CNOOC Ltd: Steadfast Commitment to Growth and Efficiency
CNOOC Ltd (883 HK) has consistently outperformed its peers and the market, achieving total returns of 44% year-to-date. This follows impressive returns of 62% in 2022 and 45% in 2023. Despite Brent crude prices correcting by about 3% YTD, CNOOC’s performance diverges significantly, indicating its strength beyond being a simple proxy to oil prices. Investors are encouraged by CNOOC’s strong production growth and cost control, which have supported earnings even during commodity price declines. The company’s all-in cost was well-managed at USD28.83 per barrel of oil equivalent in 2023, showing improvement from 2022. CNOOC is on track to meet its FY24 production guidance, signaling 3-6% year-on-year growth. The firm is expected to continue its investments in upstream oil and gas production, particularly in regions like Guyana and Brazil.
With a fair value estimate of HKD23.44, CNOOC is favored for its best-in-class upstream cost control, robust oil and gas production growth, and attractive dividend yields. However, investors should consider risks related to commodity price fluctuations and execution challenges. CNOOC has also shown significant progress in its ESG rating, with improvements noted in its risk management tied to GHG emissions. Recommendation: BUY.
KE Holdings Inc: Subdued 3Q24 Results but Strong Improvement Expected
KE Holdings Inc (2423 HK/BEKE US) reported a 12.5% year-on-year increase in Gross Transaction Value (GTV) to CNY736.8b in 3Q24 across its core segments. However, adjusted profit after tax and minority interests (PATMI) dipped 16.9% YoY to CNY1.78b. Despite this, a strong sequential improvement is anticipated for 4Q24, backed by management’s guidance for robust revenue and GTV growth. The company continues to enhance shareholder returns through share buybacks, having repurchased significant shares under its USD3b repurchase program.
Beike’s number of active stores and agents increased, although its gross profit margin saw a notable compression to 22.7%. The company expects a rebound in transaction volumes due to property loosening measures. Despite lowering forecasts for FY24 and FY25 PATMI, KE Holdings remains committed to sustainability with its “2023 Beike Carbon Neutrality Target and Action Roadmap Report.” The ESG rating improved, highlighting advances in human capital development and data security. Recommendation: BUY.
Thai Beverage: Signs of Improvement for a Better FY25
Thai Beverage (THBEV SP) completed a share swap transaction with TCC Assets Limited, and for FY24, the total dividend per share increased by 3.3% to THB0.62. Although FY24 PATMI fell slightly by 0.8% YoY, the company showed resilience with revenue up by 2.2% to THB340.3b. The beer and non-alcoholic beverage segments performed strongly, driven by increased sales volume and improved operational efficiency.
Despite the challenges, the company’s management is optimistic about FY25, expecting lower raw material costs and continued operational efficiencies. The company aims to capitalize on the rebound in tourism and government economic boosting efforts. The fair value estimate is maintained at SGD0.69. Recommendation: BUY.
Alphabet Inc: Antitrust Remedy Proposals and Future Prospects
Alphabet Inc (GOOGL US / GOOG US) faces comprehensive remedy measures proposed by the Department of Justice in its Google Search antitrust case. The remedies include divestiture of Chrome and potentially Android, prohibition of exclusionary agreements, and measures against self-preferencing. While these proposals are more aggressive than anticipated, Alphabet is expected to provide counter proposals.
The legal process is likely to be prolonged, and potential DOJ leadership changes could impact the outcome. Despite these uncertainties, Alphabet’s strong fundamentals remain intact, with robust initiatives to reduce carbon emissions and significant revenues from clean tech product lines. The fair value remains unchanged at USD211. Recommendation: BUY.
CapitaLand Investment Ltd: Future Growth Building Blocks
CapitaLand Investment Ltd (CLI SP) aims to grow its funds under management (FUM) from SGD113b to SGD200b by 2028, focusing on India, Australia, Korea, Japan, and parts of Southeast Asia. The company plans to shift towards a fee income model, with a strategic investment in SC Capital Partners. CLI targets more than doubling its operating earnings to above SGD1b by 2028-2030, with significant contributions from high-quality fee businesses.
Despite headwinds in its China operations, CLI plans to solidify its balance sheet through divestments and strategic capital allocation. The company’s ESG rating has been upgraded, reflecting strong environmental criteria and governance practices. The fair value estimate is SGD3.93. Recommendation: BUY.
