RHB Group Research analyst Aflie Yeo has maintained his “buy” call on CSE Globalwith an unchanged target price of 63 cents.
CSE Global’s 1QFY2025 ended March 31 revenue of $205.5 million came in line with Yeo’s expectations, with 4% y-o-y growth led by the automation and communications segments, which came in 9.6% y-o-y and 7.3% y-o-y higher to $50 million and $58 million respectively, offset by the electrification segment’s lower revenue of $98 million which fell 4.1% y-o-y.
“The automation segment saw higher revenue contribution from control systems projects in the US market, while the communications segment revenue growth was largely driven by its new acquisition of subsidiary RFC Wireless,” writes Yeo.
He adds: “The decline in the electrification segment’s revenue was due to project delays in Australia and New Zealand. Otherwise, we estimate that the electrification segment’s revenue would have grown at a rate of 5% y-o-y.”
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Looking forward, CSE Global’s order book remains robust at $616 million as at end-March. Although this is about 14% lower than 1QFY2024, Yeo understands that the group is deliberately moving away from higher-risk projects with lower returns, including wastewater projects.
This, he notes, frees up capacity to bid for higher return projects, such as data centres, infrastructure and ports, in the coming quarters.
Meanwhile, Yeo does not expect US tariffs to impact CSE Global significantly. “Although the company derived 63% of FY2024’s revenue from the US market, revenue from domestic projects is derived locally as opposed to exporting products into the US, which has a risk of incurring tariffs,” he says.
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Yeo notes that the materials the group procures are done so locally, while cost increases from components or parts imported from overseas can largely be passed on to its customers. “Other cost increases can be mitigated by higher tender prices, which can defend its margins from higher component costs,” he adds.
With the group beginning to pay 50% of earnings as dividends, Yeo has raised his dividend per share forecasts, increasing his FY2026 dividend yield from 5.4% to 6.1%.
Key drivers include the expansion of CSE Global’s communications business via acquisitions and more infrastructure development, driving demand for the electrification business segment.
Conversely, downside risks he noted include unforeseen project cost overruns and customer arbitration for failure to deliver its services, which could dampen earnings and margins. — The Edge Singapore
Centurion Corp
Price target:
PhillipCapital ‘accumulate’ $1.45
Strong asset pipeline
Yik Ban Chong of Phillip Capital has kept his “accumulate” call on Centurion Corp following the dormitory operator’s 1QFY2025 business update, where revenue was up 13% y-o-y. Revenue from its student dorm segment dipped slightly, but growth continued in its main workers’ dorm segment.
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Chong notes that Centurion has a strong upcoming asset pipeline in FY2025 and FY2026. They include the 1,700-bed Westlite Toh Guan PBWA redevelopment by 4QFY2025 and the 3,700-bed Westlite Mandai redevelopment by FY2026. New developments include the 870-bed Westlite Johor Tech Park, slated by 4QFY2025; a 732-bed Sydney dorm for students by 4QFY2025; and the redevelopment of a 600-bed Melbourne dorm for students by FY2026.
Separately, the company is potentially spinning off some of its assets into a REIT, following which shareholders can enjoy a dividend in specie. However, Chong says specific details have not yet been finalised.
Chong has applied a higher valuation multiple of 9.2 times EV/Ebitda, from 8 times, to reflect the “visibility and strong asset pipeline expected” in the current FY2025 and coming FY2026. As such, his target price for this counter, as indicated in his May 21 note, increased from $1.22 to $1.45. — The Edge Singapore
City Developments
Price targets:
Citi Research ‘buy’ $9.51
CGS International ‘add’ $8.97
PhillipCapital ‘buy’ $6.02
OCBC Investment Research ‘buy’ $6.01
‘Encouraging’ 1QFY2025 update
Analysts from CGS International, Citi Research, OCBC Investment Research and PhillipCapital are keeping their “add” and “buy” calls on City Developments (CDL) after the group showed “encouraging signs” from its 1QFY2025 ended March 31 update.
