to current travellers, millennials. Most of the new moderately priced sub-brands will initially focus on Asia, taking advantage of the undersupply in the region.
- 1H22 results. Banyan Tree’s revenue more than doubled to S$119 million. Operating Profit achieved S$26 million vs previous loss of S$16 million.
- Technical TP of S$0.305; fundamental TP of S$0.400. While we have a technical TP of S$0.305 based on short-term technical factors, we initiated a coverage with a fundamentals-based TP of S$0.400. Our fundamental TP is based on 1.24x FY23F P/S as we expect FY22 earnings to improve due to the slow recovery and reopening of the industry. Read the full fundamentals-based report here.
(Source: Bloomberg)
Fuyao Glass Industry Group Co Ltd (3606 HK): Benefiting from the booming EV trend
- Buy Entry – 33.0 Target –37.0 Stop Loss – 31.0
- Fuyao Glass Industry Group Co Ltd is a China-based company, principally engaged in the manufacture and distribution of float glasses and automobile glasses. The Company’s products portfolio consist of automobile glasses, such as coating glasses and others, which are applied in passenger cars, buses, limousines and others, and float glasses. The Company distributes its products within domestic markets and to overseas markets.
- High-value-added products are the growth driver. In 9M22, the high value-added products such as panoramic roof glass, windshield glass with a camera, head-up display glass, and soundproof glass accounted for 43.8% of the overall product mix. Accordingly, the overall ASP increased by 11.0% YoY during the period. Moving forward, the increasing demand for EVs will drive the growth of the utilization of smart glass and energy conservation glass.
- Falling raw material and shipping costs. Float glass prices further dropped in November due to soft demand and excessive inventories. Meanwhile, global freight rates had been trending downward with the gradual normalization of the global supply chain. Both tailwinds will help margin improvement in the near term.
China Float Flat Glass 4.8/5mm price
Global Container Freight Index
- Record high quarterly performance. 3Q22 operating revenue jumped by 34.3% YoY to a historical high of RMB7.5bn. 9M22 operating revenue grew by 19.2% YoY to RMB20.4bn. 3Q22 gross profit jumped by 66.1% YoY to RMB2.6bn. 3Q22 GMP increased by 6.6ppts to 34.9%. Profit attributable to owners of the company jumped by 83.8% YoY to RMB1.5bn. NPM grew by 6.6ppts to 20.4%.
- The updated market consensus of the EPS growth in FY22/23 is 46.5%/10.0% YoY respectively, which translates to 17.0x/15.5x forward PE. The current PER is 21.3x. Bloomberg consensus average 12-month target price is HK$46.45.
(Source: Bloomberg)
Dongfang Electric Corp Ltd. (1072 HK): Fuel cell and hydrogen energy themes in play
- RE-ITERATE Buy Entry – 13.0 Target –15.0 Stop Loss – 12.0
- Dongfang Electric Corp Ltd is a China-based company mainly engaged in the manufacturing and sales of power generation equipment. The Company operates five major reporting segments: Clean and High-Efficiency Energy Equipment segment, Renewable Energy Equipment segment, Engineering and Trade segment, Modern Manufacturing Service Industry segment, and Emerging Growth Industry segment. The Company’s main products include water turbine generator sets, steam turbine generators, wind turbine generator sets, power station steam turbines and power station boilers as well as gas turbines. he Company distributes its products within the domestic market and to overseas market.
- China to accelerate fuel cell vehicle deployments. By 2025, China will have about 50,000 hydrogen fuel-cell vehicles and its annual hydrogen production from renewable energy will reach 100,000 to 200,000 tonnes, according to the plan jointly released by the National Development and Reform Commission, and the National Energy Administration. Following the release of a national plan in March aimed at promoting the development of the hydrogen energy industry, local governments have made policies to strategize corresponding deployments.
- 3Q22 earnings review. Operating income grew by 18.4% YoY to RMB12.3bn. Net profit attributable to shareholders of the company jumped by 40.2% YoY to RMB725.9mn. In 9M22, the company manufactured power generation equipment with a capacity of 25,631.8MW, including hydro-electric turbine generating units (2,695.0MW), steam turbine generators (19,831.0MW), wind power generating units (3,105.8MW), power station steam turbines (19,318.0MW) and power station boilers (17,044.0MW). In 9M22, the company’s new effective orders amounted to RMB53.822 billion, among which 32.45% was attributable to high-efficiency clean energy equipment, 27.67% to renewable energy equipment, 12.98% to engineering and trade, 13.10% to modern manufacturing service business, and 13.81% to an emerging growth industry.
- The updated market consensus of the EPS growth in FY22/23 is 24.9%/28.3% YoY respectively, which translates to 13.4x/10.5x forward PE. The current PER is 13.0x. Bloomberg consensus average 12-month target price is HK$15.4.
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Trading Dashboard Update: Add Dongfang Electirc (1072 HK) at HK$13.0.
