19 September 2022: ComfortDelGro Corp Ltd (CD SP), Tsingtao Brewery Company Limited (168 HK)

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ComfortDelGro Corp Ltd (CD SP): Range-bound trade

• BUY Entry 1.38 – Target – 1.50 Stop Loss – 1.33
• ComfortDelGro is a publicly listed passenger land transport company, with a fleet of more than 38,700 vehicles worldwide. ComfortDelGro’s businesses include taxi, bus, rail, car rental and leasing, automotive engineering and maintenance services, inspection, test and assessment services, learner drivers’ instruction services, insurance brokerage services and outdoor advertising. SBS Transit Ltd and VICOM Ltd are subsidiaries listed on the Singapore Exchange. SBS Transit is Singapore’s largest public bus transport operator with a fleet of more than 2,400 buses, as well as urban rail operation, serving more than 2 million passengers daily. VICOM provides inspection, test and assessment services. The Group is also Singapore’s largest taxi operator with more than 17,000 taxis. The Group’s overseas operations currently extend from the United Kingdom and Ireland to Vietnam and Malaysia, as well as across 12 cities in China, including Beijing, Shanghai, Guangzhou, Shenyang and Chengdu.
• Growth drivers. CDG plans to drive future growth through rail, electrification, logistics, and non-emergency medical transportation segments, with acquisitions and partnerships. On 1 September, its subsidiary, Scottish Citylink Coaches Limited, had successfully acquired the businesses and business assets relating to the retail and customer services operations for the marketing and sale of coach journeys within the United Kingdom under the ‘megabus’ brand and between Plymouth and Bristol under the ‘Falcon’ brand.
• 1H22 results. With COVID-19 restrictions easing in countries where the group operates, the land transport giant has reported better financials for the first half of FY 2022. Revenue for the group inched up 6.7% year on year to S$1.86 billion. Net profit rose 30.4% year on year to S$118.7 million, boosted by a S$38.8 million net gain on the disposal of property. With Singapore contributing 72% to its operating profit. Public transport services made up close to 80% of CDG’s group revenue and half of the group’s operating profit. With more people riding on public transport, operating profit for the division inched up from S$82.5 million to S$85.6 million.
• Disposal of property. CDG sold Alperton property in the UK for S$37.2 million. Resulting in the group’s cash flow statement reflecting a nearly four-fold jump in proceeds from the disposal of fixed assets, from S$16.1 million to S$63.1 million.
• Dividend distribution. CDG declared an interim dividend of S$0.0285, up 35.7% year on year from 1H2021’s S$0.021. Together with the special dividend of S$0.0141, rewarding shareholders from the gains it made from the disposal of a London property, the total dividend announced this round came up to S$0.0426. Coupled with last year’s final dividend of S$0.021, the trailing 12-month dividend stood at S$0.0636, giving CDG’s shares a trailing dividend yield of 4.8%.
• Updated market consensus of the EPS growth in FY23/24 is 49.5%/15.0% YoY respectively, which translates to 14.6x/13.5x forward PE. Bloomberg consensus average 12-month target price is S$1.75.

(Source: Bloomberg)

