retail market monitor 20210812 - alanyeo.files.wordpress.com

R e t a i l M a r k e t M o n i t o r Thur sda y , 12 A ugus t 2021

w w w . u t r a d e . c o m . s g 1

S I N G A P O R E H O N G K O N G

WHAT HAPPENED LAST NIGHT

US stocks were mixed after the close on Wednesday, as gains in the materials, industrials and financials sectors led shares higher and losses in health sector led shares lower. At the close of the NYSE, the DJIA rose 0.62% while the S&P 500 index was up 0.25%, and the NASDAQ Composite index slid 0.16%. Advancing stocks outnumbered falling ones on the NYSE by 2,205 to 1,084 and 175 ended unchanged; on the Nasdaq Stock Exchange, 2,319 advanced and 2,024 declined, while 240 ended unchanged. (Source: WSJ, CNBC). WHAT’S IN THE PACK Singapore Company Update: Wilmar International - 1H21: Results came in slightly above our expectations. (WIL SP/BUY/S$4.49/Target: S$6.40)

Wilmar’s 1H21 results came in slightly above our expectations. The positive variance mainly came from better-than-expected sugar, oilseeds and grains contributions. 2H21 earnings could come in stronger mainly supported by higher production and higher commodity prices for palm and sugar. Adani Wilmar’s (AWL) potential listing would unlock shareholders’ value; however, it might not be as great as YKA’s listing due to its lower contribution to Wilmar. Maintain BUY. Target price: S$6.40…

Koufu Group - 1H21: Earnings beat expectations, better outlook as recovery continues; maintain BUY. (KOUFU SP/BUY/S$0.67/Target: S$0.77)

1H21 earnings of S$9.9m (+291% yoy/+35% hoh) was above expectations, meeting 67% of our full-year estimate. Revenue increased 19% yoy due to an increase in footfall and the newly-acquired snack business. We expect Singapore’s business to improve as restrictions have eased, and a higher percentage of the population has been vaccinated. Macau should also see more Mainland Chinese visitors. We raise our 2021 earnings forecast by 15%. Maintain BUY with a target price of S$0.77…

Propnex - 1H21: Blockbuster results, but may be tough to repeat. Downgrade to HOLD. (PROP SP/HOLD/S$1.96/Target: S$2.09)

Propnex reported a very strong 1H21 net profit of S$34.4m (+115% yoy), beating our and consensus’ expectations. All business segments contributed to the strength, and ROE accordingly doubled to over 16%. A bullish S$0.055 dividend was declared. However, with worries that 2021 may be the peak earnings year for the company, we downgrade our recommendation to HOLD. Fair value: S$2.09… Monthly Technical Regional Indices Watch In this report, we provide the outlook of regional indices on a monthly basis. We also include a list of tradable Exchange Traded Funds (ETF) for each of the said indices.

The said indices under our coverage are:

• Hang Seng Index (HSI IND)

• FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI IND)

• Jakarta Stock Exchange Composite Index (JCI IND)

• Stock Exchange Of Thailand Index (SET IND)

• FTSE Straits Times Index (STI IND)

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P R I C E C H A R T

KEY INDICES Prev Close 1D % YTD %

DJIA 35485.0 0.6 15.9 S&P 500 4447.7 0.2 18.4 FTSE 100 7220.1 0.8 11.8 AS30 7854.6 0.3 14.7 CSI 300 5015.3 (0.6) (3.8)FSSTI 3180.0 (0.9) 11.8 HSCEI 9548.1 0.5 (11.1)HSI 26660.2 0.2 (2.1)JCI 6088.4 (0.6) 1.8 KLCI 1504.4 0.5 (7.5)KOSPI 3220.6 (0.7) 12.1 Nikkei 225 28070.5 0.7 2.3 SET 1532.7 (0.6) 5.8 TWSE 17227.2 (0.6) 16.9

BDI 3410 1.0 149.6 CPO (RM/mt) 4484 (0.4) 18.4 Brent Crude (US$/bbl) 71 1.1 37.9

Source: Bloomberg

http://www.utrade.com.sg/page/site/public/english/utradeSG_edu.jsp




YESTERDAY IN SINGAPORE

Yesterday, the FSSTI index ended 27.36pt lower at 3,180.00, taking the ytd performance to +11.8%. Among the top active stocks were Sembcorp Marine (-2.6%), Yangzijiang Shipbuilding (-1.3%), Singtel (-0.9%), Jiutian Chemical (-2.1%) and Thomson Medical (+3.5%). The FTSE ST Mid Cap Index fell 0.7%, while the FTSE ST Small Cap Index rose 0.2%. The broader market saw 240 gainers and 265 losers with total trading value of S$1.09b.