Citi analyst Brandon Lee notes CDL’s “solid” residential sales in Singapore and marginal revenue per available room (RevPAR) growth in its hotel operations. However, the group reported lower q-o-q occupancies in its domestic commercial portfolio.
During the quarter, CDL sold 795 units in Singapore, 85% higher y-o-y, mainly due to the launch of The Orie in Toa Payoh, the group’s joint venture (JV) project. About 86% or 668 of the development’s 777 units were sold on its launch weekend with an average selling price of $2,704 psf. The group’s other launched projects also continued to post good sales, leading to a total sales revenue of $1.9 billion, 155% higher y-o-y.
In 1QFY2025, the group’s hotel operations reported a RevPAR of $139.70, 1.2% higher y-o-y, thanks to higher room occupancy and average room rates in Australasia and the rest of the UK and Europe.
CDL’s committed occupancy for its office portfolio in Singapore fell by 0.5 percentage points q-o-q to 97.2% due to South Beach and Republic Plaza, which saw lower occupancies of 92.4% and 97.7%. The group’s committed occupancy rate for its retail portfolio also fell by 1.8 percentage points q-o-q to 96.2%, mainly due to Quayside Isle, which fell to 91.9%.
In its release, CDL said the group will remain focused on recycling capital for FY2025 and has lined up “significant divestments” to reduce its gearing. Lee believes these divestments will likely be CDL’s non-core, strata-titled units from its retail, office and industrial properties in Singapore and selected hotels globally. The former Stag Brewery site may also be up for divestment, given that it has now attained planning approval, which could “better facilitate” a sale, says Lee.
The analyst has kept his target price of $9.51. Due to the lack of financial disclosures during the update, he expects a limited share price impact following the announcement.
PhillipCapital analyst Darren Chan has kept his target price of $6.02 due to strong property development sales and higher portfolio RevPAR during the quarter. While Chan expects CDL’s hotel RevPAR to see low- to mid-single-digit growth in FY2025, the group’s elevated net gearing remains a concern.
Like their peers, the research team at OCBC Investment Research also highlighted CDL’s “robust uplift” in its Singapore residential sales during the quarter and resilient operating metrics for its investment properties in the city-state.
The team also notes that the group has been proactive in reconstituting its portfolio, including divestments and redeveloping some of its older properties, to unlock shareholder value.
Despite the positives, the team feels that the uncertain global economic outlook and the impact of policy tightening may dampen investor sentiment.
Furthermore, investors may be watching CDL’s moves, mainly its execution of its strategies and future corporate governance practices, following the recent board disagreement.
OIR has a slightly lower target price of $6.01, down from $6.02.
CGSI analyst Lock Mun Yee, who kept her target price of $8.97, remains positive on CDL as she sees limited downside risk. This is given its current stock valuation of 0.49 times its FY2024 P/B. — Felicia Tan
LHN
Price targets:
Maybank Securities ‘buy’ 55 cents
PhillipCapital ‘buy’ 61 cents
Eyes on Coliwoo spin-off listing
Analysts from Maybank Securities and PhillipCapital have maintained their “buy” calls and target prices on LHN after its 1HFY2025 ended March 31 results came in within expectations.
In 1HFY2025, LHN reported earnings of $14.1 million, up 8.8% y-o-y. Revenue was up 29.4% y-o-y to $70.6 million, driven by its space optimisation business contribution.
Its property development business segment helped with maiden revenue of $12.1 million, with the sale of some strata units in a factory at 55 Tuas South Avenue 1.
LHN’s commercial properties, on the other hand, suffered a 47.1% y-o-y drop in revenue.
The company is maintaining an interim dividend payout of one cent per share.
If non-recurring items were excluded, LHN would have reported a core net profit of $15.4 million, within the expectations of Maybank Securities’ Eric Ong.
