UOB Kay Hian ‘buy’ $2.42
Continuous organic growth
Jonathan Koh of UOB Kay Hian has kept his “buy” call on CapitaLand Integrated Commercial Trust (CICT), with a slightly raised target price of $2.42 from $2.37 previously, with a series of projects driving continuous organic growth for the largest S-REIT here.
First, CICT is finalising by 4QFY2025 ways to reposition its asset, Tampines Mall, to tap the master plan to rejuvenate Tampines Town Central. Within the mall, the departmental store space vacated by Isetan on Nov 25 could be reconfigured into smaller speciality units, which is expected to generate a sizeable rental uplift, states Koh in his June 26 note.
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CICT is also enhancing another asset, the IMM Building, which is positioned as Singapore’s largest outlet mall. CICT has achieved committed occupancy of 100% for Phases 1 and 2 of the asset enhancement initiative, and the retail space was handed over to the new tenants in 4QFY2024, such as Birkenstock, Le Creuset and a new food court, Makan Street.
Phases 3 and 4 of the asset enhancement inititaive (AEI) are expected to be completed in 3QFY2025. CICT’s capex of $48 million is expected to generate a return on investment of 8%, estimates Koh.
CICT, according to Koh, sees room to increase rental income at ION Orchard by reconfiguring retail space, especially in the upper levels 3 and 4. CICT plans to refresh the tenant mix on the ground floor and focus on keeping this as an iconic premium mall, including creating more duplexes for luxury brands. The AEI would be staggered over two years in 2025 and 2026.
See also: RHB keeps ‘buy’ call on Sheng Siong, raises target price to $2.12 on higher store count
Upgrading works are being done at Galileo, a Frankfurt office valued at $383 million. This property is rented out to the European Central Bank and will contribute more meaningfully to rental income in the coming FY2026, says Koh, which figures that this is an asset CICT could consider divesting.
Koh likes CICT’s “strong” balance sheet with stable cost of debt and leverage at 38.7%. Management expects the cost of debt to remain stable at about 3.4% in 2025.
CICT, according to Koh, could consider acquiring the remaining 55% of the integrated development CapitaSpring, valued by him at $1.78 billion. CICT has a call option on this asset, which expires next November.
Koh describes this REIT as “solidly anchored to home base Singapore. CICT will continue strengthening its Singapore portfolio through acquisitions and AEIs to increase its overall resiliency.”
According to Koh, CICT is keen on expansion in integrated developments, which are more resilient throughout economic cycles. “The office and residential components in integrated developments provide a constant flow of shoppers to the retail component,” he says.
He believes CICT can weather second-order impact from reciprocal tariffs, as 94.7% of its portfolio value resides in Singapore, where the reciprocal tariff for imports into the US is the lowest at 10%.
While CICT does not have direct exposure to the export sector, Koh warns that, given Singapore’s open economy, GDP growth would be affected by a broader slowdown caused by the uncertain global trade environment.
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Koh has raised his DPU forecasts marginally by 1.1% for 2025 and 1.5% for 2026 due to a lower average cost of debt of 3.4%, down from 3.6% in 2024. — The Edge Singapore
Aztech Global
Price target:
DBS Group Research ‘fully valued’ 38 cents
Slowing order momentum
Ling Lee Keng of DBS Group Research has maintained her “fully valued” call on Aztech Global but with a reduced target price of 38 cents from 52 cents, citing further deterioration of order momentum.
“Although new customers have been secured, initial production volumes will likely remain limited. Given the continued weakening order momentum and the time required to ramp up new customer production, we project a 60% y-o-y revenue decline in FY2025,” states Ling in her June 27 note.
On June 26, Aztech announced the sale of a factory building in Johor for RM28.75 million ($8.66 million), allowing the company to book a net gain of RM13.7 million, or $4.2 million.
This one-off gain aside, Ling warns that order momentum from Aztech’s key customer, which accounts for 80% of its revenue, is seen to remain weak. In 1QFY2025, the company suffered a 67% y-o-y drop in revenue.
“Though the group is working on onboarding new customers and launching new products, the progress is still slow, and unable to close the gap from the slowdown in order momentum from its key existing customer.
“Coupled with the uncertainties on the tariffs front, we continue to expect further weakness ahead,” says Ling, who has cut her earnings estimates for FY2025 and FY2026.
For the current FY2025, she is projecting a 72% drop in earnings, even accounting for proceeds from the sale.