SINGAPORE

TOP VOLUME

Company Price (S$)

Chg (%)

Volume ('000s)

Sembcorp Marine 0.11 (2.6) 92,241Thomson Medical Group 0.09 3.4 46,991Golden Agri-Resources 0.24 (2.1) 28,109ESR-REIT 0.47 4.5 27,315Yangzijiang Shipbuilding 1.49 (1.3) 26,002

TOP GAINERS

Company Price (S$)

Chg (%)

Volume ('000s)

ESR-REIT 0.47 4.5 27,315Ifast Corp 8.73 4.4 1,836Thomson Medical Group 0.09 3.4 46,991Golden Energy & Resources 0.40 2.6 4,912Sinarmas Land 0.29 1.8 168

TOP LOSERS

Company Price (S$)

Chg (%)

Volume ('000s)

Japfa 0.73 (2.7) 2,209Sembcorp Marine 0.11 (2.6) 92,241Manulife Us Real Estate Inv 0.77 (2.5) 1,968Singapore Post 0.64 (2.3) 8,806Hutchison Port Holdings Trust 0.23 (2.2) 571

HONG KONG

TOP VOLUME

Stock Price (HK$)

Chg (%)

Vol (‘000)

China Construction Bank-H 5.62 2.4 405,676China Tower Corp Ltd-H 1.06 1.0 332,271Bank Of China Ltd-H 2.73 1.1 234,680China Telecom Corp Ltd-H 3.07 6.2 220,890Postal Savings Bank Of Chi-H 5.75 5.9 170,474

TOP GAINERS

Stock Price (HK$)

Chg (%)

Vol (‘000)

China Overseas Land & Invest 18.62 8.9 71,212China Resources Land Ltd 30.15 7.3 39,912Longfor Group Holdings Ltd 38.85 6.9 32,184China Telecom Corp Ltd-H 3.07 6.2 220,890Postal Savings Bank Of Chi-H 5.75 5.9 170,474

TOP LOSERS

Stock Price (HK$)

Chg (%)

Vol (‘000)

Cansino Biologics Inc-H 328.00 (13.0) 2,874Flat Glass Group Co Ltd-H 34.15 (12.3) 19,487Microport Scientific Corp 52.15 (8.6) 9,049Hansoh Pharmaceutical Group 26.95 (4.9) 2,282Sunac China Holdings Ltd 21.30 (4.1) 59,662




MONTHLY TECHNICAL REGIONAL INDICES WATCH – INDICES OUTLOOK

In this report, we provide the monthly outlook for regional indices, namely the Hang Seng Index, the FTSE Bursa Malaysia Kuala Lumpur Composite, the Jakarta Stock Exchange Composite Index, the Stock Exchange Of Thailand Index and the FTSE Straits Times Index. We also include a list of tradable Exchange Traded Funds (ETF) for each of the said indices.

Hang Seng Index (HSI IND) Continuation of range: Expects to move sideways between 25,743 and 28,000

Source: Bloomberg Tradable ETF(s) listed in Hong Kong: Tracker Fund Of Hong Kong (2800 HK), Hang Seng Index ETF (SEHK: 2833 HK) Tradable ETF(s) listed in Singapore: Lyxor HSI US$ by Societe Generale (A9B)

Last close: 26,660.16 Outlook: After a sharp consolidation, the Hang Seng Index is rebounding from lower boundary of a bullish channel (orange lines). On the other hand, the index is also capped by a bearish trendline (pink line) and the 250-week (purple line) moving averages. In this case, the immediate outlook is quite neutral. However, the weekly indicators are turning better. The weekly RSI is turning up, while the MACD histogram is narrowing up. Therefore, a continuation of technical rebound cannot be ruled out. If the index is able to break above the 250-week (purple line) moving average and the bearish trendline (pink line), it may call for a further advance towards 28,000. On the other hand, a break below 25,743 would also break below the bullish channel and would call for a further drop towards 24,748. Strategy: Investors are recommended to watch whether the index can break above 250-week (purple line) moving average before a long entry. Then look for a technical rebound towards 28,000. At the same time, they can use 25,743 as a stop to control risk. Support: 25,743 (horizontal support), 24,748 (previous low) Resistance: 250-week moving average + bearish trendline (~27,011), 28,000 (psychological resistance). Analyst Joyce Chan, CMT +852 2236 6716 [email protected]

FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBMKLCI IND) Dive into the deep sea

Source: Bloomberg

Tradable ETF(s) in Malaysia: FTSE Bursa Malaysia KLCI ETF (FBMKLCI-EA 0820EA)

