William Tng of CGS International, the only analyst covering ISDN Holdings, has downgraded his call from "add" to "reduce." Due to uncertainties from the US-China trade war, he also has a lower price target of 28 cents from 40 cents.
Citing the company's annual report, Tng notes that ISDN generates 69% of its FY2024 revenue from China, 9% from Singapore, 5% from Vietnam and 3% from Malaysia.
According to Tng, ISDN does not have any direct export sales into the US and its imports from the US into China are also negligible.
The company has a two-pronged strategy. First, it will continue to focus on its core industrial automation business in Southeast Asia. Second, it has expanded into Malaysia and Taiwan to capture growth opportunities from the reorganisation of the global supply chain as more manufacturing activity shifts to these markets.
See also: CGSI and OIR cautious of balance sheet, keep ‘hold’ on Suntec REIT following 1QFY2025 results
In addition, ISDN is pushing for a bigger presence for its hydro-power business. In the last FY2024, the company announced the construction of its fourth and fifth mini-hydropower plants in Indonesia. The construction of these two plants is on track for completion in 2026.
"Once operational, these facilities will increase the group's total hydro-power capacity by an additional 20 megawatts (MW) to 44.6 MW with a projected recurring tariff income of $25 million each year, says Tng, citing ISDN's annual report.
Given the uncertainties of the trade war, Tng has turned conservative. He figures that the valuation multiple for this counter will drop to 8.8 times FY2026 earnings, which was its average P/E in the previous earnings upcycle of between FY2016 and FY2021.
See also: CGSI, Maybank raise OUE REIT’s TP slightly on ‘steady’ commercial assets
Tng, in the pre-trade war escalation phase, had previously valued this stock at 12.4 times FY2026 earnings, which is one standard deviation above the FY2016 to FY2021 average.
Downside risks include weak customer demand if the global economy continues to slow and the possibility of bad debts as economic conditions worsen. - The Edge Singapore
Wilmar International
Price target:
CGS International 'hold' $3.15
Stronger 1QFY2025 but flags 'uncertainties' in Indonesia
Wilmar International is expected to report 1QFY2025 earnings that are both higher y-o-y and q-o-q, led by higher contributions from its feed and industrial segments.
However, Jacquelyn Yow of CGS International has downgraded her call for Wilmar Internationalfrom "add" to "hold" along with a reduced target price of $3.15 from $3.47 previously.
The lower target price is premised on a lower valuation multiple of 10 times FY2026 earnings, which is -0.5 standard deviations from Wilmar's five-year average versus 11 times previously.
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The lower multiple accounts for growing uncertainty in Indonesia, one of the company's key markets.
According to Yow, the Indonesian government's plan to confiscate over one million hectares of allegedly illegal private oil palm plantations may impact Wilmar's significant land holdings of some 150,000ha, presenting a risk to its future crude palm oil production.
Based on her earnings sensitivity analysis, Yow figures that a 5% loss of Wilmar's land in Indonesia would result in a 1.5% decline in net profit.
Separately, in an April 16 report by Reuters, an unnamed employee of Wilmar was arrested in Indonesia on graft charges related to corruption in obtaining export permits. Earlier on April 14, Wilmar said investigations "so far have not involved" the company or any of its employees.
"We will assist in any investigation if we are called upon. We believe we are not guilty of the charges, as our actions during that period to increase the supply of palm oil to the market, despite the additional cost incurred, were intended to help the government improve domestic supplies and reduce prices. We wish to reiterate that the Wilmar group has zero tolerance for corrupt practices," says Wilmar's April 14 statement.
According to CGSI's Yow in her April 21 note, while the investigation is ongoing, the case introduces uncertainty for Wilmar.
Meanwhile, possible upside risks include stronger-than-expected consumption in China supporting better profitability of its food products segment.
On the other hand, downside risks include an unfavourable court ruling from litigation in Indonesia and any escalation of trade tensions between China and the US, which may result in higher operating costs. - The Edge Singapore
ISOTeam
Price target:
CGS International 'add' 9.6 cents
FY2025 patmi to triple
CGS International (CGSI) Research analysts Natalie Ong and Lim Siew Khee have initiated coverage on ISOTeam, expecting the estate maintenance firm to triple its patmi in the current FY2025 ending June 30 on higher margins.
