Alpha Picks – November 2024
Alpha Picks – November 2024
Report Date: Monday, 04 November 2024
Broker: UOB Kay Hian
Introduction
As we navigate through November 2024, the financial landscape continues to present a mix of opportunities and challenges across various regions. This comprehensive analysis covers the strategic picks and detailed insights into the performance and future potential of key companies in Greater China, Indonesia, Malaysia, Singapore, and Thailand. Let’s dive deep into each listed company and understand the rationale behind their selection or removal from the Alpha Picks portfolio.
Greater China Strategy
Overview
The Hang Seng Index (HSI) and MSCI China experienced declines of 3.9% and 5.9% month-on-month respectively in October, driven by profit-taking amidst anticipation of fiscal support details. This report focuses on stocks with specific catalysts expected to drive performance in the near term.
Key Recommendations
BYD Electronic (285 HK) – BUY
BYD Electronic (BYDE) is expected to regain earnings momentum following two quarters of slower growth. This is due to several factors:
- Peak season for consumer electronics with solid demand from both iOS and Android.
- Acceleration in the automotive business due to mass production of high ASP/margin new products.
- Stabilizing Energy Storage System (ESS) business.
- Momentum in the AI server supply chain, particularly with NVIDIA’s Blackwell racks.
The target price is HK\$40.90, based on SOTP valuation. The growth is expected to regain momentum from 4Q24 onwards, making BYDE a key revaluation opportunity.
China State Construction Engineering Corporation (CSCEC) – BUY
CSCEC has announced a stronger-than-expected debt reduction plan. This, combined with a positive outlook from the National People’s Congress (NPC) meeting, makes CSCEC a solid buy. The company is expected to benefit from the expected fiscal stimulus package, with a target price of HK\$6.79, providing an upside of 10.4%.
Hansoh Pharma (3692 HK) – BUY
Hansoh Pharma is forecasted to continue its strong revenue and earnings growth for 2024. The company’s focus on R&D and new drug approvals, along with productive business development programs, positions it well for future growth. The target price is HK\$29.00, implying a significant upside of 62.6%.
Sands China (1928 HK) – BUY
Sands China is benefiting from a faster recovery in Gross Gaming Revenue (GGR). The ongoing property renovations are expected to boost business operations. The target price is HK\$28.60, with an upside potential of 36.8%.
Sinopharm (1099 HK) – SELL
Sinopharm has been added to the sell list due to its 9M24 results miss and weak growth visibility in 2024-26. Policy uncertainties are expected to challenge earnings growth. The target price is HK\$18.00, indicating a downside of 7.7%.
Maintain BUY on CATL, Crystal, and Geely
These companies continue to show strong potential with positive outlooks on earnings and growth:
- CATL (300750 CH) – Maintained BUY with a target price of Rmb350.00.
- Crystal (2232 HK) – Maintained BUY with a target price of HK\$5.12.
- Geely (175 HK) – Maintained BUY with a target price of HK\$21.50.
Indonesia Strategy
Alpha Picks: Underperformance in Oct 24
The Indonesian market saw underperformance in October, with the portfolio declining by 1.9% compared to the JCI’s 0.6% rise. Despite this, several companies are poised for growth in the coming months.
Key Recommendations
Nickel Mines (NCKL) – BUY
NCKL is expected to deliver a 44.8% yoy rise in 2025 NPAT, driven by strong production and the commencement of new ferronickel plants. The target price is Rp1,430, with a potential upside of 61.6%.
Bank Tabungan Negara (BBTN) – BUY
BBTN is forecasted to improve its net profit in 4Q24 due to recovery income and the impact of time deposit rate cuts. The target price is Rp1,740, indicating a 23.0% upside.
Bank Mandiri (BMRI) – BUY
BMRI’s strong underwriting capabilities and improved asset quality make it a solid investment. The target price is Rp8,120, with a potential upside of 22.1%.
Bank Rakyat Indonesia (BBRI) – BUY
BBRI is expected to benefit the most from rate cuts, given its loan structure. The target price is Rp5,600, with an upside of 19.1%.
XL Axiata (EXCL) – BUY
EXCL is likely to benefit from the festive season in 4Q24. The target price is Rp2,900, indicating a 28.9% upside.
Ciputra Development (CTRA) – BUY
CTRA continues to show strong marketing sales and NPAT growth. The target price is Rp1,570, with a potential upside of 22.7%.
Jasa Marga (JSMR) – BUY
JSMR is expected to see major tariff increases in 2025, boosting its earnings. The target price is Rp6,000, with a 25.5% upside.
Cisarua Mountain Dairy (CMRY) – BUY
CMRY’s net income is projected to rise by 25.6% in 2024. The target price is Rp6,000, indicating an 8.1% upside.
Astra International (ASII) – BUY
ASII is expected to benefit from its financing arm, with 70% of car and motorcycle sales financed. The target price is Rp5,800, with a 14.3% upside.
Malaysia Strategy
Alpha Picks: Gearing Up For The Reporting Season
The Malaysian market is gearing up for the upcoming reporting season, with several key picks expected to outperform. The Alpha Picks outperformed the FBMKLCI in October, with a decline of only 0.5% compared to the FBMKLCI’s 2.9% drop.
Key Recommendations
Eco World Development (ECW) – BUY
EcoWorld is a proxy to the Iskandar Malaysia 2.0 investment theme, with opportunities to monetize its industrial landbank. The target price is RM2.10, with a 16.7% upside.
Gamuda Berhad (GAM) – BUY
Gamuda is expected to see robust earnings growth backed by a sturdy orderbook and a bright replenishment outlook. The target price is RM9.60, with a 13.2% upside.
