20 April 2022: OxPay Financial Ltd (OPFL SP), Samsonite International S.A. (1910 HK)

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SINGAPORE

OxPay Financial Ltd (OPFL SP): Robust acquisitions to drive growth

• BUY Entry – 0.192  Target – 0.219  Stop Loss – 0.179
• OxPay is principally engaged in the provision of merchant payment services and digital commerce enabling services, offering online-to-offline (O2O) solutions through a fully integrated platform with a focus on servicing merchants in the retail, transportation and food and beverage industries. OxPay currently has a presence in four geographical markets – Singapore, Malaysia, Indonesia and Thailand – with ambitions to become a regional player.
• From losses to profits. OxPay’s revenue jumped 53.2% YoY to S$17mn in FY21, while gross profit surged nearly 2-fold to S$10.6mn. Gross profit margin improved significantly from 32% in FY20 to 62% in FY21, mainly due to an increase in remittance activities from its merchants. Even though the company was in a loss-making position of S$26.8mn in FY21, this was due to one-off RTO listing expenses of S$26.4mn and non-recurring expenses relating to the RTO transaction of S$3.6mn. Excluding these, adjusted net profit stood at S$3.2mn, a turnaround from losses of S$1.9mn recorded a year ago.
• Killing two birds with one stone. OxPay will acquire up to 20% shareholding in AppsPOS, enabling it immediate access to AppsPOS’ network of over 300 F&B and retail merchants for both E-commerce and Cloud-Based Point of Sales Solutions. AppsPOS has more than 1mn users on its mobile apps/website in Asia, facilitating over S$300mn worth of Gross Merchant Value annually. Upon acquisition, OxPay will be able to churn revenue for both its Digital Commerce Enabling Solutions (DCES) and Merchant Payment Services (MPS) segment. 
• Riding on the Buy Now Pay Later (BNPL) trend. OxPay announced in December 2021 that its wholly-owned subsidiary, MC Payment Malaysia, has entered into a partnership agreement with IOU Pay (Asia). Pursuant to the partnership, OxPay will be able to add the BNPL option into its online e-invoicing, Quickpay and web payment acceptance platform in Malaysia. In addition, OxPay has also collaborated with BNPL brand PaySlowSlow in Singapore and will provide the brand with payment gateway and merchant acquiring services. PaySlowSlow Singapore targets to roll out BNPL services in 1Q22.
• Recent catalyst. The company announced on 18 April that it has been appointed as the official digital payment service provider for Q&M Dental’s clinics in Singapore. The rollout of the digital payment services programme will be done in two phases. The first phase will comprise all non-credit card payments processing, such as GrabPay and PayNow,, while the second phase will consist of credit card payments processing, such as Visa, Mastercard and instalment payment plans. Q&M Dental’s 21 clinics will participate in the pilot testing before the program is progressively rolled out to all 99 clinics in Singapore by 2QFY2022.
• We currently have an OUTPERFORM rating on OxPay with a 12M TP of S$0.30, implying a potential 50% upside from the last closing price.

OxPay Financial Ltd (OPFL SP) (Source: Bloomberg)

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Golden Energy and Resources (AUE SP): Higher highs

• RE-ITERATE BUY Entry – 0.61 Target – 0.71 Stop Loss – 0.56
• Disclaimer: KGI Securities (Singapore) was the placement agent for Golden Energy and Resources’ S$86.9mn private placement that was completed on 7 March 2022. 
• Diversified resources play. GEAR is a diversified mining and natural resources investment company. Having its roots as one of Indonesia’s largest coal miners, the group is on track to become the dominant metallurgical coal player in Australia with the acquisition of Mitsui Coal Pty Ltd (BMC) from BHP Group (BHP AU). GEAR will further diversify into base metals that will be utilised for clean energy uses such as copper, cobalt, zinc and nickel.
• Transformational year. Golden Energy & Resources (GEAR) is on track to significantly expand its production capacity and profits with the acquisition of BHP Mitsui Coal Pty Ltd (BMC). The acquisition will cement GEAR, through its ASX-listed Stanmore subsidiary, as a major metallurgical coal (coking coal) provider in the region. Metallurgical coal is the key ingredient in the steel industry, whose demand is driven by China now and India in the future. 
• Primary beneficiary of Russia coal ban. Last week, the European Union, UK and Japan announced plans to phase out imports of coal from Russia, leaving power utilities to source from other countries such as Indonesia and Australia. Russia is the world’s third largest exporter of thermal coal, with the EU, UK, Japan and South Korea taking about 55% of those deliveries in 2020, according to data provided by BloombergNEF. 
• Technical TP of S$0.71; fundamental TP of S$1.29. While we have a Technical TP of S$0.71 based on short-term technical factors, we maintain our fundamentals-based TP of S$1.29. Our fundamental TP is based on the SOTP valuation of its majority stakes in Stanmore Resources (metallurgical coal), PT Golden Energy Mines (thermal coal) and Ravenswood Gold (gold). Stanmore will increasingly drive GEAR’s valuations, which currently makes up 48% of GEAR’s fair value, while GEMS drops to 42% of our fair value, down from 85% in our initiation report (25 Aug 2021). Read the full fundamentals-based report here.

