Daily Brief Industrials: Sembcorp Marine, Horizon Construction Development, CIMC Enric Holdings and more

In today’s briefing:

Quiddity Leaderboard Singapore’s STI Sep 23: KDCREIT Facing Risk of Deletion

In this insight, we take a look at the potential index changes for Singapore’s ST index (“STI”) between now and the September 2023 index review.
With roughly 4 more months left for the base date, Sembcorp Marine (SMM SP) seems to be an ADD but it is close to the border.
Since the ranking system used for this index in based on prices as at a single point in time, the rankings could change significantly and our expectations could change too.

Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.
HCD is the largest equipment operation service provider in China in terms of revenue in 2021, according to Frost & Sullivan.
The key elements of the bull case rest on market share gains, an anticipated post-COVID recovery boost, high revenue visibility, stable operating margin and young equipment life.

We see the recent sell-down of CIMC Enric Holdings (3899 HK) unjustified. 1Q23 revenue grew a healthy 19.6%, and management indicated excellent margin expansion as well.
New orders signed accelerated in Mar to 21.6%, from just 10.7% in Jan-Feb. Its order backlog reached Rmb18.9bn (+22.3%). For hydrogen business, new orders even grew 61%.
Guidances are for double-digit revenue growth in FY23, and besides better gross margin, lower tax rates have benefited net margin. We estimate 1Q23 profit may have increased ~50%.

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