Read in today' s CIMB daily review that a foreign broker initiating underweight call on Sembcorp. Anyone read the report?

CGS-CIMB Highlights

* OCBC (OCBC SP)  We expect softer qoq earnings in 2Q23F. NIMs could start tapering as risk-off momentum weighs on wealth management. Credit cost should stay benign. OCBC believes its ASEAN-Greater China connectivity could drive S$3bn in incremental revenue over FY23-25F. ROE translation was not disclosed. Retain Add. Possible upwards revision to NIM guidance could catalyse share price, whilst we wait for risk-on sentiment to drive wealth management flows. ADD TPS$13.50.

* UOL (UOL SP)  UOL has announced that it is divesting Parkroyal on Kitchener for S$525m. This is in line with its strategy to unlock value and reconstitute its overall property portfolio. Reiterate our Add rating, with a higher TP of S$8.20.

* Singpost (SPOST SP)  Minister of State for Communications and Information announced IMDA is working closely with SingPost on a " fundamental review" of Singapore' s postal service. Government will consider allowing SingPost to introduce more frequent postage rate adjustments to better reflect cost of letter mail business in the future with reviews carried out to 1) current postal service obligations and 2) optimise and automate post office services for cost effectiveness. The intention is for SingPost to remain commercially viable without requiring direct government funding.  We believe that a holistic approach is needed to tackle the structural issue of postal declines - rate adjustments is only a temporary solution and could backfire in potentially accelerating volume declines. Nevertheless this is a first step in the right direction, which could help with share price sentiment near term. Last call was Hold, TP: S$0.55

 

SEMBCORP : U96 +3.79%Industries : U96 +3.79%&rsquo recent share price drop is a &ldquo buying opportunity&rdquo for investors, Maybank Securities said in a report on Thursday (Jun 29).

 

With the energy player&rsquo s market capitalisation crossing the S$10 billion mark, its potential to be included in the MSCI index in August or November 2023 could also be a catalyst, the research team said.

 

It has maintained its &ldquo buy&rdquo call on Sembcorp, but raised its target price slightly to S$6.10 from S$6. The counter was trading 3.8 per cent or S$0.21 higher at S$5.75 as at 2.26 pm.

 

The new target price is 12 times Maybank&rsquo s FY2024 price-to-earnings estimates, in line with the average of Sembcorp&rsquo s regional peers.

 

Maybank analyst Kelvin Tan noted that Sembcorp shares fell on Jun 20 amid heavy trading, the day after the Energy Market Authority said that it will introduce a temporary price cap on wholesale electricity prices.

 

The temporary price cap, which came amid rising electricity costs in Singapore as a result of the global energy crisis, is expected to take effect on Jul 1.

 

Tan expects &ldquo limited impact&rdquo from the price cap and estimated occurrence to stand at about 4 per cent, reducing the average uniform Singapore energy price (USEP) by only 8.1 per cent.

 

The analyst is also positive on Sembcorp&rsquo s growth prospects, noting that the group has secured at least two-thirds of its electricity capacity under long-term contracts with chipmaker Micron and telco Singtel.

 

This leaves only one-third of the group&rsquo s electricity capacity to benefit from market volatility during the projected power market crunch, noted Tan.

 

Assuming USEP falls by S$20 per megawatt hour, the analyst estimates that the impact on Sembcorp could be S$35 million, or 4 per cent of its annual profit.

 

Taking into account a moderate outlook for electricity prices, Maybank raised Sembcorp&rsquo s FY2023 to FY2025 earnings estimates by 2 per cent to 4 per cent.