Singtel Ltd (ST SP): A new business development

• RE-ITERATE BUY Entry 2.68 – Target – 2.86 Stop Loss – 2.56
• Singtel provides an extensive range of telecommunications and digital services to consumers and businesses across Asia, Australia, Africa and the US. It serves over 753 million mobile customers in 21 countries, including Singapore, Australia (via wholly-owned subsidiary Singtel Optus) and the emerging markets of India, Indonesia, the Philippines, Thailand and Africa.
• Offloading stakes in Airtel. According to NSE block deal data, Singtel entities were believed to have sold 1.76% stakes of Bharti Airtel through block deals, aggregating to around INR7,148 crore. A bulk of these shares has been acquired by Bharti Telecom Ltd (BTL), a key promoter company of the Indian telco. Two weeks ago, Singtel announced that its affiliates have entered into an agreement to transfer approximately 3.33 % shares to BTL for an aggregate amount of approximately S$2.25bn, leaving direct shareholding of Singtel and Bharti in Airtel at around 10% and 6%, respectively.
• Singtel-Intel collaboration launched a 5G programme. Singtel and Intel jointly launched a multi-access edge compute 5G incubator that will enable enterprises to adopt 5G seamlessly, deploy applications that need low latency processing at the edge, and drive innovation. Through the incubator, enterprises can tap into Singtel and Intel’s ecosystem to deliver their 5G use cases, including ready-to-deploy applications for rapid trials and proof of concepts for research and development.
• 1Q23 (YE March) results review. The improvement of the bottom line was driven by improved operational performance and exceptional gains from Airtel and dilution of the Group’s effective shareholding in Australia Tower Network.

• Updated market consensus of the EPS growth in FY23/24 is 26.1%/17.2% YoY respectively, which translates to 18.3x/15.6x forward PE. Current PER is 23.1x. Bloomberg consensus average 12-month target price is S$3.24.

(Source: Bloomberg)

Tsingtao Brewery Company Limited (168 HK): A FIFA World Cup themed play

• Buy Entry – 70 Target – 80 Stop Loss – 65
• Tsingtao Brewery Company Limited, together with its subsidiaries, engages in the production, distribution, wholesale, and retail sale of beer products worldwide. The company sells its beer products primarily under the Tsingtaoand and Laoshan brand names. It also provides wealth management, and agency collection and payment services; and financing, construction, and logistics services, as well as technology promotion and application services.
• FIFA World Cup Qatar 2022 in two months. The once in every four years FIFA World Cup is going to take place from November to December 2022. This is the global largest sports event after the Tokyo Olympic Games, and it is expected to attract a record high of spectators as most countries have eased COVID restrictions. Accordingly, it will stimulate sales of alcohol and other drinks. The beer feast will take place during the world cup period.
• 1H22 earnings review. Revenue grew by 5.4% YoY to RMB19.3bn. Gross profit dropped by 9.6% YoY to RMB7.3bn. GPM dropped by 6.3ppts to 38.1%. Net profit attributable to shareholders of the company grew by 18.1% YoY to RMB2.9bn. NPM increased by 1.3ppts to 14.8%. The growth of the bottom line was due mainly to the upgrade of the product mix and improvement of cost control.
• The updated market consensus of the EPS growth in FY22/23 is 1.5%/17.1% YoY, respectively, translating to 27.4×/23.4x forward PE. The current PER is 24.4x. Bloomberg consensus average 12-month target price is HK$89.35.

(Source: Bloomberg)

TRIP.COM (9961 HK): A Mid-autumn festival holiday-themed trade

• RE-ITERATE Buy Entry – 190 Target – 210 Stop Loss – 180
• Trip.com Group Limited, formerly Ctrip.com International, Ltd., is a travel service provider in China that provides accommodation booking, transportation ticketing, package tours and corporate travel management. The company aggregates hotel and transportation information to help leisure and business travellers make reservations. The company helps leisure travellers book travel packages and guided tours and helps corporate clients manage their travel needs. The company also offers a range of travel-related services to meet the different booking and travel needs of leisure and business travellers, including visitor reviews, attraction tickets, travel-related financial services, car services, travel insurance services and passport services. The company also offers package tours for independent leisure travellers, including tour groups, semi-tour groups and private groups, as well as package tours that require different transportation arrangements (such as cruise, buses or self-driving).
• Mid-autumn Festival holiday bookings surged. As of 30th August, according to the company’s 2022 Mid-autumn festival and autumn holiday booking statistics report, the overal bookings for the upcoming Mid-autumn festival holiday surged by 137% compared to the previous Dragon Boat Festival holiday. This year’s Mid-Autumn Festival local travel, peripheral travel, long-distance travel orders accounted for 23%, 24%, 53%, long-distance travel compared with the same period this year Dragon Boat Festival accounted for nearly 30% of the increase. Mid-Autumn Festival is expected to become the best short holiday for this year’s tourism market recovery.
• 1Q22 earnings review. Revenue remained flat at RMB4.1bn. Gross profit dropped by 1% YoY to RMB3.0bn. GPM fell 0.8ppt to 74%. Net loss narrowed to RMB149mn compared to RMB676mn during the same period last year.
• Updated market consensus of the EPS in FY22/23 is US$0.253/US$1.096 respectively, which translates to 101.0x/23.3x forward PE. Bloomberg consensus average 12-month target price is HK$253.04.