Last close: 1,504.44 Outlook: Based on the chart, the FBMKLCI penetrated below the psychological support level of 1,500 on last week’s movement. Given the lack of domestic catalysts, external factors may have more weightage. Thus, the FBMKLCI may be vulnerable to negative sentiments regionally. In the near term, we expect the index to continue on the downside movement if it drops and penetrates the support level of 1,470. If the bear continues to control the market, the index will continue to drop till the next support level of 1420. Strategy: Since the index is now on the bearish mode, we suggest investors to take the opportunity when it is the right time to enter the market; thus, they should wait on the sidelines and buy on the dip. Support: 1,470 / 1,420 Resistance: 1,530 / 1,547 Analyst Mohd Fakhrul Asyraq Bin Mohd Aluwi, MSTA, CFTe +603 21471997 [email protected]





Jakarta Stock Exchange Composite Index (JCI IND) More rallies ahead triggered by positive GDP data

Source: Bloomberg Tradable ETF(s) listed in Indonesia: Reksa Dana Premier ETF LQ-45 (ETF LQ45), Reksa Dana Premier ETF IDX30 (ETF IDX 30)

Last close: 6,088.41 Outlook: The JCI has been forming a neutral candlestick pattern for several months now, however earlier this month we saw the price breaking above its previous 6170 resistance level; hence we expect to see more rallies ahead. On the weekly chart, technical indicator RSI is holding well above its centre line while the MACD is ready to give out a bullish crossover signal anytime. Seasonality pattern for the last 10 years hangs in balance with 5x gains and 5x losses, however last August the JCI managed to make a rebound from the COVID-19 slump and we expect the same move this year. There are sentiments to watch out for, such as the COVID-19 daily cases that remain elevated and triggered the government to impose restrictions on activities (PPKM) which could impact the economy negatively. There are also positive sentiments, including the 1H21 earning reports which so far show that corporate earnings are improving from last year and signal that the economy is recovering as well. Furthermore, 2Q21 GDP data is better than expected with +7.07% yoy and +3.31% qoq. Looking forward, we expect the JCI to move forward positively with resistance at 6390 and support at 5935. Strategy: We expect more rallies ahead, hence we advise bargain-hunting for stocks with cheap valuations and focus on sectors such as banking, property and consumer. Support: 5,935 / 5,735 Resistance: 6,390 / 6,505 Analyst Maskun Ramli, CFTe +6221 2993 3915 [email protected]

Stock Exchange Of Thailand Index (SET IND) Big caps signal potential further drop of SET Index

Source: Bloomberg Tradable ETF(s) in Thailand: ThaiDEX SET50 ETF (TDEX), ThaiDEX SET100 ETF (TH100), KTAM SET50 ETF Tracker (ESET50) Tradable ETF(s) in Singapore: Lyxor UCITS ETF by Societe Generale (P2P)

Last close: 1,532.71 Outlook: In Jun 21, the SET Index formed a “bull trap” after breaking the 4-year resistance but could not stand above the line and started the downward movement after that. The SET50 Index, comprising of top 50 large caps in the SET Index, showed many signs that it has been weaker than the SET Index such as: a) it could not go higher than the top made in mid-20; b) it fell below the low made in early-21; and c) it fell below the 200-day simple moving average (SMA) earlier than the SET Index. We think that all signs mentioned above might be a signal that may lead the SET Index to drop further. Strategy: We expect the market to move sideways in the range of 1,500-1,565 pts. Given that the SET50 showed signs of weakness and fell below the 200-day SMA. We are cautious of potential downside risk to the SET Index at the next support of 1,500 and 1,450-1,480 pts. Therefore, we recommend just a speculative buy on dip for individual stocks. Support: 1,480 / 1,450 Resistance: 1,565 / 1,590 Analyst Sittiporn Jennaimuang +66 2659 8026 [email protected]





FTSE Straits Times Index (STI IND) Price could move in sideway manner

Source: Bloomberg

Tradable ETF(s) in Singapore: Singapore STI ETF by Nikko AM (G3B), Straits Times Index ETF by SPDR (ES3)

Last close: 3,180.00 Outlook: The outlook of the FSSTI index remains bullish as the price is trading above the cloud. The lagging span is above the cloud and the price of 26 days ago, confirming the bullish trend. The base line is acting as support now, coinciding with the gap support zone at 3,020. The MACD remains bullish with both of its lines far above the zero line. We expect the FSSTI index to move in a sideway manner from its recent high of 3,237 to 3,020 until either end is broken. Strategy: Investors could accumulate either when this index is trading near to the base line and gap support zone at 3,020, or when the index breaks above the resistance of 3,237. Support: 3,020 / 2,890 Resistance: 3,285 / 3,390 Analyst Wong Shueh Ting, CFTe +65 6590 6616 [email protected]

