GoTo Gojek Tokopedia
Price target:
Macquarie “outperform” IDR162
Lower earnings multiple assumptions
Macquarie has maintained its “outperform” call on GoTo Gojek Tokopedia but has cut its target price by 50% to IDR162 (1.4 cents) on lower earnings multiple assumptions across all segments.
Macquarie Research analyst Ari Jahja has slashed his sum-of-the parts target price for GoTo by 50% to IDR162 from IDR324 previously on the back of lower multiple assumptions across all segments.
The new target price implies FY2023 EV/Net sales of 6.7 times or a slight expansion from a consensus multiple of about six times, notes Ari. “Valuation appears more reasonable after correction post its Nov 30 lockup period expiration, while public free float had risen to about 68% of shares,” he adds.
Goto anticipates its adjusted ebitda to become positive within 4QFY2023 ending December. Macquarie believes this could be achieved with about 10% gross transaction volume (GTV) growth for FY2023; 60– 70 basis points blended take rate uptick; 30%–35% cut on promotion to customers; as well as 25%–30% opex reduction.
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In line with Macquarie’s thesis, GoTo is getting more aggressive on cost-cutting measures, Ari notes. The company had also raised its take rates — since 3QFY2022, Tokopedia’s take rate had increased due to a new commission scheme for consumer-to-consumer (C2C) merchants, the introduction of platform fees in July as well as the strong adoption of value-added services.
“GoTo has boosted Tokopedia’s take rate further since Jan 2 for the C2C segment, which will be followed by business-to-consumer from March 1 onwards. These underscore continued efforts to accelerate monetisation,” says Ari.
Macquarie has baked in slower Tokopedia GTV growth of about 7% for FY2023. This takes into account shifts in customer behaviour towards more offline purchases, the impact of lower promotions spending, emerging competition from TikTok Shop’s rapid growth in Indonesia and high base effect y-o-y.
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That said, the firm’s checks suggest that consumer sentiment has been resilient so far, says Ari. “Our checks suggest that TikTok Shop has closed its gap with market leaders including Tokopedia on several delivered parcels, although still below on average order value (AOV) basis.
“Nonetheless, Tokopedia’s generally higher revenue exposure to core fast-moving consumer goods products compared to beauty-related products, along with middle-to-high income customer segment, might provide buffers in our view,” he adds.
Ari also highlights that rising take rates could be a key offset towards GoTo’s slowing GTV growth. According to Macquarie, Tokopedia’s AOV currently stands at US$25–US$30, versus Shopee’s high-single-digit US dollar and TikTok’s mid to single-digit US dollar.
Macquarie raises its FY2023 and FY2024 net revenue estimates by 56% and 35% respectively, above consensus by about 16% to 8%. — Khairani Afifi Noordin
Genting Singapore G13
Price target:
Maybank Securities “buy” $1.18
Higher gaming revenue thanks to local property boom
Maybank Securities has upgraded Genting Singapore to “buy” from “hold” with evidence mounting that the mass-market segment is poised to recover to a level that will be “comfortably” above the pre-pandemic levels.
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“Singapore’s booming property prices created a lot of wealth which we gather has been driving locally sourced mass market gross gaming revenues higher,” writes analyst Yin Shao Yang in his March 20 report.
“Also, seat capacity from China to Singapore suggests that Chinese visitorship could recover to pre-Covid levels by year-end,” adds Yin, who has raised his earnings estimate for the stock by between 18 and 20% and along with that, a higher target price of $1.18 from 96 cents previously.
According to Yin, the mass market for Genting Singapore is an “especially important” one because of its high ebitda margin of more than 50%.
Yin points out that mass market gross gaming revenue for 2HFY2022 ended June 2022 in Singapore has hit 104% of 2HFY2019 pre-pandemic levels.
He says this trend should not have happened because Chinese visitors, a key traditional source of visitors accounting for around a fifth of FY2019 revenue, have only returned to Singapore since Jan this year.
