Brokers’ Digest: Grand Venture Tech, CSE Global, YZJ Shipbuilding, Credit Bureau Asia, Wilmar, Venture, Nanofilm

With an “upbeat” guidance for the current 1HFY2025, analysts Amanda Tan and Ling Lee Keng have raised their target price to $1.12 from $1.04.

In FY2024, the company reported earnings of $10.9 million, up 96% y-o-y. Revenue hit a record as it captured more business from semiconductor clients.

GVT’s share price has gained by three-quarters in the past 12 months to change hands at around 85 cents.

See also: DBS’s capital return plan ‘outclasses’ rivals UOB, OCBC in balancing returns, sustainability: BI

Even so, DBS analysts Tan and Ling view this counter as “still a promising grand venture, as long-term semiconductor uptrend remains intact”.

“Notwithstanding cyclicality, the semiconductor industry is poised for growth, owing to the push towards digitalisation,” they add.

“The long-term semiconductor outlook looks bright, which should benefit GVT, as more than half of its revenue comes from the semiconductor segment,” state Tan and Ling.

See also: Analysts, bullish on semicon recovery, up Frencken’s target price

They have raised their FY2025 and FY2026 revenue projections by 11% and 6%, respectively, due to stronger-than-expected contributions from the semiconductor segment.

Accordingly, their earnings estimates for the counter for the same two years have been lifted by 7% and 8%, respectively.

However, they have included slightly higher finance costs from increased leverage and toned-down gross margin assumptions due to higher costs related to onboarding new customers.

Their revised target price of $1.12 is pegged to 21 times FY2026 earnings, which is close to its historical mean, to account for more meaningful volume production for new so-called “front end” customers. — The Edge Singapore

CSE Global
Price targets:
Maybank Securities ‘buy’ 67 cents
CGS International ‘add’ 70 cents
UOB Kay Hian ‘buy’ 61 cents

Higher target prices despite dividend cut

CSE Global, recognised as a generous dividend payout stock, has cut its 2HFY2024 ended Dec 31, 2024 payout. Nonetheless, given the brighter prospects of more order wins, analysts have raised their respective target stock prices.

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There is a one-off expense of $10 million from an arbitration settlement and if included, earnings increased by 16.9% y-o-y to $26.3 million.

To re-channel resources to generate new growth, the company trimmed its final dividend to 1.15 cents per share, down from 1.5 cents a year ago.

Jarick Seet of Maybank Securities, acknowledging the dividend cut, believes that in the future, the company will implement a dividend policy of at least 50% of net profit after tax to balance growth and cash needs due to its expansion plans in the US.

“We expect short-time knee-jerk negative price reaction due to the reduction in dividends, but remain bullish on the longer-term growth potential of CSE and believe dividends will bounce back in FY2025,” says Seet.

The company’s order book has reached some $672.6 million, with a bigger proportion of so-called large greenfield projects to be executed in two to three years.

“Larger orders are likely to follow through as it continues to expand in the US, especially with its new facility, which is 2–3 times larger,” says Seet, who estimates the company to incur capex of around US$50 million ($67 million) to get the expanded facility ready by the end of FY2026.

Besides revenue growth of 10% to 15% y-o-y, Seet believes that CSE Global’s net margins will further improve in the current FY2025.

With a corresponding better bottom line, Seet estimates that CSE Global’s dividends can potentially be higher than the 2.75 cents per share it used to pay before the dividend cut.

Seet has raised his earnings forecast for FY2025 by 32% and FY2026 by 24%, leading to a higher target price of 67 cents from 64 cents, based on 11.5 times FY2025 earnings.

“With the stars aligning for CSE, we believe the expansion of its US facility signifies the strong confidence management has in its prospects. We expect share buybacks as well as higher net margins y-o-y,” he adds.

Meanwhile, Kenneth Tan and Lim Siew Khee of CGS International are reiterating their “add” call but with a higher target price of 70 cents from 62 cents.