For the coming FY2026, she expects higher contributions from new customers, and Ling figures Aztech’s revenue can increase by 10% y-o-y. Her latest target price of 38 cents is pegged to 15 times FY2025 earnings. — The Edge Singapore
Sembcorp Industries
Price target:
PhillipCapital ‘add’ $8.10
Upgrade due to Sembcorp’s acquisition of additional stake in Senoko Energy
PhillipCapital analyst Paul Chew has upgraded Sembcorp Industries to “buy” from “accumulate” as he sees stable growth ahead on the back of the group’s acquisition of its additional stake in Senoko Energy.
On June 13, Sembcorp confirmed that it completed the acquisition of the stake in Senoko, bringing it to 50% from 20%. The acquisition was made via a 28.6% stake in Lion Power, which holds a 70% stake in Senoko. Senoko is jointly owned by Sembcorp and Marubeni Corporation.
In Chew’s view, Senoko has several attractive factors, including having a direct gas pipeline from Malaysia, its location near energy-intensive semiconductor facilities, as well as land for a new gas power plant.
Other factors behind the analyst’s positivity on Senoko are its room to lower Sembcorp’s cost of debt and a higher proportion of long-term contracts with gas from Sembcorp. Of the 2.64GW registered capacity, 800MW is reserve capacity, Chew notes.
As such, the analyst is expecting Sembcorp’s earnings for the 1HFY2025 ended June 30 to increase due to the expansion in renewable capacity, the absence of plant maintenance costs in the 1HFY2024, the contributions from Senoko Power, as well as land sales in Vietnam.
Sembcorp’s growth in the 2HFY2025 will also depend on the outcome of the reciprocal tariffs, where the 90-day pause will expire on July 9.
“Following the April 2 tariff announcement, land sales in Vietnam and Indonesia would have been more cautious. Electricity generated year-to-date (ytd) May 2025 is down 1.4% y-o-y. It may place margin pressure on electricity spreads,” says Chew.
In addition to his upgrade, Chew has increased his earnings estimates by 5% to $1.13 billion due to the Senoko acquisition. He has also lifted his EV/Ebitda from eight times to nine times, which is in line with peer valuations. Sembcorp’s association and deferred payment notes (DPN) are valued at book value.
“Demand for power in Singapore will be driven by new electric vehicles, data centres, and semiconductor electricity. With more stable earnings and operating cash flow, we expect the dividend payout ratio to increase from 40% to 50% in FY2025,” he writes.
Chew’s new target price of $8.10, raised from $7.10 previously, represents a total return of 23% based on Sembcorp’s share price of $6.83 as at the analyst’s June 30 report.— Felicia Tan
DFI Retail Group
Price target:
RHB Bank Singapore ‘buy’ US$3.09
Group’s 1QFY2025 earnings point to underlying profit recovery
Analyst Alfie Yeo of RHB Bank Singapore (RHB) has maintained his “buy” call on DFI Retail Group with a raised target price of US$3.03 ($3.86) to US$3.09 as he anticipates the group’s net profit to recover this year.
The group’s FY2024 ended Dec 31, 2024 earnings, he notes, have tracked his estimates, while 1QFY2025 continued to point to an underlying profit recovery.
While sales in the first quarter were more or less flat, effective cost management in the form of long-term restructuring of loss-making stores and entities helped shore up profit, notes Yeo.
Thus, DFI Retail has maintained its underlying FY2025 earnings guidance of US$230 million to $270 million on the back of 2% y-o-y revenue growth.
“Overall, we expect earnings to continue recovering on effective cost management. We raise our FY2025 to FY2027 forecasts and target price by 2% each on better earnings prospects,” writes the analyst.
Excluding divestments, the group booked an increase in underlying profit growth of 28% y-o-y, while headline core profit, including the divestment of Yonghui Superstores, declined by 18% y-o-y.
Revenue was driven by DFI’s health and beauty division and offset by other segments.
Like-for-like sales growth for the health and beauty division rose by 4% y-o-y, led by Mannings Hong Kong.
The division’s other key markets, including Malaysia and Indonesia, saw strong like-for-like sales growth, with earnings rising by 10% y-o-y on better operating efficiencies.
DFI’s convenience unit’s like-for-like sales growth declined 6% y-o-y as the tobacco tax rose in Hong Kong from late February 2024.
Like-for-like sales growth for other non-cigarette sales declined by 2% y-o-y, while the food division’s earnings expanded by 14% y-o-y from an improvement in Singapore. Like-for-like sales growth was marginally below the numbers recorded in the 1QFY2024.
In the meantime, DFI’s home furnishing business saw a significant recovery in underlying profit due to improved cost controls.
On the impact of US tariffs, Yeo writes: “We see little-to-no direct impact of the US tariffs on DFI. DFI does not derive any sales from the US, and imports from that country accounted for less than 2% of underlying subsidiary sales in FY2024.”