(Source: Bloomberg)

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United States

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• FedEx Corp (FDX US) slid 21.4% after the company preannounced disappointing results for the recent quarter, citing weakness in global shipment volumes, and several Wall Street analysts downgraded the stock. CEO Raj Subramaniam said he expects the economy to enter a “worldwide recession” on CNBC’s “Mad Money” Thursday. FedEx dragged its peers United Parcel Service Inc (UPS US) and XPO Logistics Inc (XPO US) down 4.5% and 4.7%, respectively.
• International Paper Co (IP US) dropped 11.2% after Jefferies downgraded the stock from hold to underperforming as the paper services industry struggles with a glut of containerboard and sliding demand.
• NCR Corp (NCR US) the technology provider for banks, retailers and restaurants saw shares hit a new 52-week low today after falling 20.3%. NCR’s board of directors announced the company would split into two independent publicly traded companies.

Singapore

• Golden Energy & Resources Ltd (GER SP) fell 3.1% on Friday. India and other members of the Shanghai Cooperation Organisation (SCO) discussed energy security at the regional security bloc’s meeting in Uzbekistan. The SCO originated in the 1990s with a security agreement between Russia, China and ex-Soviet states in central Asia. It coincides with a sharp rise in Indian imports of Russian oil, coal and fertiliser, a vital outlet for Moscow as it seeks to secure new markets after Western sanctions were imposed following the invasion of Ukraine. Russia, the biggest oil producer in the SCO bloc, has also overtaken the United States to emerge as India’s fourth largest coal supplier. India, the world’s second largest coal importer, imports of coal surged to 9.35 million tonnes in the six full months since the invasion, nearly double the 4.83 million tonnes during the same period in 2021, data from Indian consultancy Coalmint showed.
• Nanofilm Technologies International Ltd (NANO SP) declined 2.7% on Friday. There was no company specific news. The benchmark Straits Times Index (STI) edged up slightly – by 0.01 per cent – rising 0.31 points to 3,268.29. Losers outnumbered gainers 284 to 213, with about 1.71 billion securities worth S$1.9 billion changing hands. However, most Asian markets closed red on Friday, with concerns over high global inflation.
• First Resources Ltd (FR SP) fell 2.6% on Friday. Indonesia set its crude palm oil reference price for the Sept. 16 to 30 period at $846.32 per tonne, a Trade Ministry regulation issued on Thursday showed, down from $929.66 per tonne for the first half of the month. The new reference price would place the export tax at $52 per tonne, down from the current $74 per tonne.
• Hour Glass Ltd/The (HG SP) tumbled 2.6% on Friday. There was no company specific news. Persistent concerns over global high inflation, as well as more rate hikes from the United States Federal Reserve, sent Asian markets closing in the red on Friday (Sep 16). Vasu Menon, executive director of investment strategy at OCBC Bank, said that the US’ August inflation coming in higher than expected has led some market watchers to believe that the risk of the Federal Reserve increasing the interest rate by 100 basis points (bps), instead of last week’s consensus of a 75 bps hike, has gone up quite sharply. Inflation represents a time where consumers find their purchasing powers continuously eroded. This in turn compels people to be more selective with their spending by prioritising the essential goods and/or down-trading to lower-priced alternatives to stretch their dollar.
• City Developments Ltd (CIT SP) dropped 2.2% on Friday. There was no company specific news. Persistent concerns over global high inflation, as well as more rate hikes from the United States Federal Reserve, sent Asian markets closing in the red on Friday (Sep 16). City Developments was the top decliner, falling 2.2 per cent, or S$0.18 to S$8.17.