Similarly, John Cheong and Heidi Mo of UOB Kay Hian have raised their target price from 59 cents to 61 cents while maintaining their “buy” call. — The Edge Singapore

Yangzijiang Shipbuilding (Holdings)
Price targets:
DBS Group Research ‘buy’ $3.80
UOB Kay Hian ‘buy’ $3.50
Citi Research ‘buy’ $3.24
CGS International ‘add’ $3.62

US port fees plan not a ‘debilitating’ move

Despite reporting FY2024 ended Dec 31, 2024 earnings that surged by two-thirds and proposing a final dividend that is nearly from last year’s, shipbuilder Yangzijiang Shipping (Holdings) suffered a selldown from jittery investors over worries that US proposals to charge up to US$1.5 million ($2.03 million) for Chinese-built vessels entering US ports.

While most analysts remain upbeat about the company’s prospects, some have trimmed their target prices slightly. From a recent peak of $3.30 on Feb 20, Yangzijiang shares plunged by nearly a third to close at $2.38 on Feb 28.

Ho Pei Hwa of DBS Group Research describes the sell-off as “overdone” and she has kept her “buy” call and $3.80 target price for several reasons. She observes that Yangzijiang suffered a larger drop in its share price relative to other shipping companies and major Chinese shipyards. Ho also points out that shipping companies are likely to pass on the additional port fees to consumers via higher surcharges.

Also, Chinese shipyards account for nearly half of global shipbuilding capacity. Thus, it is “not plausible” for shipping lines to avoid placing orders entirely with Chinese shipyards, especially as the Korean yards are also occupied. Domestic US yards, meanwhile, are not competitive as they cost two to three times that of Asian yards.

Ho acknowledges that this news “inevitably” caused uncertainties and “may impact” new ordering sentiment. Nonetheless, “based on the current hefty global ship order backlog, any new order placed now will be delivered from 2028 onwards, which is nearing the end of Trump’s presidency term,” she notes.

Luis Hilado of Citi Research points out that the US proposal, in its current form, is “not debilitating” and not the “doom and gloom” that the drop in Yangzijiang’s share price movement has suggested. Citing the company management, Hilado says the potential cost increase to shippers would be around US$100 per container.

Nonetheless, Hilado, while keeping his “buy” call, has tempered his revenue outlook as lower value contracts will be “significantly” worked through the current FY2025, thereby diluting the price uplift from the higher value order book.

The company’s management has guided for no revenue growth this year, but Hilado believes this is a “conservative” stance. From an earlier projection of RMB34.2 billion ($6.35 billion) in FY2025 revenue, Hilado has lowered his estimate to RM27.7 billion, which is still a 4% gain over FY2024.

All in, he has lowered his FY2025 and FY2026 earnings forecast by 4% and 15%, respectively. By applying the same 10 times earnings multiple, Hilado’s new target price is thus trimmed to $3.24 from $3.40.

In FY2024, Yangzijiang won record new orders of US$14.6 billion. This brings its total order book as at the end of last year to US$24.36 billion, providing revenue visibility up to 2030 and ensuring sustained growth in the coming years.

For the current FY2025, the company expects to win another US$6 billion worth of new orders versus an earlier projection of US$4.5 billion.

Even so, Adrian Loh of UOB KayHian observes that the company is not standing still. It has put in place multiple growth plans for the coming two years, including RMB3 billion to be invested for bigger yard space and RMB2 billion to be spent on an LNG terminal to help diversify its revenue streams.

However, while maintaining his “buy” call, Loh has trimmed his FY2025 earnings estimate by 1% to account for slightly higher tax rates. For FY2026, he has raised his earnings projection by 7% to factor in contributions from new projects.

Loh’s new target price of $3.50, from $3.60, is pegged to 9.5 times earnings, which is 1 s.d. above the 10-year average of 6.8 times. “We believe the premium to its average PE multiple is justified given the company’s earnings visibility into 2028,” says Loh.