“We gather that this is due to Singapore’s booming property prices which created a lot of wealth and drove Singaporean’s propensity to gamble,” Yin reasons.
Now, with tourists from China set to return in bigger numbers, the mass-market gross gaming revenue for Singapore as a whole could rise even further. — The Edge Singapore
Singapore Telecommunications Z74
Price target:
RHB Group Research ‘buy’ $3.30
Positive drivers ahead
RHB Group Research’s research team has kept its “buy” call and $3.30 target price on Singapore Telecommunications (Singtel, with a series of positive drivers for the stock.
First, Singtel is set to enjoy a recovery in roaming revenue in the wake of the pandemic, as well as prepaid sales, as international travel resumes.
RHB notes that Singtel’s mobile service revenue for 3QFY2023 ended Dec 31, 2022 was up 14% y-o-y and that roaming revenue was already at 65% of pre-pandemic levels.
Most recently, with China’s reopening, the recovery momentum is seen to be more pronounced. The stronger numbers are expected when Singtel reports its 4QFY2023 ending March.
In addition, Singtel’s enterprise technology subsidiary NCS is seen to report better earnings as it charges more for its services and as it gains more scale.
“We see the repricing of services and solutions (inflation adjustments) mitigating the pressure on NCS’ earnings, which have been crimped by significant headcount investments to drive new capabilities and expertise,” says RHB.
In 3QFY2023, NCS’s ebitda was down 29% y-o-y even though revenue was up 21% y-o-y, thanks to contributions from newly-acquired ICT assets in Australia.
Elsewhere, Bharti, Singtel’s largest and most valuable associate company, is expected to enjoy further earnings recovery.
Last but not least, with an active capital recycling strategy in place, RHB expects room for a higher dividend payout.
Since the middle of 2021, Singtel has realised proceeds of some $5.8 billion from the sale of assets and while some of the money has been used to fund 5G mobile networks and other capex, there’s room for the company to pay out more dividends.
For 9MFY2023, Singtel has already declared an interim dividend of 4.6 cents, plus a special dividend of 5 cents to be paid out over two tranches. This brings the payout ratio thus far to 48% and RHB believes there’s room for the ratio to be raised to between 60 and 80%. — The Edge Singapore
AEM Holdings XWA
Price target:
CGS-CIMB Research ‘add’ $3.86
Possible recovery from 2HFY2023
CGS-CIMB Research analysts William Tng and Izabella Tan have kept their “add” call on AEM Holdings as they see a potential earnings recovery in FY2024. However, they estimate that the company’s earnings per share (EPS) for FY2023 will decline by 29.3% y-o-y.
In their March 17 report, the analysts have also kept their target price unchanged at $3.86 after shares in the company fell by 18.3% to $2.76 on March 1, just days after its FY2022 results were announced on Feb 24. Before the announcement, AEM’s shares were trading at around $3.38.
“Our target price is based on 9.5 times FY2024 P/E, 0.5 standard deviations (s.d.) above its six-year average given its sole supplier status with its major customer,” write Tng and Tan.
For the FY2022 ended Dec 31, 2022, AEM’s earnings stood at $126.8 million, 38% lower y-o-y. While the company’s FY2022 stood at its highest annual figure at $870.5 million, exceeding its full-year revenue guidance, its target revenue guidance of $500 million for FY2023 was deemed conservative.
On the share price decline, Tng and Tan believe that the market has priced in a weaker performance for FY2023. At its current share price of $2.99, AEM’s shares are trading at 7.35 times of Tng and Tan’s FY2024 earnings per share (EPS) forecast, or 7% below its six-year average of 7.9 times.
In FY2023, Tng and Tan remain fairly positive on AEM’s prospects, believing that its management will “oversee its costs diligently” given the industry slowdown in the year.