He adds that the procurement of products for the group’s grocery retailers is generally dynamic, with grocers able to diversify their procurement sources internationally for the best prices, quality and import terms.
“Instead, any indirect impact would be on domestic consumption, especially in China and Hong Kong,” writes Yeo. — Douglas Toh
CSE Global
Price target:
Maybank Securities ‘buy’ 70 cents
CSE Global likely to be ‘key beneficiary’ of more US factories and data centres
With Trump pushing companies to set up US factories and build more data centres, Mainboard-listed CSE Global will likely be a key beneficiary of these megatrends, says Maybank Securities analyst Jarick See.
CSE, a systems integrator providing electrification, communications and automation solutions, is focused on expanding its US capacity with a much larger facility being constructed, adds Seet in a June 27 note.
“We believe CSE is gaining good traction with one of the largest data centre players in the US and is in the midst of qualifying for another one or two major customers,” he writes. CSE is also “well-placed” to be one of the “key beneficiaries” of the Monetary Authority of Singapore’s (MAS) $5 billion programme to lift the valuation and liquidity of small- and mid-caps here, Seet adds.
Hence, Seet is staying “buy” on CSE and raising his 12-month target price by nearly 213% to 70 cents from 58 cents previously.
His target price implies a P/E multiple of 14 times for a net profit estimate of $35 million for FY2025 ending Dec 31, up from 11.5 times, to reflect a more optimistic earnings outlook and re-rating potential.
The company’s “strategic move” to focus on clients in the data centre and utility sectors and reserve capacity in 1QFY2025 led to an 11.3% y-o-y dip in orders to $155.3 million, says Seet. He adds that margins are expected to remain “resilient” as management has ensured back-to-back pricing orders with suppliers to avoid any tariff shocks down the road.
Seet expects CSE’s order wins to pick up in 2HFY2025, “especially with data centre-related projects in the US”. “We are also expecting larger-sized orders to come from Singapore government-related projects.”
In addition, Seet believes CSE will “likely be one of the key beneficiaries” of Monetary Authority of Singapore’s $5 billion scheme, and its valuation “will likely increase”. “This should be supported by the data centre space in the US, especially if it can win large-sized orders in 2HFY2025.”
At 55 cents per share, CSE trades at 11 times P/E, a “significant discount” to peers despite a forecast 33.6% core net profit growth and 6% dividend yield, says Seet. Its energy, public infrastructure and data-centre segments are all projected to grow strongly in the next few years.
Seet’s revised target price of 70 cents is supported by several factors, including a growing pipeline of large, high-margin projects in the US; the steady recovery of public infrastructure contracts in Singapore; a robust balance sheet with a net cash position forecast by FY2026; and a 50% dividend payout guidance.
With sector multiples expanding and CSE’s risk-reward skewed attractively, Seet sees room for valuation catch-up.
“Over time, we expect maintenance revenue to build as it completes more projects. We also expect gearing to continue to decrease as its financial performance and operating cash flow improve, while some are used to lower its debt over time,” Seet says.
He adds that dividends will likely to be maintained at 2.75 cents per share, which has been its payout for many years. — Ruth Chai
Stoneweg Europe Stapled Trust
Price target:
CGS International ‘add’ EUR1.93
Data centre fund investment could raise valuation
CGS International Research analysts Lock Mun Yee and Li Jialin favour Stoneweg Europe Stapled Trust’s (SERT) EUR50 million investment ($74.4 million) in a fund with interests in early-stage data centre sites.
The investment in the Stoneweg Icona data centre fund (IDC), announced June 24, comprises interests in four early-stage data centre development sites in Ireland, Spain, Italy and Denmark, spanning 225ha.
The investment is equivalent to a 4%-8% stake in the fund, depending on the final quantum of investment made by other investors.
According to the REIT manager, the sites have a secured or reserved 1,116MW of power with “very good visibility” for an additional 563MW.
The investment “complements” SERT’s stable income generation from its core logistics and light industrial portfolio, say Lock and Li in a June 24 note, and adds to the REIT’s existing data centre holdings in Denmark and Poland.
“Given SERT’s involvement in the early development stage of these projects, we believe SERT could also benefit from [the] portfolio value enhancement process during the development cycle,” they add.
In addition to potential net asset value (NAV) accretion, increasing exposure to the data centre segment could also allow SERT to enjoy “premium valuation multiples” and potential stronger investor interest, according to the analysts.
Hence, the CGSI analysts maintain “add” on SERT with an unchanged target price of EUR1.93.