Lagenda Properties (LAGENDA) – BUY
Lagenda is a pure-play affordable housing developer with the highest ROE of 17%. Stronger 2H24 earnings are anticipated. The target price is RM2.32, indicating a 73.1% upside.
My E.G. Services (MYEG) – BUY
MYEG is anticipated to launch AI/blockchain initiatives such as China-centric eCNY and ZTrade, and WorldID and MyDigitalID. The target price is RM1.42, with a 69.0% upside.
Pekat Group (PEKAT) – BUY
Pekat is set to capitalize on the long-term structural growth in solar energy demand. M&As will fuel growth. The target price is RM1.15, with a 29.2% upside.
RGB International (RGB) – BUY
RGB is expected to see potential upside to 3Q24 dividends and an exceptionally strong 4Q24. The target price is RM0.66, with a 78.4% upside.
RHB Bank (RHBBANK) – BUY
RHB Bank’s lower-than-expected credit cost and stronger-than-expected non-interest income make it a high beta laggard. The target price is RM6.80, with a 6.4% upside.
Top Glove (TOPG) – BUY
Top Glove is expected to see an earnings turnaround as industry operating metrics improve. The target price is RM1.31, with a 22.4% upside.
VS Industry (VSI) – BUY
VS Industry is expected to see strong earnings in FY25 driven by vertical integration and additional impetus from its Philippines venture. The target price is RM1.42, with a 37.9% upside.
Yinson Holdings (YNS) – BUY
Yinson is widely expected to deeply monetize its FPSO assets. The target price is RM3.90, with a 44.4% upside.
Singapore Strategy
Alpha Picks: Solid Beat For Oct 24
Despite the STI’s negative performance in October, the Alpha Picks portfolio outperformed, rising 0.4% month-on-month on an equal-weighted basis.
Key Recommendations
Sembcorp Industries (SCI) – BUY
Sembcorp Industries’ proposed acquisition of a 30% stake in Senoko Energy is seen as positive, allowing SCI to potentially sign more long-term power purchase agreements. The target price is S\$7.47, with a 48.2% upside.
Seatrium (STM) – BUY
Seatrium’s long-term potential for growth is bolstered by its two-decade-long exposure in Brazil, a key competitive advantage. The target price is S\$2.80, with a 47.4% upside.
DFI Retail Group (DFI) – BUY
DFI’s divestment of its 21.1% stake in Yonghui Superstores is seen as a positive development. The target price is US\$2.57, with an 8.0% upside.
Singapore Post (SPOST) – BUY
Singapore Post is expected to see improved earnings in its postal segment and increased contributions from its acquisition of Border Express. The target price is S\$0.61, with an 11.9% upside.
Genting Singapore (GENS) – BUY
Genting Singapore’s prospects remain bright with multiple catalysts, including the accelerated recovery of foreign visits and major entertainment events in 2H24. The target price is S\$1.25, with a 41.3% upside.
China Sunsine Chemical (CSSC) – BUY
China Sunsine Chemical is expected to see improved demand and ASPs from a stronger Chinese economy. The target price is S\$0.58, with a 27.5% upside.
Civmec (CIVMEC) – BUY
Civmec is expected to see higher-than-expected contract wins and margins. The target price is S\$1.40, with a 23.9% upside.
CSE Global (CSE) – BUY
CSE Global continues to enjoy strong order wins and a healthy orderbook. The target price is S\$0.59, with a 37.2% upside.
Venture Corp (VMS) – BUY
Venture Corp is expected to see better revenue in 2H24, driven by new customers and product introductions. The target price is S\$16.17, with a 21.6% upside.
Marco Polo Marine (MPM) – BUY
Marco Polo Marine is expected to benefit from higher charter rates and limited vessel supply. The target price is S\$0.061, with an 8.9% upside.
Oversea-Chinese Banking Corp (OCBC) – BUY
OCBC is committed to a new dividend policy, providing an attractive yield of 6.1% for 2025. The target price is S\$19.40, with a 27.7% upside.
Thailand Strategy
Alpha Picks: Diversifying Portfolio In A Volatile Market
October saw the portfolio underperforming the market, with a decline of 1.4% compared to the SET Index’s 1.2% rise. However, several companies are expected to perform well in the coming months.
Key Recommendations
CP ALL (CPALL) – BUY
CP ALL, the operator of 7-Eleven stores in Thailand, is expected to deliver the strongest 2024 earnings growth of 29% yoy. The target price is Bt84.00, with a 32.81% upside.
Central Pattana (CPN) – BUY
CPN’s 3Q24 earnings are expected to soften but improve in 4Q24 due to seasonal factors. The target price is Bt83.00, with a 32.27% upside.
The Erawan Group (ERW) – BUY
ERW is expected to see stronger forward bookings in Nov 24 and Dec 24, boosting occupancy rates. The target price is Bt6.50, with a 62.50% upside.
Kasikornbank (KBANK) – BUY
Kasikornbank’s 3Q24 results are in line with expectations, and the bank is expected to see normalisation in credit costs in 2025. The target price is Bt190.00, with a 29.69% upside.
Major Cineplex (MAJOR) – BUY
Major Cineplex is expected to see significant earnings growth in 2025 due to the release of several blockbusters. The target price is Bt19.00, with a 28.38% upside.
Ratchaburi Group (RATCH) – BUY
Ratchaburi Group is expected to see impressive growth in 2024-25. The target price is Bt40.00, with a 24.03% upside.
True Corporation (TRUE) – BUY
True Corporation’s core operations are expected to be strong in 4Q24, driven by improved revenue and cost reductions. The target price is Bt14.50, with a 17.89% upside.
WHA Corporation (WHA) – BUY
WHA Corporation is expected to see strong land presales and transfers in 4Q24. The target price is Bt6.50, with an 11.11% upside.