Golden Energy and Resources (AUE SP) (Source: Bloomberg)

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HONG KONG

Samsonite International S.A. (1910 HK): Travelling spree this summer vacation 

• BUY Entry 17 – Target – 19 Stop Loss – 16
• Samsonite International S.A. is a Hong Kong-based company principally engaged in the design, manufacture, sourcing and distribution of luggages, business and computer bags, outdoor and casual bags, travel accessories and slim protective cases for personal electronic devices. The Company operates its business through three segments. The Travel Bag segment is engaged in travel products with suitcases and carry-ons of three main categories, including hard-side, soft-side and hybrid luggages. The Casual Bags segment is engaged in daily use, including different types of backpacks, female and male shoulder bags and wheeled duffel bags. The Business Bags segment is engaged in business use, including rolling mobile office bags, briefcases and computer bags.
• Further recovery in the tourism sector. According to the IATA, the global economics air passenger traffic will continue to recover, indicating an enhancement in tourism. On average, the industry-wide air traffic volume will reach 83% of the 2019 level in 2022 compared to 47% of the pre-COVID level in 2021.

• Turned losses in profits in FY21. FY21 revenue jumped by 31.5% YoY to US$2.0bn. Gross profit jumped by 55.0% YoY to US$1.1bn. GMP reached 54.5% during the period (FY19 GPM: 55.4%). Net profit attributable to the company shareholders reached US$14.3mn compared to US$1.3bn losses in FY20. 
• The updated market consensus of the EPS growth in FY22/23 is 1,230%/33.8% YoY, respectively, translating to 16.9×/12.6x forward PE. The current PER is 237.7x. Bloomberg consensus average 12-month target price is HK$22.34.

Samsonite International S.A. (1910 HK) (Source: Bloomberg)

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China National Building Material Company Limited (3323 HK): Infrastructure expansion to boost the weak economy

• RE-ITERATE BUY Entry 10.4 – Target – 11.5 Stop Loss – 9.8

• China National Building Material Company Limited is an investment holding company. The Company operates its business through four segments. The Cement segment is mainly engaged in the production and sale New Suspension Preheater (NSP) cement and commercial concrete. The Lightweight Building Materials segment is mainly engaged in the production and sale of dry wall and ceiling system. The Glass Fiber and Composite Materials segment is engaged in the production and sale of rotor blades, glass fiber and composite materials. The Engineering Services segment is engaged in the provision of engineering services to glass and cement manufacturers, as well as equipment procurement business. 
• A new round of loosening monetary policy. On April 15th, PBOC lowered the requirement reserve ratio by 25bps but kept the one-year loan prime rate at 2.85%. There will be RMB530bn (US$83.25bn) in long term liquidities released in the banking system, buffering the slowdown in the economy due to lockdowns in main cities. Previously, China’s central government drew up lists of infrastructure projects totalled at US$2.3tn. It is evident that China will resort to government spending to boost the economy in the near term.  
• Plan to restructure subsidiaries’ businesses. The 84.5%-owned A-share listed subsidiary Xinjiang Tianshan Cement Co., Ltd (000877 CH) has announced that it is planning on certain restructuring which, if implemented, would involve asset acquisition, but would not be expected to constitute material asset restructuring of Tianshan Cement. The 49.3%-owned A-share listed subsidiary Ningxia Building Materials Group Co., Limited (600449 CH) has announced that it is planning on certain restructuring which, if implemented, would involve the issuance of shares by Ningxia Building Materials, and may constitute material asset restructuring of Ningxia Building Material.
• The updated market consensus of the EPS growth in FY22/23 is 10.9%/9.5% YoY, respectively, translating to 4.1×/3.7x forward PE. The current PER is 4.5x. FY22F/23F dividend yield is 8.5%/9.5%. Bloomberg consensus average 12-month target price is HK$14.61.