OUR PREVIOUS WRITE UP…

77th Edition – 7 July 2021, Wednesday https://research.uobkayhian.com/content_download.jsp?id=63303&h=79612dff30f911f7d1d8530ff3f77235 76th Edition – 9 June 2021, Wednesday https://research.uobkayhian.com/content_download.jsp?id=62871&h=6c5fbde2861c8bfe00687fbd8266d885 75th Edition – 11 May 2021, Tuesday https://research.uobkayhian.com/content_download.jsp?id=62412&h=97da316c79d138ed4871e85bc889c657 74th Edition – 8 April 2021, Thursday https://research.uobkayhian.com/content_download.jsp?id=61872&h=fca0113e8cf114d0ebc907bdd0157f05 73rd Edition – 10 March 2021, Wednesday https://research.uobkayhian.com/content_download.jsp?id=61388&h=52660fd5af844425740f3a7bf5151008




FROM THE REGIONAL MORNING NOTES.. .

Wilmar International (WIL SP) 1H21: Results Slightly Above Our Expectations Wilmar’s 1H21 results came in slightly above our expectations. The positive variance mainly came from better-than-expected sugar, oilseeds and grains contributions. 2H21 earnings could come in stronger mainly supported by higher production and higher commodity prices for palm and sugar. Adani Wilmar’s (AWL) potential listing would unlock shareholders’ value; however, it might not be as great as YKA’s listing due to its lower contribution to Wilmar. Maintain BUY. Target price: S$6.40.

1H21 RESULTS

Year to 31 Dec (US$m) 1H20 2H20 1H21 hoh

% chg yoy

% chg Remark Total Revenue 22,658 27,869 29,534 6.0 30.4 Driven by higher selling pricesTotal PBT 825 1,487 1,216 (18.2) 47.3Food Products 495 657 428 (34.8) (13.5) Negatively affected by high feedstocks

price Feed and Industrial Products 371 425 479 12.6 29.1 Good contribution from palm and aided

by a reversal of mark-to-market losses on hedging derivatives in 4Q20.

Plantations & Sugar Milling (83) 188 164 (12.7) n.m High CPO & sugar price and capitalisation of sugar mills’ maintenance costs

Share of results of JV & associates

84 118 139 17.8 65.5

Net Profit 611 924 751 (18.7) 22.9Core Net Profit 636 851 732 (13.9) 15.1 5% above our expectation PBT Margin (%) 3.64 5.33 4.12 (1.2) 0.5Food Products 4.77 4.97 3.14 (1.8) (1.6) High feedstocks pricesFeed and Industrial Products 2.87 2.65 2.79 0.1 (0.1) Supported by good palm refining

margins Core Net Profit Margin (%) 2.81 3.05 2.48 (0.6) (0.3)

Source: Wilmar, UOB Kay Hian

RESULTS • Results within expectations. Wilmar International (Wilmar) reported core net profit of

US$732m for 1H21 (-14% hoh, +15% yoy) contributing 45% of our full-year assumption. We deem the result higher than our expectation of US$675m-695m. The positive variance mainly came from the better-than-expected contributions from sugar and oilseeds & grains divisions. Having said that, 2Q21 core net profit came in lower at US$309m, dropped by 27% qoq due to lower margin and seasonally low demand.

• Better feed and industrial products segment (39% of 1H21 PBT) mainly supported by good refining margins from tropical oils and higher demand for tropical oil downstream products, However, lower soybean rushing volume and higher raw material cost had partially offset the higher sales volume in both the sugar and tropical oils business.

KEY FINANCIALS Year to 31 Dec (US$m) 2019 2020 2021F 2022F 2023FNet turnover 44,499 50,527 66,332 64,217 69,787EBITDA 2,881 3,323 3,411 3,943 4,118Operating profit 2,006 2,340 2,324 2,732 2,856Net profit (rep./act.) 1,293 1,534 1,655 1,781 1,946Net profit (adj.) 1,256 1,486 1,655 1,781 1,946EPS (US$ cent) 19.6 23.2 25.8 27.8 30.4PE (x) 16.8 14.2 12.8 11.9 10.9P/B (x) 1.3 1.1 1.1 1.0 1.0EV/EBITDA (x) 15.5 13.4 13.1 11.3 10.8Dividend yield (%) 2.6 4.1 3.1 3.4 3.7Net margin (%) 2.9 3.0 2.5 2.8 2.8Net debt/(cash) to equity (%) 117.3 91.2 108.2 101.9 96.6Interest cover (x) 6.9 14.4 19.8 9.7 13.3ROE (%) 7.9 8.6 8.6 8.9 9.4Consensus net profit - - 1,595 1,707 1,826UOBKH/Consensus (x) - - 1.04 1.04 1.07Source: Wilmar International, Bloomberg, UOB Kay Hian




• Higher yoy plantation & sugar milling segment (13.5% of 1H21 PBT) mainly driven by better palm oil and sugar prices despite lower sugar sales volume. The palm plantations’ good performance was further supported by higher FFB production in 1H21 which increased by 9% yoy. We expect both the plantation and sugar milling segments to deliver higher margins in 2H21 on the back of higher selling prices.

