D&O Green Technologies Bhd

Target price: RM6.36 OUTPERFORM

PublicInvest Research (March 28): We affirm a few positive takeaways to reiterate our upbeat view on D&O’s prospects following its 4QFY21 post-results virtual briefing.

Since early this year, the company’s share price has taken a beating (YTD: -19%) in tandem with the sell-off in the global technology sector. Its valuation has become more appealing, with the stock now trading at a forward PER of only 29 times. It remains one of our top picks for exposure to the tech sector, given the robust growth of the automotive LED industry. We maintain our “outperform” call with an unchanged target price of RM6.36, based on 40 times FY23 EPS.

The group saw a strong +43% year-on-year (y-o-y) growth of the design-in segment last year. It normally takes one to three years before conversion into business wins (purchase orders).

Management has allocated capex of RM150 million for FY22, mainly to cater for new production lines at Plant 2. It is in the process of installing new machinery with the commencement of LED production taking place in 2QFY22.

Given the increased capacity, we expect to see strong earnings momentum to persist in 1H2022. Based on the timeline, the 25,000 sq m Plant 2, which can potentially generate at least RM1 billion in annual revenue, is expected to be fully utilised by 2025. It has a capacity of producing at least 400 million pieces of LEDs per month. Meanwhile, construction for the 10-storey 35,000 sq m manufacturing Plant 3, which costs about RM200 million, is set to kick-start in 4Q22 and ready for commercial operation by end-2024.

This year, the group plans to release a range of new exterior products (five) and interior LED products (seven) that are still going through the design-in process. Meanwhile, the sales contribution of smart LEDs is still relatively small (<3%) but is expected to see tremendous growth in the next four years.

Despite global auto sales registering only 4.7% growth in 2021, global electric vehicle (EV) sales surged 108% y-o-y to 6.75 million units. This year, EV sales are expected to see another impressive growth of 41% to 9.5 million units, or even higher.

Bursa Malaysia Bhd

Target price: RM7.70 OUTPERFORM

CLSA (March 29): There are three reasons why Bursa Malaysia should warrant attention now. First, its derivatives revenue is likely to shine, and this trend will continue as long as crude palm oil prices remain volatile and high (above the 10-year average). Second, for the first time in five years, Bursa has attracted net foreign inflows for three consecutive months and this trend is getting stronger. Third, with the general election looming, market activity tends to pick up. We lift our 2022-24 earnings on higher trading activity resulting in a higher DDM-derived target price of RM7.70 (from RM6). Accordingly, we upgrade our rating from “sell” to “outperform”.

With the adjustments stated above, we lift our 2022-24 earnings by 11%-14% on higher trading activity across equities and derivatives. Its dividend yield remains relatively attractive at 4.5% in the absence of any special dividends.

We value the counter based on a DDM valuation cross-checked with a Gordon growth model, assuming 10.9% cost of equity, a beta of 1 to reflect market volatility, and terminal growth of 5%.

IJM Corp Bhd

Target price: RM2.46 OUTPERFORM

CreditSuisse (March 28): IJM’s management participated in group meetings at our 2022 Asian Investment Conference. It seemed upbeat on earnings recovery prospects in FY23 ended Mar 31.

Key positives: (1) Management is upbeat about construction order flow prospects, targeting more than RM2 billion in new orders in FY23; (2) Property sales is on track to hit a five-year high; and (3) Industrial unit secured 1.65 million tonnes of new orders in 9MFY22 (versus full-year 1.34 million in FY21).

The group plans to raise RM500 million to RM600 million from land sales and is in advanced talks with the government on a proposed transfer of its toll road assets to a highway trust.

We maintain our “outperform” call on the stock as it is trading at a compelling valuation of 0.5 times P/BV. Management expects its construction, property and industrial units to deliver better earnings performance in FY23. While optimistic about the earnings prospects for its port operations, the concession unit could still face pressure from the West Coast Expressway. Earnings should recover in FY23.

TIME dotcom Bhd

Target price: RM5.20 BUY

UOB Kay Hian (March 29): The stock offers a three-year earnings CAGR of 12% (versus muted sector growth) underpinned by strong home fibre sales and data centre contribution. Demand for data centres remains strong and we take this opportunity to factor in the Phase 2 Cyberjaya data centre expansion. Consequently, we raise 2023/24 net profit by 4%/12% respectively.

We maintain 2022’s dividend (a high capex year) while raising 2023/24 dividend from 50% to 60% given sufficient cash flow buffer. This will translate to a dividend yield of 3.7% in 2023.

We raise 2023/24 earnings by 4%/12% respectively to account for the commencement of P2DC. Our earnings have factored in a higher capex of RM500 million for 2022 (2021: RM300 million as per management’s guidance).

We maintain our “buy” call with a higher discounted cash flow-based target price of RM5.20 (weighted average cost of capital: 7%, terminal growth: 4%) in tandem with the earnings upgrade. Key rerating catalysts include: (a) the rollout of Phase 2 Data Centre in Cyberjaya; (b) faster-than-expected subscriber growth; (c) monetisation of data centre assets; (d) earnings-accretive M&A and (e) the rollout of 5G infrastructure in Malaysia.