China National Building Material Company Limited (3323 HK) (Source: Bloomberg)

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MARKET MOVERS

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United States

Top Sector Gainers

Sector	Gain	Related News
Casinos/Gaming	+4.5%	Las Vegas Sands, Wynn Resorts rally on slightly better COVID outlook in China Las Vegas Sands Corp (LVS US)
Apparel/Footwear	+4.1%	N/A Nike Inc (NKE US)
Homebuilding	+4.0%	Fed’s Bostic Wary of Hiking Rates Too High to Cool Inflation D.R. Horton Inc

Top Sector Losers

Sector	Loss	Related News
Precious Metals	-2.6%	Gold Price Forecast: XAUUSD to remain under pressure while below $1,990 Newmont Corp (NEM US)
Oil & Gas Production	-1.6%	Oil prices fall 5% after IMF cuts growth outlook Occidental Petroleum Corp (OXY US)
Other Metals/Minerals	-1.3%	N/A Rio Tinto Plc (RIO US)

• WeWork Inc (WE US) shares jumped 8.1% after Piper Sandler initiated coverage of the office-sharing company with an overweight rating. Analysts said WeWork is nearing profitability as it focuses on its balance sheet and the popularity of flexible work continues to grow.
• Hasbro Inc (HAS US) shares rose 5.2% after the toymaker reported a stronger-than-expected revenue for the previous quarter. Sales from the company’s consumer products segment also topped analyst expectations.
• Lululemon Athletica Inc (LULU US) shares jumped nearly 4.4% after Truist upgraded Lululemon to buy from hold. Analysts are expecting a “robust” five-year outlook at Lululemon’s upcoming analyst day with greater details on new products and plans to expand internationally. Truist also believes the company can easily pass on higher costs to consumers in an inflationary environment.
• Airline stocks jumped after the Transportation Security Administration said it is no longer enforcing mask mandates on planes. The news comes after a federal judge in Florida ruled that the CDC had overstepped its authority with the mandate. Shares of United Airlines Holdings Inc (UAL US) and American Airlines Group Inc (AAL US) rose 4.5% and 5.7% respectively.

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Singapore

• Grand Venture Technology Ltd (GVTL SP) shares rose 4.9% yesterday. DBS Group Research’s Ling Lee Keng and the Singapore research team has initiated coverage on Grand Venture Technology (GVT) with a “buy” call and $1.50 target price, calling the company a “promising high growth venture”. In their April 14 report, the team, led by Ling, writes that GVT rides on a positive industry outlook, highlighting that its expansion into the front-end semiconductor space is a key growth driver.
• Sembcorp Marine (SMM SP) shares rose 4.9% yesterday. UOB Kay Hian on Thursday (Apr 14) raised its target price on Sembcorp Marine to S$0.13 from S$0.11, while maintaining its “buy” call on the marine and offshore group. The research team views mainboard-listed Sembmarine as a “turnaround story” with its recent large order win, indicating possible positives when it comes to new order wins, especially when it comes to the renewables sector.
• First Resources Ltd (FR SP) and Golden Agri-Resources Ltd (GGR SP) shares rose 4.3% and 1.5% respectively yesterday. Malaysian palm oil futures were above MYR 6400 per tonne, not far from the one-month high of MYR 6520 touched on April 15th amid lingering concerns of lower supply while the war in Ukraine continued to support higher vegetable oil prices.
• Sembcorp Industries Ltd (SCI SP) shares rose 3.8% yesterday. UOB Kay Hian analyst Adrian Loh is keeping his “buy” call on Sembcorp Industries as it has been actively making deals focused on expanding its renewables footprint. In his report dated April 18, Loh is very much positive on Sembcorp, calling the counter a “key blue-chip holding in any Singapore portfolio” and raising its target price to $3.59 from $2.95 previously.

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Hong Kong

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Trading Dashboard

Trading Dashboard Update: Add China National Building Material (3323 HK) at HK$10.4. Take profit on Sinopharm Group (1099 HK) at HK$17.4.

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