“Moving forward, management remains cautiously optimistic on the demand for short-term lodging in Singapore, which should continue to support stable rental and occupancy rates for the rest of 2025,” says Ong, whose target price remains at 55 cents.
Paul Chew of PhillipCapital is similarly bullish about LHN, partly due to the proposed spin-off listing of its co-living business, Coliwoo.
Chew, noting that LHN is trading at a discount of 20% off its book value of 63.4 cents, believes that the spin-off will “better realise” its underlying value.
“The additional capital and asset-light model can accelerate the growth of the franchise, especially overseas. If the listing is via the issuance of new shares, there is unlikely to be a special dividend by LHN,” says Chew, who has kept his “buy” call.
“However, the plan to dispose of and lease back three freehold properties, we believe, is an avenue for special dividends,” says Chew, who has raised his target price to 61 cents from 56 cents by applying a higher valuation multiple of 7 times earnings from 6.5 times, which is still a discount compared to other hospitality groups. — The Edge Singapore
Delfi
Price targets:
UOB Kay Hian ‘hold’ 82 cents
CGS International ‘hold’ 71 cents
DBS Group Research ‘hold’ 80 cents
Promotions and high cocoa prices weigh on profitability
Chocolate maker Delfi has reported lower earnings of US$17 million ($22.04 million) for the 1QFY2025 ended March 31, down 27.2% y-o-y. The group’s net sales saw a 0.5% y-o-y decline to US$149.8 million for 1QFY2025. However, group net sales increased by 1.5% on a constant currency basis.
Delfi says that its performance was affected by weaker regional currencies, particularly the Indonesian rupiah, and the impact of lower sales in its agency brands business following decisions by certain agency partners in Indonesia, which reduced promotional spending for their products during the period.
Its brands’ sales for Indonesia were higher, particularly for its premium products segment, which partially offset the decreased sales in agency brands. Higher own-brand sales were driven by greater promotional investment.
The growth in regional markets was driven by robust own-brand performance in the Philippines and improved agency brands’ sales in Malaysia and the Philippines.
Following the release of the results, analysts are keeping a relatively muted sentiment on the group, maintaining their “hold” calls and waiting for better days.
UOB Kay Hian has an unchanged target price of 82 cents on the counter. According to analysts Heidi Mo and John Cheong, Delfi expects elevated cocoa prices to remain due to headwinds, putting pressure on costs and consumer demand.
Also, cocoa futures have surged over 40% y-o-y, reaching over US$12,000/tonne in early-2025 — more than triple the prices y-o-y — driven by factors such as climate change, crop diseases and underinvestment in West African farms, which produce 80% of the world’s cocoa.
“While this is likely to weigh on profitability in the near term, management believes the group is well-positioned to navigate these challenges, backed by its strong brand portfolio, operational resilience and disciplined execution,” say Mo and Cheong.
Delfi held a net cash position of US$51.7 million (+7% y-o-y), supported by a robust operating cash flow of US$37 million (+7% y-o-y) during the quarter. Its healthy current ratio of 2.01x and low gearing also support its ability to sustain brand investments and navigate input cost pressures. “Notably, its inventory level is down 7% y-o-y to US$90.5 million, reflecting Delfi’s tighter inventory management and signals its focus on operational efficiency amid macro uncertainties,” say the analysts.
The way the analysts see it, the outlook for Delfi may remain challenging, but a normalisation in cocoa prices could support earnings recovery.
Similarly, DBS Group Research has also kept its “hold” call and 80 cents target price on Delfi. “The softer performance was largely anticipated, given the weak macroeconomic conditions in Indonesia and persistently high cocoa prices. However, the sharper-than-expected Ebitda margin contraction — from 15.5% to 11.3% in what is typically the company’s strongest quarter — likely reflects an increasingly competitive landscape,” says DBS.
Its closest peer, Mayora, raised its advertising and promotion (A&P) spending by 17% to strengthen market presence, and DBS believes that Delfi similarly ramped up A&P investments meaningfully, which weighed on margins.