The analysts add that AEM’s legal and professional fees should decline “significantly” in FY2023. The company had seen a $15.9 million increase in its legal and professional fees in FY2022 from the arbitration involving its US entities in February 2022 and the IT security breach in September last year.
Despite the conservative revenue outlook in FY2023, Tng and Tan see a possible recovery happening for the company from 2HFY2023 onwards. At its briefing, AEM’s management said that its revenue guidance of $500 million might be revised as visibility for its 2HFY2023 becomes clearer.
It added that the semiconductor industry’s revenue could rebound between 2HFY2023 and early FY2024. The analysts note that its growth trajectory may reach the US$1 trillion ($1.34 trillion) mark by the 2030s, driven by high-performance computing, AI, the electrification of vehicles, and 5G communications.
“Management thinks that these customers’ revenue could double in FY2023 versus FY2022 and is optimistic that there could be secular growth opportunities from these customers in FY2024 and beyond,” write Tng and Tan.
Stronger-than-expected orders from AEM’s major customer and an earlier-than-expected success in securing orders from other potential customers are re-rating catalysts, while delivery delays and the loss of the sole supplier status for its major customer, which would negatively affect AEM’s profitability, are downside risks. — Felicia Tan
Sea
Price target:
DBS Group Research ‘buy’ US$103
Higher target price on positive FY2022 results
DBS Group Research analyst Sachin Mittal has kept his “buy” call on Sea as he sees a turnaround in Sea’s e-commerce and fintech segments. The analyst has also upped his target price to US$103 ($137.55) from US$100 previously
Following Sea’s net profit and ebitda positive results for the 4QFY2022 ended Dec 31, 2022 on March 7, Mittal is also upping his adjusted ebitda estimates for the FY2023 to US$2.3 billion compared to a loss of US$321 million earlier
“We believe e-commerce’s turnaround, achieving adjusted ebitda positive across each market by FY2023, will be the key share price catalyst. This shall outweigh potential digital entertainment weaknesses owing to high inflation, which might hurt discretionary spending on games,” the analyst writes.
Further to his report, the analyst lowered his FY2027 ebitda estimates by 14% to US$6.3 billion from US$7.3 billion previously on slower gross merchandise value (GMV) growth as Sea scales back its expansion plans. For FY2027, Mittal also sees Sea achieving an adjusted ebitda margin of 20%.
His new target price is based on 15 times Sea’s FY2027 EV/Ebitda discounted back annually by 15% assuming its investors seek a 15% return annually.
“[Sea’s] e-commerce peers are trading at 10x-20x 12-month forward EV/Ebitda while projected ebitda margins for these peers in FY2023 range from 16% - 33%. Most of the upside will be driven by 28% revenue growth in FY2024 with the stock trading around its current 2.8x EV to revenue by end of FY2023,” says Mittal.
Sea’s e-commerce arm, Shopee, holds the top place among its e-commerce peers across all its key markets except in Southeast Asia, where it is in second place.
“We expect top two e-commerce to thrive in most markets due to economies of scale. Sea also stands to benefit from its leading position as a digital lender in the region,” says the analyst.
The analyst is also estimating Sea’s target price drop to US$68 in a bear case scenario. This target price assumes long-term group ebitda margins of [around] 18% (20% under base case scenario) and 12 times FY2027 ebitda (15 times under base case) due to irrational competition.
In his view, a sharp decline in Sea’s GMW will affect its revenue for its e-commerce segment. “[Sea’s] e-commerce revenue is expected to contribute 68% to the group generally accepted accounting principles (GAAP) revenue in FY2023 and a sharp decline in GMV will adversely affect this contribution,” writes Mittal. — Felicia Tan
Delfi P34
Price target:
Lim & Tan Securities ‘buy’ $1.48
Strong demand for sweet treats
Lim & Tan Securities analyst Chan En Jie has previously kept his “buy” call on Delfi with a higher target price of $1.48 from $1.20. The new target price is pegged to 14.8 times Delfi’s FY2023 P/E or at a 15% discount to its five-year average P/E.