Hong Kong

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Precious Metal	-2.52%	Gold dips to 2-year low on US rate rise fears Zijin Mining Group Co Ltd (2899 HK)
Insurance	-1.96%	China to help Bangladesh in developing insurance sector Manulife Financial Corporation (945 HK)
Environmental Energy Material	-1.95%	PCAOB Arrives In Hong Kong, EU Regulation Sends Solar Stocks Lower Flat Glass Group Co Ltd (6865 HK)

• GF Securities Co Ltd (1776 HK) fell 8.6% on Friday. On the news, the General Office of the State Council recently issued the “Opinions on Further Optimising the Business Environment and Reducing the Institutional Transaction Costs of Market Entities”, proposing to focus on regulating financial service charges, encouraging securities, funds, guarantees and other institutions to further reduce service charges, and promote financial infrastructure. The facilities reasonably reduce the costs of transactions, custody, registration, and clearing.
• Pharmaron Beijing Co Ltd (3759 HK) fell 7.9% on Friday. According to data from the Stock Exchange on September 15, the Singapore Government Investment Corporation sold 64,300 shares of Pharmaron on September 9, valued at approximately HK$3.1689 million. This month, another institutional shareholder, JPMorgan, also reduced its holdings, with a cumulative net sale of 900,000 shares. In late August, Kanglong Huacheng disclosed that the company’s main shareholders, Xinzhong Kangcheng and Xinzhong Longcheng, planned to reduce their holdings by a total of no more than 71.45 million shares, accounting for 6% of the total share capital. At the beginning of August, Kanglong Chemical announced that the actual controller of the company and its concerted actors Lou Xiaoqiang, Zheng Bei and others planned to reduce their holdings by no more than 27.75 million shares, accounting for 2.33% of the company’s total share capital.
• Kuaishou Technology (1024 HK) fell 7.4% on Friday. On September 15, Kuaishou Senior Vice President Ma Hongbin made a round of adjustments to the department’s organisational structure after leading the international business for more than a month, which will accelerate commercialization in an all-round way.
• Tianqi Lithium Corp (9696 HK) declined 7.3% on Friday. On September 16, Tianqi Lithium responded to the Shenzhen Stock Exchange’s letter of concern regarding share transfer and repurchase of shares, and the performance appraisal indicators and employee stock ownership plans involved in the previously disclosed “2022 Employee Stock Ownership Plan” were set at 0. The company said that the implementation of the employee stock ownership plan to buy back shares at 0 yuan per share will help the company to promote the implementation of its medium and long-term strategy, and can effectively attract, retain and motivate outstanding talents, which is in line with the company’s current operating status and future.
• Huadian Power International Corp Ltd (1071 HK) fell 7.2 on Friday along with other power stocks that fell continuously last week. Baocheng Futures released a research report saying that the temperature in the south still frequently exceeds 35°C, and the reduction in residential electricity demand is not obvious. The overall demand for thermal coal is still strong; on the other hand, there have been many coal mine accidents this summer, and coal mine production is expected to be affected to a certain extent. Therefore, from an industrial perspective, the fundamentals of thermal coal remain strong after the peak season. According to the official website of the National Development and Reform Commission, reminding and urging the relevant parties to operate in compliance, strictly implement the signed medium and long-term contract prices for thermal coal, and strictly prohibit additional price increases by means of “yin and yang contracts”, so as to keep coal prices within a reasonable range.

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Trading Dashboard Update: Take profit on Genting Singapore (GENS SP) at S$0.835.

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