While no investment return details were shared, SERT’s management indicated the current estimated gross development value (GDV) of the projects over the next 15 years is EUR29.5 billion, based on a 100% interest in all four projects, according to valuations by JLL.
“There is also likely to be minimal impact on SERT’s distribution per unit (DPU) during the development phase of IDC, with material cash distributions to be made at redemption of the fund,” say Lock and Li, citing management’s comments.
The CGSI analysts like SERT’s “clear divestment/redevelopment strategies” to rebalance its portfolio to a 60%/40% industrial/Grade A office composition. Lock and Li say this allows SERT to capture leasing tailwinds.
SERT was renamed from Cromwell European REIT on Jan 2, after London- and Luxembourg-based alternative investment group Icona Capital and Geneva-headquartered real estate investment group Stoneweg paid EUR280 million to take over a 27.9% stake in the REIT.
In March, Icona Capital and Stoneweg announced that they now operate under the newly formed SWI Group brand, with more than EUR10 billion of assets under management.
SERT was converted into a trust from its former REIT structure earlier this year. Each unit of Stoneweg European REIT was stapled to a unit in Stoneweg European Business Trust, and the stapled securities began trading on the Singapore Exchange on June 16. — Jovi Ho
Boustead Singapore
Price targets:
OCBC Investment Research ‘buy’ $1.63
Multiple favourable growth trends
Boustead Singapore’s share price has gained by a fifth in less than a month, driven by a combination of stronger FY2025 earnings plus announcements by the company to unlock value for shareholders.
Despite this showing, Ada Lim of OCBC Investment Research sees further upside, as she kept her “buy” call and raised her fair value from $1.46 to $1.63 in her June 25 note.
According to Lim, Boustead’s stronger FY2025 was driven by margin expansion on effective cost management and an exceptional gain of $29 million from the transfer of Boustead’s fund and property management businesses to Unified Industrial.
More interesting for investors is that Boustead is mulling whether it should inject some logistics and industrial real estate assets into a REIT.
In addition, Boustead’s FY2025 dividend yield is also fairly attractive at 5.5% based on its June 24 closing price.
Lim figures that Boustead is also benefiting from investors starting to position themselves in various small and mid-caps ahead of the $5 billion boost from MAS expected by the end of the year.
“We look favourably upon Boustead’s growth profile in the long term as its diversified businesses provide exposure to multiple secular trends,” says Lim.
For example, as climate action continues to gain traction, Boustead’s energy engineering division can support energy majors through its energy-efficient offerings.
Demand for its real estate division’s expertise in constructing highly efficient, eco-sustainable, specialised industrial buildings continues to grow.
As the value of the Internet of Things (IoT) and the underlying technology behind smart cities accelerate, Boustead’s geospatial division will likely see continued demand.
“That being said, we acknowledge uncertainties in the company’s near-term outlook,” warns Lim, referring to external developments, including geopolitical tensions and disruptions to global manufacturing supply chains.
Even so, Boustead’s engineering order backlog is “a lot healthier” at $349 million as at March 31, up from $247 million recorded as at March 31 2024.
“Boustead is a quality business, in our view, and we think there is a possibility of re-rating in the near term, catalysed by ongoing efforts to revitalise the Singapore equity market and or any positive value-unlocking developments coming out of the ongoing strategic review,” says Lim.
She has kept her earnings estimates but has narrowed her conglomerate discount when valuing this company from 15% to just 5%, leading to the higher fair value of $1.63. — The Edge Singapore
Singapore Technologies Engineering
Price target:
Citi Research ‘neutral’ $8.30
Divestment to fund deleveraging
Citi Research analyst Luis Hilado is keeping his “neutral” call on Singapore Technologies Engineering (ST Engineering) at an unchanged target price of $8.30 following the group’s decision to divest its US-based construction equipment unit, LeeBoy, for US$290 million ($370 million).
The divestment, he notes, is the last of ST Engineering’s construction equipment businesses to be sold as part of its portfolio rationalisation plans.
With this, Hilado has revised his forecasts to assume the transaction will have some slight negative impact on recurring profit in FY2025 or FY2026. However, the analyst is “neutral” from FY2027 onwards as LeeBoy’s earnings before interests and taxes (ebit) margins are dilutive to the overall margin of the group’s defence and public security (DPS) business.
He adds that proceeds deployed to reduce the group’s debt will lower interest expenses, while other increased DPS order wins will partly cover the revenue gap.
“Our long-term forecast remains aligned with ST Engineering’s FY2029 targets of above $7.5 billion DPS revenues,” writes Hilado. — Douglas Toh