• Food products segment (35% of 1H21 PBT) came in weaker in 1H21 mainly due to the higher feedstock prices and hence leading to lower margin. The operating margin for the food products segment dropped from 5.0% to 3.1% hoh. Having said that, the group made an upward adjustment to the selling prices of consumer pack products in 1H21. However, the selling price adjustment is still not able to fully offset the tremendously increasing raw material cost.

• YKA results. Yihai Kerry Arawana (YKA) posted 1H21 net profit and recurring net profit of RMb2.97b (-1.2% yoy) and Rmb3.91b (+36.6% yoy) respectively on the back of a revenue growth of 19% yoy to Rmb103.2b. The higher revenue was supported by stronger sales volume from both the kitchen food and animal feeds & oleochemical segments. However, the soaring raw material cost led to lower margin in the kitchen food segment even with YKA adjusting the selling prices. On top of that, there is a change of consumer where hotel, restaurant and catering (HORECA) is back with higher sales volume as compared with the retail consumers which led to a lower margin in the kitchen food segment.

STOCK IMPACT • Feed & industrial product segment is expected to continue to perform with positive

downstream margin and high selling prices. This is also further supported by the sustained strong demand from the tropical oils businesses. Having said that, we expect margin pressure from soybean crushing to remain despite the improving soybean crushing margin since early-3Q21.

• Plantation and sugar milling segment is expected to continue leveraging on the high palm oil and sugar prices. On top of that, 2H production for palm would come in higher hoh and the sugar milling season also started since late-Jun 21. The sugar milling operation is still expected to perform better yoy as the much higher sugar prices should be able to offset the impact from lower sugar production due to the adverse weather.

• Food products margin may see some improvements but still lower yoy with the continued increasing raw material cost despite the adjustment to products’ selling prices. Having said that, we expect higher sales volume from HORECA and lower retails demand since individuals had stocked up since last year.

EARNINGS REVISION/RISK

• Maintain earnings forecasts. We maintain our earnings forecast for 2021/22/23 with core net profits of US$1.66b, US$1.78b and US$1.95b respectively. More updates will be given after the briefing on 13 Aug 21.

VALUATION/RECOMMENDATION • Maintain BUY with a target price of S$6.40. Our target price is based on 2021F EPS and

reflects a blended 26x 2021F PE for China operations and blended 11x PE for non-China operations.

• Wilmar has declared a dividend of S$0.05/share, payable on 27 Aug 21.

SALES VOLUME BY SEGMENT Year to 31 Dec 1H20 2H20 1H21 Hoh % chg Yoy % chgSales Volume ('000 tonnes) Food Products 12,264 14,953 13,316 (10.9) 8.6- Consumer Products 4,726 4,697 4,103 (12.6) (13.2)- Medium pack and bulk 7,538 10,256 9,213 (10.2) 22.2

Feed and Industrial Products 26,345 31,739 26,176 (17.5) (0.6)- Tropical Oils 10,714 11,512 10,969 (4.7) 2.4- Oilseeds and Grains 10,182 11,889 9,074 (23.7) (10.9)- Sugar 5,449 8,338 6,133 (26.4) 12.6

Plantations & Sugar Milling - Sugar milling 1,321 2,206 1,054 (52.2) (20.2)

Source: Wilmar





Koufu Group (KOUFU SP) 1H21: Earnings Beat Expectations, Better Outlook As Recovery Continues 1H21 earnings of S$9.9m (+291% yoy/+35% hoh) was above expectations, meeting 67% of our full-year estimate. Revenue increased 19% yoy due to an increase in footfall and the newly-acquired snack business. We expect Singapore’s business to improve as restrictions have eased, and a higher percentage of the population has been vaccinated. Macau should also see more Mainland Chinese visitors. We raise our 2021 earnings forecast by 15%. Maintain BUY with a target price of S$0.77.

1H21 RESULTS Year to 31 Dec (S$m) 1H21 1H20 yoy % chgRevenue 105.7 89.0 18.8Net profit attributable to owners 9.9 2.5 291.2Net margin (%) 9.4 2.8 6.6ppt

Source: Koufu, UOB Kay Hian

RESULTS • Results above expectations and sequential improvement trend intact. Koufu Group

(Koufu) reported 1H21 earnings of S$9.9m (+291% yoy/+35% hoh). The results were above expectations, forming 67% of our full-year forecast, mainly due to higher-than-expected other income, which include: a) government grants of S$4.4m; b) renovation income of S$1.6m; and c) gains from the disposal of assets of S$0.7m. We continue to see sequential improvement of earnings hoh (S$9.9m in 1H21 vs S$7.4m in 2H20) and revenue hoh (S$106m in 1H21 vs S$103m in 2H20). We expect this trend to continue, led by the gradual reopening of economies.

