ComfortDelGro will likely face further competitive pressure for its Singapore taxi business with Grab Holdings’ entry into this market. On the other hand, its continued expansion into new businesses outside Singapore may generate additional earnings.
“With the recent weakness in share price, we reckon that ComfortDelGo is trading at attractive levels, underpinned by strong earnings growth and a decent 2025 dividend yield of 6%,” state UOB Kay Hian analysts Llelleythan Tan Yi Rong and Heidi Mo as they held their “buy” call and $1.71 target price.
Starting next month, GrabCab, a subsidiary of Grab Holdings, will put 40 cars on the road, becoming the sixth Singapore taxi operator. With the word out, GrabCab has received applications from between 700 and 800 individuals to be its drivers.
“This is in line with our earlier expectations that incumbent taxi operators would face increased competition to retain taxi drivers,” state Tan and Mo, who expect ComfortDelGro, as the largest taxi operator here, to see lower taxi utilisation.
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Nonetheless, they believe there will be “little negative impact” as measures by GrabCab to attract new drivers are likely to be “transitory”.
Assuming GrabCab can find enough people to field all 800 vehicles — the minimum required — that is equivalent to just 5% of Singapore’s taxi market share.
Meanwhile, ComfortDelGro is stepping up its presence Down Under. It is part of a consortium bidding for the rights to operate metro lines in Melbourne. The tender will open next year. The city’s network spans 405km with 17 lines and 222 stations.
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Tan and Mo “understand” that this system generates annual revenue of around $2 billion. Assuming a 25% stake and operating margins of 5%–6%, ComfortDelGro is looking at an additional operating profit of between $25 and $30 million, equivalent to a 5%–7% increase in its total operating profit estimates.
“If the Melbourne rail bid is successful, this will allow ComfortDelGro to create a multi-modal transport model (rail-taxi-bus) in Australia that CD currently has in Singapore,” add Tan and Mo.
In addition, ComfortDelGro remains in talks with UK authorities for new bus operating contracts that will give a “better margin profile”, the analysts suggest.
Their target price of $1.71 is pegged to 16 times FY2025 earnings, which is ComfortDelGro’s five-year average long-term P/E.
“Backed by ComfortDelGro’s decent dividend yield of 6% for 2025, we opine that there is potential upside at current attractive price levels, underpinned by strong earnings growth from the taxi segment and better margins from the UK bus business.
“With its defensive earnings amidst market volatility, ComfortDelGro is one of our conviction picks for the second half this year,” they add. — The Edge Singapore
OKP Holdings
Price target:
Lim & Tan Securities ‘buy’ 97 cents
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Beneficiary of construction boom
Nicholas Yon of Lim & Tan Securities has kept his “buy” call and 97 cents target price on OKP Holdingsafter winning another roadwork contract worth $258.3 million, bringing its total order book to $735.8 million.
Despite the share price run-up, valuations remain undemanding at 6.2 times FY2025 earnings, states Yon in his June 6 note, referring to OKP’s gain of 142.2% year-to-date. “We continue to believe OKP to be one of the main beneficiaries of Singapore’s construction boom,” says Yon, who values OKP at 8 times FY2025 earnings of $37.1 million.
Besides earnings growth visibility, Yon points out that OKP’s share price is further backed by its current 35 cents per share net cash and 26 cents per share of investment properties, which continue to generate recurring income. “OKP’s cash position is also expected to build up with its strong cash flow position,” adds Yon.
According to Yon, the latest contract, announced on May 30, is an indication of OKP’s capabilities to take on large contracts and highlights LTA’s trust, as this is the 4th government contract award.
The latest contract is part of Singapore’s bid to build 1,300km of cycling paths by 2030. Approximately 50% to 60% of the network is already completed. OKP is in pole position to secure additional contracts as new tenders are progressively rolled out, says Yon.
Yon says that construction is lumpy by nature. Project startup costs can potentially eat into FY2025 margins. “As such, any assessment of OKP should be considered from a yearly perspective rather than a five-month period. Hence, we have kept revenue targets constant and only made conservative upward revisions to FY2025 net profit,” he says. — The Edge Singapore
Elite UK REIT
Price targets:
CGS International ‘add’ GBP0.35
DBS Group Research ‘buy’ GBP0.36
Positive on latest acquisitions
Analysts have stayed positive on Elite UK REIT after it announced the acquisition of three new properties for GBP9.2 million ($15.96 million) from a related fund.
Like the rest of the REIT’s portfolio, the three properties are leased to various UK government departments. Based on the gross rental income of GBP 0.8 million, the purchase price translates into a gross rental income yield of 9.2%.
To help fund the acquisition, the REIT has raised GBP4 million from a private placement. Elite UK REIT says that on a pro forma basis, FY2024 distribution per unit accretion is estimated to be 0.6%. Following the fundraising, its gearing ratio will likely drop from 43.4% to 43.2%.