Besides the higher dividends, the company may try to improve shareholders’ value in another way. “We believe the company could start a share buyback programme imminently,” he adds.

Similarly, Lim Siew Khee and Meghana Kande of CGS International believe that Yangzijiang’s shares have been “oversold” following news of the US port fees. They are satisfied that concerns over the outlook of orders have “largely been addressed by the management. “While enquiries have slowed as liners are yet to make fleet decisions following large orders made in 2024, we think this is not a concern as existing order wins have filled out its yard capacity till 2027,” state Lim and Kande.

They add that the company has not seen any knee-jerk reactions, such as order cancellations or delays due to the US proposals. They have kept their “add” call and $3.62 target price, which is based on 12 times FY2026 earnings, a valuation multiple in line with the Korean and Japanese yards.

For the CGS International analysts, key catalysts for this counter include stronger-than-expected margins amid low steel costs and favourable forex. On the other hand, downside risks will be higher steel costs, order cancellations, and the finalisation of punitive measures by the US government against the Chinese shipbuilding industry. — The Edge Singapore

Credit Bureau Asia
Price target:
CGS International ‘add’ $1.30

Pick-up in activity among digital banks a catalyst

On Feb 24, CBA reported 2HFY2024 patmi of $5.4 million, 6% lower h-o-h but 12% higher y-o-y. This was 12% below Choong’s forecasts and FY2024 patmi formed 96% of her full-year estimates.

The miss was largely due to higher staff costs, which grew 8% y-o-y, for performance-related bonuses and other operating expenses, which grew 9% y-o-y due to a combination of business-related costs, such as an increase in report costs, lease expenses, maintenance and commission expenses, IT support fees and forex losses.

The miss was further exacerbated by its weaker share of results from its joint ventures, which fell 22% y-o-y.

CBA’s contribution from Cambodia in 2HFY2024 was weaker, with a 17% lower y-o-y due to higher employee expenses for increased headcount and depreciation. Losses from Myanmar stayed stable at $0.1 million in 2HFY2024.

CBA declared a final dividend per share (DPS) of 2 cents in 2HFY2024, bringing its full-year FY2024 DPS to 4 cents, up from 3.7 cents last year.

Choong notes sustained growth across CBA’s financial institution (FI) and non-FI data segments. Revenue growth in 2HFY2024 was broad-based across both the FI and non-FI data businesses.

CBA is one of two credit bureaus licensed to provide FI data business services in Singapore. Apart from the incumbent banks, the two newer digital full bank entrants in Singapore continued to engage CBA’s services, although its volumes have been slightly softer than expected, says management.

On CBA’s non-FI data business, the pick-up in revenue came largely from global customers seeking credit risk management solutions; this partly offset the lower revenue from local customers, says Choong.

While the US Federal Reserve rate cuts in FY2024 make a case for higher volumes of bulk risk reviews, CBA noted in its earnings discussion that demand for new applications has sustained so far in FY2025.

Choong acknowledges that CBA’s FY2024 revenue from its joint venture Credit Bureau Cambodia was stable y-o-y on a constant currency basis, but higher staff costs could drag its FY2025 net profit.

Although credit report sales for its other joint venture, Myanmar Credit Bureau, picked up slightly in FY2024, this was offset by the absence of new membership fees contributed by banks, which were collected in the preceding year. This resulted in its flattish contributions to CBA.

In Choong’s view, the progressive growth of business activity among digital banks in Singapore is a key re-rating catalyst for CBA.

On the other hand, the prolonged uncertain political situation in Myanmar, which affects the joint venture Myanmar Credit Bureau, along with the introduction of additional credit bureau licences in Singapore, are key downside risks, says Choong.

Wilmar International
Price targets:
UOB Kay Hian ‘buy’ $3.45 from $3.18
Maybank ‘buy’ $3.17 to $4.05
RHB Bank Singapore ‘neutral’ $3 from $3.10
OCBC Investment Research ‘buy’ $3.67 from $3.54
DBS Group Research ‘buy’ $3.80

Earnings down, but prospects up

Wilmar International’s most recent earnings came in lower than expected, but some analysts have upgraded their calls nonetheless, as they believe the prospects are improving.