• 1H21 revenue increased 19% yoy due to an increase in footfall and the newly acquired business. Revenue from the outlet and mall management segment increased 3% yoy in 1H21 due to increase in rental and related income from stall tenants as a result of higher footfall and food sales generated. Revenue from food and beverage increased 37% yoy in 1H21 due to an improvement in footfall as compared with the previous year where revenue was impacted by circuit breaker and Phase 1 periods and contributions from the newly acquired snacks and dough products business.

• Better outlook for 2H21 as recovery continues. In the outlook statement, Koufu expects business in Singapore to improve as restrictions have eased and a higher percentage of the population is getting vaccinated. On the other hand, business in Macau is expected to improve as more Mainland Chinese visitors visit Macau under the quarantine-free travel arrangements, notwithstanding any further flare-ups of COVID-19 in China or Macau. In addition, Koufu’s strong balance sheet with net cash of S$69m as at 1H21 (equivalent to about 20% of its market cap) could help it seize new opportunities.

KEY FINANCIALS Year to 31 Dec (S$m) 2019 2020 2021F 2022F 2023FNet turnover 238 192 231 255 272EBITDA 114 92 106 117 123Operating profit 37 16 25 35 42Net profit (rep./act.) 28 10 17 25 29Net profit (adj.) 28 10 17 25 29EPS (S$ cent) 5.4 1.9 3.4 4.9 5.7PE (x) 12.3 34.6 19.9 13.6 11.7P/B (x) 3.6 3.7 3.4 3.0 2.7EV/EBITDA (x) 2.5 3.1 2.7 2.4 2.3Dividend yield (%) 3.7 1.8 2.3 3.4 3.9Net margin (%) 11.7 5.1 7.5 9.9 10.8Net debt/(cash) to equity (%) (88.3) (65.0) (78.4) (85.3) (91.4)Interest cover (x) 31.8 20.6 23.3 24.4 24.5ROE (%) 28.6 9.7 16.3 21.7 22.6Consensus net profit - - 18 24 29UOBKH/Consensus (x) - - 0.94 1.05 1.02Source: Bloomberg, UOB Kay Hian




STOCK IMPACT • Expect better recovery in Singapore as restrictions ease. The government announced

that in the upcoming months, as Singapore moves towards a large percentage of the population being fully vaccinated, safe management measures will be gradually relaxed. The group expects its business operations to improve significantly once the restrictions have eased. From 10 Aug 21, Phase 2 (Heightened Alert) measures will be lifted in a calibrated manner as part of Singapore’s transition towards COVID-19 resilience, including more relaxed measures on dining-in

• Macau update. On 16 Mar 21, Macau eased its border restrictions by reopening its borders to foreigners via Mainland China provided they hold a mainland China visa issued by the Office of the Commissioner of the Ministry of Foreign Affairs of the People’s Republic of China in the Macao Special Administrative Region. Koufu saw improvements to the footfalls to the Londoner Macao especially during the Labour Day holiday in May 21 where Macau’s daily visitor arrivals jumped to nearly 28,000, more than tripling from the third quarter of 2020. However, the number of visitors was 39% lower in Jun 21 as compared with the previous month due to the reintroduction of pandemic prevention restrictions in the Guangdong province resulting from a surge in the number of COVID-19 cases there. In Jul 21, Koufu again saw a surge in the footfall to the food court at Londoner Macao due to the increase in the number of Chinese visitors to Macau. Koufu expects its business operations to improve significantly in time as more Mainland Chinese visitors flock to Macau under the quarantine-free travel arrangements, which at the moment is only granted to most low risks areas of China.

• Strong cash position. Koufu’s cash generation ability has helped it build a significant net cash of S$69m as at 1H21, equivalent to about 20% of its market capitalisation.

EARNINGS REVISION/RISK • We raise our 2021 earnings forecast by 15% to account for higher-than-expected other

income (raised from S$5.5m to S$8.1m), which arises mainly from government grants and renovation income. The Singapore government has increased its grants for 2021 to cushion the impact of Phase 2 (Heightened Alert) measures.

• We kept our 2022 and 2023 earnings estimates unchanged.

VALUATION/RECOMMENDATION • Maintain BUY with a PE-based target price of S$0.77, pegged at 17x 2022F PE or

approximately 25% discount to peers’ average. Koufu has the highest ROE and is the most profitable among local peers.

SHARE PRICE CATALYST • Completion of the sale of two central kitchens and special dividend.

• Easing of travel restrictions and stronger-than-expected recovery from the impacts of COVID-19.