“We believe Elite UK REIT is well placed to focus on portfolio optimisation through opportunistic divestments and capital recycling to strengthen its balance sheet,” say CGS International analysts Lock Mun Yee and Li Jialin in their June 10 note, where they kept their “add” call and GBP0.35 target price. They like the REIT’s FY2025 yield of 8.8%, at a 92% payout ratio.
In a separate June 10 note, DBS Group Research likes how these three new properties will help diversify the tenant base and lease expiry spread.
“All three properties offer organic growth potential, with current contracted rents estimated to be 40%–50% below market levels. The leases are subject to upward-only rent reviews every five years, which are not inflation-linked and have no cap on rental increases,” says DBS, whose “buy” call and target of GBP0.36 remains.
Elite UK REIT had earlier announced plans for a data centre repositioning project at Blackpool, which remains a “key strategic priority”.
“While approval has yet to be granted, management is reasonably confident of receiving it within one to two months, with a divestment targeted within this financial year,” says DBS.
“We remain positive on Elite’s proactive asset management approach, which continues to gain traction through lease renewals, capital recycling and repositioning efforts, complemented by its efforts to diversify its tenant base while maintaining the stability of government-backed income streams,” adds DBS. — The Edge Singapore
Oversea-Chinese Banking Corp
Price target:
Citi Research ‘neutral’ $15.80
Outperform after GEH overhang removal
Shares in Oversea-Chinese Banking Corporation (OCBC) may outperform soon after lagging its peers, says Citi Research analyst Tan Yong Hong.
Tan was referring to OCBC’s June 6 announcement that it will support Great Eastern Holdings’ (GEH) proposal to seek a delisting of the latter’s shares with a $0.9 billion conditional exit offer of $30.15 per share for the 6.28% stake in GEH that OCBC does not own.
Tan notes that the latest suspension of listing, which was extended by two weeks ended June 8, signals the possibility of reaching a conclusion to facilitate a delisting.
“In our view, this removes an overhang and the impact to capital of just 30 basis points even if OCBC raises [its] offer price for GEH by 20%,” he writes.
He also believes the latest move should not impact the bank’s dividends with its 1QFY2025 common equity tier 1 (CET-1) ratio of 14.5% with a transitory 1.9% lift from Basel reforms.
“OCBC also has paused buyback since April 22, which could be resumed after the conclusion of GEH,” he notes.
Beyond the GEH overhang, other factors in OCBC’s favour include better net interest margin stability expected in 2QFY2025 after the bank took in excess deposits in 1QFY2025, likely due to a lower liquidity coverage ratio, which fell by 8% q-o-q. OCBC Hong Kong, which has the lowest current accounts savings accounts ratio compared to its peers, could also help offset the falling Hong Kong interbank offered rate, he points out.
In addition, OCBC’s asset quality is sound, with benign non-performing asset formation offset by recoveries and write-offs. Around 90% of OCBC’s Hong Kong property loans are backed by collateral, compared to DBS’s 94% and United Overseas Bank’s 63%.
Finally, given that the 90-day tariff pause deadline is on July 8, Tan expects OCBC to outperform its peers, especially after underperforming them thus far.
Even though the analyst remains “neutral” on Singapore banks, he has opened a “short-term positive view” on OCBC in anticipation of “rotation within the sector”. Tan has kept his “neutral” call on OCBC and a $15.80 target price. — Felicia Tan
Marco Polo Marine
Price target:
RHB Bank Singapore ‘buy’ 7 cents
Lowered earnings estimates, but still a ‘buy’
RHB Bank Singapore analyst Alfie Yeo has lowered his target price on Marco Polo Marinefrom 8 cents to 7 cents as he lowers his earnings estimates for FY2025 to FY2027 by 13% per year.
Yeo’s net profit estimate for FY2025 is now at $24 million, putting his recurring P/E estimate at 6.85 times. His net profit estimates for FY2026 and FY2027 are at $26 million and $28 million, respectively, putting his recurring P/E estimates at 6.31 times and 5.85 times.
The lower estimates come after Marco Polo reported lower-than-expected earnings in the 1HFY2025 ended March 31, when Marco Polo’s revenue fell 14% y-o-y to $53 million. The lower figure factored in the temporary loss of third-party shipyard revenue during the construction period of its commissioning service operation vessel (CSOV). Marco Polo’s ship chartering revenue decreased 3% y-o-y to $32 million.
Still, Yeo continues to like the stock as he sees Marco Polo’s earnings drivers intact. The analyst, who has a “buy” call on Marco Polo, believes that the deployment of its new CSOV will spark higher growth and an increased bottom line.
“The vessel has secured charters at robust rates for the next three years and is taking on more orders beyond that,” says Yeo in his June 5 report.