In his report dated March 17, Chan’s optimism towards the chocolate confectionery maker is backed by their steady recovery from the pandemic as both top and bottom lines surpassed pre-pandemic FY2019.
During FY2022 ended Dec 31, 2022, Delfi remained the “undisputed market leader of chocolate confectionery products in Indonesia” after its profit rose by 49.9% y-o-y to US$43.9 million ($59.1 million). Delfi’s revenue for the year grew by 19.2% y-o-y to US$483 million.
“Premium brands ‘SilverQueen’ and ‘Cha Cha’ have grown by double-digits in FY2022, and sales in Indonesia (+17.5% y-o-y) were supported by the launch of [over seven] healthy snacks (August 2022) and Van Houten Vegan series (September 2022),” says Chan.
“Delfi’s huge increase in inventory levels of US$50.6 million signals management’s optimism of an FY2023 outperformance as they invest more working capital in meeting higher anticipated sales,” he adds.
Chan is optimistic that Delfi will see a “stronger” FY2023 ahead. In his interview with Delfi, the group explained that it expects to see “strong sales” in FY2023 after it reported a huge increase in its inventory levels to US$115.5 million as at end-FY2022 from FY2021’s US$64.8 million.
He has upped his FY2023 sales and earnings projections by 6.7% and 26.2%, respectively, on the back of a full recovery this year and strong GDP growth in Delfi’s key markets.
Further to his report, Chan sees other factors supporting his upbeat outlook, including removing pandemic restrictions in Delfi’s key market, Indonesia; higher margins from the group’s premiumisation efforts; an “unparalleled distribution network” unappreciated by market watchers; and increasing dividend payout.
At its current share price levels, Delfi is trading at an attractive valuation of 10.4 times FY2023 P/E compared to its five-year average P/E of 17.5 times and its peer’s average P/E of 23.6 times. “With both FY2022 top and bottom line at their highest since 2015, we continue to see sustained growth in FY2023 and FY2024 as consumer optimism emerges from the first full years without major pandemic restrictions,” says Chan. — Nicole Lim
Yanlord Land Group Z25
Price target:
DBS Group Research ‘buy’ $1.06
Lower target price in the absence of dividends
DBS Group Research has maintained its “buy” call on Yanloard Land Group. However, with a lowered earnings forecast, analysts Jason Lam, Ken He, Dexter Chun and Ben Wong have cut their target price from $1.43 to $1.06.
The China-based but Singapore-listed developer surprised shareholders recently when it refrained from declaring a dividend following its FY2022 ended Dec 31, 2022 earnings. In previous years, the company has been paying 6.8 cents per share.
Yanlord, on Feb 28, reported earnings of RMB1.5 billion ($290 million) for the year ended Dec 31, 2022, a drop from earnings of RMB2.7 billion reported for FY2021. Revenue in the same period decreased from RMB34.8 billion in FY2021 to RMB28.7 billion in FY2022.
In their March 20 report, the DBS analysts see signs of a turnaround, given Yanlord’s sizeable unbooked sales of some RMB57 billion as of December 2022, offering “decent” revenue booking visibility for the current FY2023 despite China’s ongoing property downturn.
The DBS analysts add that Yanlord, by suspending its dividend and scaling back on land acquisition, is “playing it safe” as the company prioritises making repayments in the near term with certain tranches of debt maturing.
“It intends to take a conservative approach to manage cash outflows to prepare for the repayment peak in FY2023 to FY2024,” write the analysts. Following a 4% cut in earnings estimate, the revised target price is pegged to 4.1 times FY2023 earnings, which was the average one-year forward P/E of the company since 2HFY2021, when the property market started to trend down.
In contrast, smaller Chinese developers have been valued at a lower multiple of 3.2 times over the same period. “We believe Yanlord deserves an above-peers valuation given its better liquidity management track record and solidified market reputation,” the analysts write. — The Edge Singapore