PEER COMPARSION Price @ Market ------------ PE ------------ ----------- P/B ----------- ROE ROE Yield Yield Net Company Ticker 11 Aug 21 Cap 2021 2022 2021 2022 2021 2022 2021 2022 Gearing (lcy) (US$m) (x) (x) (x) (x) (%) (%) (%) (%) (%) Jumbo JUMBO SP 0.325 153 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. (6.3) Kimly KMLY SP 0.42 368 16.8 12.4 4.2 3.7 27.8 31.0 4.3 5.5 (48.0) Jollibee JFC PM 191.6 4,213 54.2 34.5 3.7 3.4 7.0 10.0 0.7 1.0 68.2 Mk Restaurants M TB 49.75 1,373 82.6 27.5 3.4 3.3 4.4 11.5 1.5 2.8 24.1 Gourmet Master 2723 TT 135.5 876 20.3 17.8 2.0 1.9 10.6 11.3 2.9 3.6 (2.0) Cafe De Coral 341 HK 15.08 1,135 24.6 19.3 2.7 2.6 11.4 13.9 2.4 3.3 37.4 China Quanjude 002186 CH 9.17 436 131.0 43.7 n.a. n.a. 1.8 4.9 n.a. n.a. (19.5) Ajisen China 538 HK 1.39 195 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. (28.5) Berjaya Food BFD MK 1.91 161 16.8 15.7 2.0 1.9 12.4 12.5 1.4 2.0 165.7 Average 46.5 23.7 2.9 2.7 10.3 13.3 2.8 3.3 16.4 Koufu KOUFU SP 0.67 273 19.9 13.6 3.4 3.0 16.3 21.7 2.3 3.4 (64.9)

Source: Bloomberg, UOB Kay Hian


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Propnex (PROP SP) 1H21: Blockbuster Results, But May Be Tough To Repeat; Downgrade To HOLD Propnex reported a very strong 1H21 net profit of S$34.4m (+115% yoy), beating our and consensus expectations. All business segments contributed to the strength, and ROE accordingly doubled to over 16%. A bullish S$0.055 dividend was declared. However, with worries that 2021 may be the peak earnings year for the company, we downgrade our recommendation to HOLD. Fair value: S$2.09.

1H21 RESULTS Year to 31 Dec (S$m) 1H20 1H21 yoy Remarks Revenue 240.4 481.1 100.1% - All business segments performed strongly yoy Gross profit 27.2 51.1 88.1% Staff costs (7.0) (7.8) 12.5% - Salaries & performance bonuses due to better Pre-tax profit 18.9 41.4 119.0% performance NPAT 16.0 34.4 115.0% Gross profit margin 11.3% 10.6% -0.7ppt Pre-tax margin 7.9% 8.6% +0.7ppt Net margin 6.6% 7.1% +0.5ppt

Source: Propnex, UOB Kay Hian

RESULTS • Strong 1H21 results which were better than expected... Propnex reported a strong 1H21

with revenue doubling to S$481.1m, resulting in net profit increasing by 115% yoy to S$34.4m. All business segments did well with the strongest revenue growth coming from landed (+150% yoy) and private resale (+146% yoy) although the largest segment is still project marketing, or new launches, representing 47% of Propnex’s revenue of S$481m.

• ...however 2021 could be the peak in the company’s earnings. Given the strong transaction volumes seen across all its business segments in 1H21, as well as the new and potentially lucrative en bloc team that is now in place, we worry that 2021 may be the peak earnings year for Propnex. In the short term, continued bullish newsflow on transaction volumes, en blocs or property pricing may prop up the share price. However, looking ahead into 4Q21 and 2022, we believe that such strength will be difficult to sustain.

• The company declared an interim dividend of S$0.055 which formed 58% of our prior full-year estimate of S$0.095. We subsequently upgraded our 2021 DPS estimate to S$0.11.

KEY FINANCIALS Year to 31 Dec (S$m) 2019 2020 2021F 2022F 2023FNet turnover 420 516 732 693 665EBITDA 28 40 74 62 54Operating profit 24 37 71 58 50Net profit (rep./act.) 20 29 57 47 41Net profit (adj.) 20 29 57 47 41EPS (S$ cent) 5.4 7.9 15.4 12.7 11.0PE (x) 36.2 24.9 12.7 15.5 17.9P/B (x) 10.5 8.6 7.1 6.3 5.7EV/EBITDA (x) 20.7 14.5 7.9 9.5 10.9Dividend yield (%) 1.8 2.8 5.6 4.6 4.1Net margin (%) 4.8 5.6 7.8 6.8 6.1Net debt/(cash) to equity (%) (117.7) (125.1) (145.4) (138.3) (121.8)ROE (%) 29.4 37.8 61.2 43.1 33.3Consensus net profit - - 48 42 41UOBKH/Consensus (x) - - 1.18 1.11 0.99Source: Propnex, Bloomberg, UOB Kay Hian


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STOCK IMPACT • Propnex’s management remains bullish for 2H21, stating at the results briefing that apart

from Singapore being seen as a safe haven by many foreign buyers – thus continuing to drive sales, local buyers remain keen on property, particularly HDB upgraders. With volumes already hitting 14,600 in 1H21, a year-end target of 26,000-27,000 is likely and will positively affect Propnex given that it is a market leader in the HDB resale segment.

