Brokers Digest: Local Equities - Yinson Holdings Bhd, Axis Real Estate Investment Trust, IGB Real Estate Investment Trust, Unisem (M) Bhd

This article first appeared in Capital, The Edge Malaysia Weekly, on November 1, 2021 - November 07, 2021.
Brokers Digest: Local Equities - Yinson Holdings Bhd, Axis Real Estate Investment Trust, IGB Real Estate Investment Trust, Unisem (M) Bhd
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Yinson Holdings Bhd

Fair value: RM7.20 BUY

AMINVESTMENT RESEARCH (OCT 27): The group’s 100%-owned Yinson Green Technologies (M) Sdn Bhd (YGT) has signed a term sheet involving a joint venture to provide electric vehicle (EV) charging stations nationally with GreenTech Malaysia Alliances (GTMA), which is wholly owned by the government’s Malaysian Green Technology and Climate Change Centre.

According to the term sheet, YGT will initially have a 70% stake in the JV, which will be injected with GTMA’s wholly-owned ChargEV. ChargEV owns over 400 charging stations nationwide and dominates this segment as other operators — ParkEasy, JomCharge and ChargeN’ Go — have deployed only 60 stations at this stage.

ChargEV charges its 9,850 members RM240 annually for unlimited charging. While no financial details have been disclosed, we expect ChargEV to be loss-making given an estimated annual revenue of RM2.4 million based on the present payment structure.

Assuming procurement and installation costs at RM30,000 per unit, we estimate that Yinson’s investment could be below RM10 million — 0.2% of the group’s market cap. Assuming interest costs at 5%, we estimate a minimal earnings reduction of RM1 million to RM2 million, which is 0.4% of FY22F EPS.

Management expects the government to introduce more incentives to encourage EV adoption, in line with the country’s green agenda. This could increase the number of fully battery-powered EVs from 200 and hybrid plug-ins from 52,000 currently. Together with new payment schemes, this is envisioned to turn ChargEV around to profitability.

Notwithstanding the slight immediate earnings erosion, we are neutral on this development that reaffirms the group’s net-zero carbon ambitions, which have led to investments of up to RM60 million in green technologies, in addition to its 330mw solar projects in India. This justifies our 4-star ESG rating for the group, which still derives most of its earnings from the oil and gas sector.

The stock currently trades at a bargain FY23F PE of 14 times versus its five-year average of 21 times for a globally recognised FPSO player with a healthy balance sheet and strong prospects of substantively expanding its already formidable outstanding order book of RM40 billion, which translates into a robust 13 times FY22F revenue.

Axis Real Estate Investment Trust

Target price: RM2.54 BUY

HONG LEONG INVESTMENT BANK RESEARCH (OCT 26): Axis REIT has proposed to acquire a property from Venice Tulip Sdn Bhd for RM32 million. The property is identified as PLO 78, located within Kawasan Perindustrian Pasir Gudang, Johor. It comprises one block of single-storey warehouse with a mezzanine floor and three blocks of single-storey warehouse. The total lettable area is 276,000 sq ft. The proposed acquisition will be funded by an existing debt facility and is expected to be completed by 1HFY22. The property is currently 100% tenanted by Venice Tulip. The lease term is for a fixed period of three years, with a monthly rental of RM261,000.

We are positive about the acquisition as it is yield accretive, given that the net property income (NPI) yield is 9.6% versus its current NPI yield of 7.6%. With the new asset, Axis REIT’s FY22-23 earnings will improve by about 1%.

The acquisition price works out to be RM116 psf, which is very reasonable for industrial space in Pasir Gudang and also lower than the market value of RM35 million based on the valuation made by the independent valuer.

IGB Real Estate Investment Trust

Target price: RM1.88 ADD

CGS-CIMB RESEARCH (OCT 27): IGB REIT’s 9MFY21 results made up 70% of our and consensus full-year forecasts. We deem the performance as broadly in line as we project robust q-o-q growth in earnings in 4QFY21F, supported by: 1) easing rental support, and 2) strong recovery in car park income — benefitting from the full economic reopening under the National Recovery Plan (NRP) Phase 4 and the lifting of the interstate travel ban.

Revenue in 3QFY21 fell by a steep 27% y-o-y but grew 13% q-o-q as rental support sequentially eased in September from its peak in June to July. 9MFY21 net property income margin slipped 5.6 percentage points y-o-y to 65% but is on track to improve in 4QFY21F. We gather that Mid Valley Megamall and The Gardens Mall (TGM) managed to sustain healthy occupancy rates of over 90%, while average weekend footfall since late September has improved to 80% to 85% versus pre-Covid-19 levels, particularly since NRP Phase 3 began on Oct 1.

Prospects are looking brighter towards end-2021 and the group is cautiously optimistic about a recovery in the retail space and consumer spending in 4QFY21F. Rental support risks will gradually diminish in the coming months and the priority will also be on tenants in the luxury goods space at TGM. However, rental reversion outlook remains in negative territory (single-digits) in FY21F for both malls.

Unisem (M) Bhd

Target price: RM4.62 BUY

RHB RESEARCH (OCT 27): Revenue and core earnings for 9M21 of RM1.1 billion and RM142.2 million respectively were broadly in line with expectations at 67.6% and 66.1% of our and consensus’ full-year forecasts, given the stronger 4Q. Overall, YTD revenue growth of 23.8% was driven by higher sales volumes and better average selling prices on favourable market conditions, while profit expanded by a greater magnitude, owing to operating leverage and higher net interest income. A second interim dividend of two sen per share was declared.

Management expects sequentially stronger results ahead, as operations returned to normalcy in October following the full vaccination of all its employees. Sustained strong demand across all products will likely flow through in the next two to three quarters, given the current chip shortage.

Phase 3 expansion at its Chengdu plant is progressing as planned and is expected to be completed by end-2022. Total capex incurred in 3QFY21 was RM134 million for additional capacities at its Chengdu and Ipoh facilities, while its headcount dipped slightly to 6,078 from 6,148 employees due to the non-renewal of certain foreign operators.

We believe Unisem will resume its growth momentum in the upcoming quarters, tracking overall robust demand and favourable factors seen in the semiconductor sector.


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