“With cocoa prices still elevated near US$11,000/ton, we expect earnings recovery to be pushed back to FY2026 or later,” says DBS. That said, Delfi’s strong free cash flow generation should help sustain its absolute dividend at 3.24 US cents, implying an about 5.9% yield at the current share price of 71 cents, which will provide some downside support to the share price.
Meanwhile, CGS International has downgraded its call on Delfi to “hold” from “add” previously with a lower target price of 71 cents from 88 cents, as analysts Tay Wee Kuang and Tan Jie Hui trim revenue expectations due to macroeconomic uncertainties that could weigh on consumer sentiments and dented profitability given elevated cocoa prices, while accounting for a negative translation impact from the weaker US dollar against the Singapore dollar.
Upside risks include improved profitability from better margins and maintaining its FY2024 DPS of 3.24 US cents in FY2025, which translates to a payout ratio of about 78% (FY2024: 58%) and yield of around 6.0%, based on CGSI’s estimates. Downside risks include an economic downturn that could further arrest revenue momentum and a loss of market share. — Samantha Chiew
DFI Retail Group
Price targets:
DBS Group Research ‘buy’ US$3
CGS International ‘add’ US$3
On track to lift earnings
DFI Retail Group reported that underlying profit declined 18% y-o-y for 1QFY2025 ended March 31, following the divestment of Yonghui, which contributed US$23 million ($29.7 million) in earnings the prior year. Including Yonghui, underlying profit increased 28% y-o-y in 1QFY2025.
The group says that for the quarter, underlying subsidiary sales, excluding the impact of cigarette tax and the divestment of Hero Supermarket in Indonesia, were 1% y-o-y lower.
Lower contributions from other divisions offset strong sales in its health and beauty segment. Within its home market of Hong Kong, the group saw reported and like-for-like (LFL) sales down by approximately 2% y-o-y or stable when excluding the impact of the cigarette tax.
Analysts are keeping a relatively positive view of DFI following its 1QFY2025 business update.
DBS Group Research is reiterating its “buy” call and US$3.00 target price. Analyst Chee Zheng Fong notes that while top-line growth was disappointing (flat on an LFL basis), he believes this was mainly due to a high base for the Convenience segment. The segment saw sales decline following the increase in the cigarette tax in Hong Kong in late February 2024.
“Looking ahead, we expect this impact to moderate. With the repayment of US$617 million in debt, and assuming an average interest cost of about 5% in FY2024, we estimate the company could realise interest savings of around US$23 million over the next three quarters,” says Chee.
Based on Yonghui’s contribution of US$23 million in the prior year, Chee estimates 1QFY2025 underlying earnings at about US$52 million. Annualised and assuming no significant seasonal variation, this implies approximately US$208 million in core earnings. When combined with the expected interest savings, the lower end of management’s FY2024 guidance (US$230 million) appears readily achievable.
Taking into account the seasonally stronger second half, driven by mooncake sales in the third quarter for Maxim’s, and assuming about US$28 million profit uplift between the first half and second half (based on the FY2017 and FY2018 average), Chee believes that DFI remains on track to deliver above-consensus core earnings estimate of US$259 million for FY2025.
CGS International has also kept its “add” call but with a higher target price of US$3.00 from US$2.71, as analysts Meghana Kande and Lim Siew Khee expect cost efficiencies from its streamlined business portfolio and improving operating environment.
“We think DFI’s disciplined execution towards driving profitability and a net cash position of US$127 million as of end-Mar 2025 are re-rating catalysts,” they say, adding that other catalysts include faster recovery of its Hong Kong supermarket sales, the announcement of a special dividend and higher-than-expected growth in Southeast Asia.
Downside risks include slow economic recovery in Hong Kong, affecting its sales growth, and cost pressures that will impact margin uplift. — Samantha Chiew