• Outlook for resale seems bright according to Propnex. The company pointed out that in the first seven months of 2021 to end-Jul 21, private resale volumes have already exceeded 2020’s numbers. Propnex attributes this to COVID-19 which has changed the way people view their homes which are now extensions of the office, and thus many have bought bigger properties. On top of this, the price point of resale apartments vs new launches is about 40%, thus resulting in a buoyant resale market.

• En bloc – upside to earnings in the next 12-18 months. Propnex disclosed that it has a total of S$4.4b in en bloc projects in hand: a) a commercial office space valued at $280m; and b) six residential condominiums valued at S$4.1b. As inventory has declined by 47% in the past two years (see chart on RHS), we believe that the ‘en bloc fever’ will resume, however the company believes that much of the potential sites that will succeed will not be in the Core Central Region but in the Outer Central Region given pricing considerations.

• Cooling measures, if it happens, may not have much of a negative impact. Management appears to be sanguine about the prospects of cooling measures being introduced by the government, pointing to the fact that the private property price index (PPPI) rose only 0.8% yoy in 2Q21 vs 3.3% in 1Q21. Propnex believes that cooling measures may be triggered only if price increases hit 3-4% in 3Q21 and 4Q21.

• Foreign buyers still a factor, but in the upper end of the market. Propnex stated that penthouses and Good Class Bungalows have been in “hot demand from new citizens” with 40% of them already in the country while the rest remain overseas but are able to attend showroom visits virtually. China remains the largest source of buyers while other buyers come from Vietnam, Korea, Indonesia, Hong Kong and the US.

EARNINGS REVISION/RISK • Upgrading earnings. We have upgraded 2021-23 earnings by 6-17% (see table at RHS)

with the largest changes coming in 2021 due to the stronger-than-expected transaction volumes across the board. We have also conservatively factored in a 50% success rate for its S$4.4b worth of en bloc projects which translate to a revenue uplift of S$1.4m and $4.1m for 2021 and 2022 respectively.

VALUATION/RECOMMENDATION • Given the strong share price performance ytd and the stock approaching our new PE-

based fair value of S$2.09, we have elected to downgrade Propnex to HOLD. Our target PE multiple of 12.5x is +2SD above the company’s historical average of 6.6x. We have chosen not to lower our target PE multiple given various issues that could still lend support to its share price, for example: a) stronger-than-expected transaction volumes for private and HDB resale; and b) strong conversion of its S$4.4b worth of en bloc projects currently in hand.

• We highlight that there is still a lot to like about Propnex. In 1H21, its ROE nearly doubled to 16.3% vs 8.6% in 1H20 while remaining in a net cash position to the tune of S$120.7m (or S$0.33 per share) as at end-1H21. In addition, the company generated S$19.2m in free cash flow in 1H21 which was a 59% yoy increase from the S$12.1m generated in the year-ago period.

SHARE PRICE CATALYST • Continued positive newsflow on private and HDB resale volumes.

• Moderation in quarterly price increases of the PPPI.


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Disclosures/Disclaimers

This report is prepared by UOB Kay Hian Private Limited (“UOBKH”), which is a holder of a capital markets services licence and an exempt financial adviser in Singapore. This report is provided for information only and is not an offer or a solicitation to deal in securities or to enter into any legal relations, nor an advice or a recommendation with respect to such securities. This report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation and the particular needs of any recipient hereof. Advice should be sought from a financial adviser regarding the suitability of the investment product, taking into account the specific investment objectives, financial situation or particular needs of any person in receipt of the recommendation, before the person makes a commitment to purchase the investment product. This report is confidential. This report may not be published, circulated, reproduced or distributed in whole or in part by any recipient of this report to any other person without the prior written consent of UOBKH. This report is not directed to or intended for distribution to or use by any person or any entity who is a citizen or resident of or located in any locality, state, country or any other jurisdiction as UOBKH may determine in its absolute discretion, where the distribution, publication, availability or use of this report would be contrary to applicable law or would subject UOBKH and its connected persons (as defined in the Financial Advisers Act, Chapter 110 of Singapore) to any registration, licensing or other requirements within such jurisdiction. The information or views in the report (“Information”) has been obtained or derived from sources believed by UOBKH to be reliable. 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