For the six months ended Dec 31, 2024, Wilmar suffered a 39.4% y-o-y earnings drop despite increasing revenue.

“We believe this is the bottom. Margins are stabilising as input costs fall and the group gains scale advantages. Volumes across all business segments are improving as demand recovers and crush margins strengthen,” says  Thilan Wickramasinghe of Maybank Securities.

“We believe the expected acceleration of the Chinese government’s fiscal stimulus as well as sustained domestic demand in key markets should drive improved prospects for the group going forward,” adds Wickramasinghe, who upgraded his call from “hold” to “buy” along with a higher target price of $4.05 from $3.17.

In their Feb 24 note, UOB Kay Hian’s Heidi Mo and Llelleythan Tan Yi Rong note that Wilmar’s palm oil refining is expected to remain challenging.

However, the company’s management is cautiously optimistic about the oilseeds business and expects stronger y-o-y performance due to Brazil’s record soybean crop production this year.

They expect Wilmar’s FY2025 core earnings to increase by 30% over FY2024, leading to an upgrade from “hold” to “buy” and a target price of $3.45 from $3.18.

DBS Group Research, on its part, is similarly optimistic about this company’s prospects. Given that it already has a relatively bullish target price of $3.80, its “buy” call remains, pegged to 12.1 times FY2025 earnings, in line with its five-year average P/E multiple of 11.8 times.

On Feb 17, media reports described a palm oil corruption case in Indonesia. However, Wickramasinghe says Wilmar’s management notes “these are just charges and not a verdict” and that the group “plans to contest them vigorously and has zero-tolerance policies for corrupt practices”.

RHB Bank Singapore is more restrained. It describes Wilmar’s final dividend of 10 cents per share higher-than-expected. This payout will bring the full-year total to 16 cents, implying a yield of 5.2%. This payout level translates into a payout ratio of 64%, an increase from 40%–50% in the previous years.  

Nonetheless, RHB is keeping its “neutral” call along with a slightly trimmed target price of $3 from $3.10 previously. As operating conditions improve in China, Wilmar’s sugar and palm refining units continue to face challenges. — The Edge Singapore

Venture Corp
Price targets:
CGS International ‘add’ $14.95
DBS Group Research ‘buy’ $14.70
Maybank Securities ‘hold’ $12.40
RHB Bank Singapore ‘buy’ $14.70
UOB Kay Hian ‘hold’ $13.35

FY2024 earnings in line but uncertain near-term

Venture Corp has reported FY2024 earnings in line with expectations; its most recent 2HFY2024 ended Dec 31, 2024, has shown recovery. However, given the uncertain macro outlook, customer orders have become more uncertain. As such, analysts have trimmed their respective target prices for the stock to reflect lower earnings estimates.

Venture is at various stages of implementing new business wins in design and manufacturing. However, Jarick Seet of Maybank Securities says the current 1QFY2025 is likely to remain weak, and a turnaround is only seen in 2HFY2025. “Customers still not ramping up orders due to macro-environment factors,” says Seet, who has kept his “hold” call.

As such, he has trimmed his earnings forecast for the current FY2025 and coming FY2026 by 12.8% and 12.6%, respectively. With his valuation multiple kept at 15x, his target price has been trimmed to $12.40 from $12.60.

John Cheong and Heidi Mo of UOB Kay Hian, citing further delays in Venture’s earnings recovery because of the uncertainties, have downgraded their call from “buy” to “hold” along with a lower target price of $13.35 from $15.55.

Nonetheless, there are reasons to still like this stock. Despite the lower earnings, Venture has kept its final dividend at 50 cents per share, bringing the total payout for FY2024 to 75 cents, equivalent to a payout ratio of 89%. The company’s net cash increased from $1.1 billion in FY2023 to $1.3 billion in FY2024.