The analyst also sees Marco Polo’s shipyard revenue improving, thanks to higher capacity from its fleet size and shipyard capacity. MPM’s fleet is anticipated to expand to include two crew transfer vessels (CTVs) for Siemens Gamesa’s offshore wind projects in Taiwan and South Korea from 2024 to 2026, while it has a fourth new dry dock, which adds shipyard capacity.
Plus, with its CSOV now deployed, the higher shipyard capacity should support a revenue turnaround in the subsequent quarters, says Yeo.
Despite his reduced earnings forecast, Yeo expects Marco Polo’s gross profit margin (GPM) to improve due to stronger ship chartering margins from attractive CSOV charter rates. In 1HFY2025, MPM’s GPM rose by 5.3 percentage points to 41.3% from the reduction of re-chartering third-party vessels. The company’s shipyard revenue in 2HFY2025 is expected to improve sequentially, thanks to higher capacity.
As Yeo’s estimates are predicated on improved charter and utilisation rates, key risks include the underperformance of these aspects.
Looking at Marco Polo’s balance sheets, capex is expected to taper in FY2026 and FY2027, supporting higher free cash flow yields of 15.5% and 17.3%, respectively. Marco Polo’s 1HFY2025 net profit now forms 44% of Yeo’s revised estimates. — Ruth Chai
DFI Retail Group
Price target:
DBS Group Research ‘buy’ US$3.60
Reinvestments and special dividends following divestments
DBS Group Research is keeping a “buy” call on DFI Retail Groupwith a higher target price of US$3.60 ($4.63) from US$3.00.
In a June 9 report, analysts Chee Zheng Feng and Andy Sim say: “Our revised target price reflects a higher 16.7 times P/E peg on higher FY2026 earnings, in line with the peer median given DFI’s margin profile. We believe this is also justified by the potential for special dividends over the next few years.”
Assuming a 10 US cents payout for FY2025/FY2026, the duo expects total yield to reach an attractive 8% at $2.70, or about a 6% yield at the revised target price.
To recap, DFI has been actively reshaping its business portfolio to focus on operating control and improving return on capital employed (ROCE) and total shareholder return (TSR). Over the past few years, it has streamlined operations by divesting low-margin, low-advantage businesses, particularly the food segments in SEA.
“The exit from associate stakes in Yonghui and Robinson Retail Holdings Inc (RRHI) means that operations are now largely within management’s control. Looking ahead, we see ample scope to drive earnings growth by improving operational efficiencies of over US$100 million, in line with the dual targets of ROCE and TSR uplift,” say Chee and Sim, expecting every 0.1 percentage point improvement in operating margins to result in about 2.2% upside to FY2026 patmi.
The analysts have estimated FY2025 earnings to be at US$269 million, near the high end of management’s guidance, supported by higher contributions from Maxim’s and lower net interest expenses. For FY2026, they anticipate further margin expansion for the remaining businesses and continued interest savings, driven by a full-year impact from lower debt levels and reduced lease liabilities following the sale of DFI’s food business in Singapore.
“These factors are expected to more than offset the US$14 million FY2025 earnings contribution lost from the RRHI disposal,” say the analysts.
After the RRHI and Giant Singapore sale, DFI is sitting on significant cash reserves and is expected to spend them on reinvestments, special dividends and potential mergers and acquisitions (M&A).
“Our screen of potential M&A targets that are a good strategic fit remains expensive, with elevated P/E multiples and book value premiums. If consummated at premium valuations, risk of goodwill write-offs is elevated,” say the analysts, as they believe a more prudent and value-accretive approach is to reinvest in existing operations to enhance efficiency while maintaining a manageable special dividend payout of 10 US cents over the next few years as the company awaits better opportunities. — Samantha Chiew
Frencken Group
Price target:
Maybank Securities ‘buy’ $1.34
New $63 mil facility validates positive outlook
Jarick Seet of Maybank Securities has maintained his “buy” call and $1.34 target price on Frencken Group. The manufacturer’s recent announcement to invest $63 million in a new facility in Singapore, according to Seet, is a validation of its positive outlook.
According to Frencken, the new facility at Kaki Bukit will be ready by the first quarter of 2027. The company can then consolidate operations at two different sites at this bigger space and better support customers who want work done in Singapore.
Seet says Frencken is now constrained by larger-sized clean rooms here, which limits what it can do for one of its key semiconductor customers.
By building larger clean rooms in the new Kaki Bukit facility, Frencken can scale up its portfolio for such customers and help shift work from Europe to Singapore. “This would also point to higher margins due to lower production costs in Singapore compared to Europe,” says Seet.
“We continue to like Frencken and believe it will remain a key beneficiary of the recovery in the semiconductor industry. Its Singapore expansion bodes well amid ongoing uncertainty created by the threat of higher US tariffs due to tensions between the US and China,” says Seet.
He values this counter based on 13 times FY2026 earnings, leading to a target price of $1.34.
“Frencken remains our top Singapore tech pick,” says Seet. — The Edge Singapore