“We reiterate our ‘add’ call on Venture as we believe the company’s fundamentals remain strong,” says William Tng of CGS International, who has nonetheless trimmed his target price from $15.30 to $14.95 on the “still-cautious demand outlook”.

Ling Lee Keng of DBS Group Research has trimmed her earnings forecast by 2-3% on “near-term” challenges in the consumer and life sciences segments, leading to a new target price of $14.70 from $15.10. Her “buy” call remains.

Nonetheless, she expects Venture to be a key beneficiary of the so-called China+1 strategy many manufacturers adopted amid the trade war that could potentially escalate. “With its manufacturing facilities primarily in Malaysia (Penang and Johor), Venture is well-positioned to capitalise on this growing trend,” says Ling, who expects Venture to report a better 2HFY2025 versus the current 1HFY2025.

Similarly, Alfie Yeo of RHB Bank Singapore has trimmed his earnings forecast, leading to a new target price of $14.70 from $15.40, along with his “buy” call. “Nonetheless, we expect growth to be driven by new business wins across its various domains,” says Yeo. — The Edge Singapore

Nanofilm Technologies International
Price targets:
CGS International ‘reduce’ 63 cents
UOB Kay Hian ‘sell’ 50 cents
DBS Group Research ‘hold’ 72 cents
OCBC Investment Research ‘hold’ 73.5 cents

Lower-than-expected recovery

The increase could be attributed to new customers placing orders during a seasonal peak. Contributions from a recent acquisition also helped lift the topline.

However, earnings in the same period, up 147% to $7.7 million, missed expectations due to higher-than-expected depreciation expenses.

Nanofilm is “cautiously optimistic” about its recovery this current FY2025. “However, we are mindful that the fixed costs could remain elevated given Nanofilm’s continued expansion moves,” state UOB Kay Hian analysts John Cheong and Heidi Mo, who have not only kept their “sell” call but even cut their target price from 68 cents to 50 cents.

Ada Lim of OCBC Investment Research is not as bearish with her “hold” call. She expects the company to enjoy continued recovery for its key consumer segment, with new customers and new product lines in accessories and wearables likely in the coming 2QFY2025.

Citing the management, Lim says the company should see better sales of its industrial equipment this year. “All things considered, we roll forward our valuations and finetune our assumptions, taking into account Nanofilm’s recent acquisition of EC Europ Coating and MC Europ Coating to expand its footprint in Europe,” says Lim, referring to two Europe-based coating companies bought recently.

However, Lim is wary and stands ready to lower her estimates given the ongoing macroeconomic and geopolitical uncertainties that could lead to volatile end-consumer demand. Lim’s new fair value is 73.5 cents, down from 76 cents. Similarly, Ling Lee Leng of DBS Group Research is flagging better business for the consumer segment, with “robust” growth from existing key customers and new ones. Ling also sees growth in other business segments.

For now, Ling is keeping her “hold” call but with a reduced target price of 72 cents from 75 cents previously, as she now expects lower earnings for the current FY2025 and the coming FY2026. “Although several initiatives are underway, they are not yet at full capacity, and margins remain suboptimal due to high costs,” says Ling. Her new target price of 72 cents is pegged to 22x FY2025 earnings.

Meanwhile, William Tng of CGS International has kept his “reduce” call and his already lower-than-consensus price target of 63 cents, which he believes has already priced in possible earnings recovery for FY2025 and FY2026.

Tng says there is a risk that 1HFY2025 could be in the red again, which could “deter” investors from re-looking at this counter until 2HFY2025. Given the slow pace of earnings recovery, Tng values Nanofilm at 14.8 times FY2026 earnings, a valuation multiple at –1 standard deviation of the FY2021 and FY2025 range. For Tng, upside risks will come from new order wins and faster progress from other areas, such as Sydrogen, a joint venture with Temasek. — The Edge Singapore