In an April 15 note, Ong and Lim initiated coverage with "add" and a 9.6-cent target price, which represents an upside of around 35%. They add that ISOTeam is trading at an "attractive" FY2026 dividend yield of 5.2%.
The CGSI analysts say ISOTeam's business is highly recurring and supported by various government initiatives. Its order book grew 9.8% y-o-y in FY2024, reaching a high of $191.3 million at end-FY2024, with some 75% of contracts coming from the public sector. As at Feb 7, ISOTeam's order book stood at $188.7 million.
ISOTeam posted earnings of $6.5 million for its FY2024 ended June 30, 2024, 363.1% higher y-o-y.
Ong and Lim expect profit margins to improve, driven by the execution of input cost-adjusted pricing on contracts secured after the pandemic.
Also, ISOTeam is using drones for painting works, which the CGSI analysts estimate could reduce painting-related costs by 30%-40% and increase productivity.
Painting constituted 30% of ISOTeam's total work undertaken as of FY2024. While several players use facade inspection drones in Singapore, ISOTeam is one of the pioneers of using autonomous facade painting drones and indoor painting robots in Singapore.
Ong and Lim forecast gross profit margin (GPM) to be between 18% and 20% in FY2025 and FY2027, up from 15.5% in FY2024.
The analysts say ISOTeam's facade painting drone and indoor painting robot are likely to be ready for internal deployment in 1HFY2026 or by the end of this calendar year.
"Based on our scenario analysis, GPM could reach 27% assuming 100% painting drone utilisation. We believe ISOTeam's more competitive cost structure and improved productivity could enable it to increase its market share, specifically in the coating and painting (C&P) segment," they write.
Ong and Lim expect to see core patmi surge, tripling y-o-y in FY2025 and up 26% y-o-y in FY2026.
ISOTeam's artificial intelligence-enabled autonomous facade and indoor painting robots will be the first of their kind in Singapore, and the company will own all patents, hardware and software rights.
Ong and Lim see potential for ISOTeam to commercialise its suite of BuildTech solutions and believe this is a rerating catalyst, allowing it to establish a new revenue stream involving asset leasing, which is a scalable model that presents geographical diversification opportunities.
The CGSI analysts believe possible targets are Australia and Japan, which have high labour costs.
ISOTeam's foray into BuildTech began in 2021. In collaboration with technology partners H3 Dynamics and Acclivis Technologies, ISOTeam developed four BuildTech solutions, which are currently in various stages of testing and deployment.
The four solutions are: a manned facade inspection drone launched in 2022; an autonomous facade washing drone launched in June 2024; an autonomous facade painting drone with an estimated deployment ready date in 1HFY2026; and an autonomous indoor painting robot, with an estimated deployment ready date in 1HFY2026.
ISOTeam ceased dividend payments during the pandemic years of FY2020-FY2023. Following that, the company committed to a dividend payout ratio of not less than 25% for FY2024 and not less than 30% for FY2025 onwards.
"We believe this reflects the management's confidence in its business outlook and ability to sustain a higher dividend payout policy," says Ong and Lim. "We forecast FY2025 dividend per share (DPS) of 0.28 cents, 251% higher than the 0.08 cents announced for FY2024 and expect to see FY2026/FY2027 DPS grow 31%/23% y-o-y, bringing FY2027 DPS to FY2019 levels."
Ong and Lim see "more room" for ISOTeam to raise its dividend policy in the mid-term, given their forecast of positive core earnings per share (EPS) growth over FY2025-FY2027 and its strengthening net debt position. - Jovi Ho
CapitaLand Ascendas REIT
Price target:
RHB Bank Singapore 'buy' $3.20
Weathering market headwinds
Vijay Natarajan of RHB Bank Singapore has kept his "buy" call and $3.20 target price on CapitaLand Ascendas REIT's (CLAR), on the optimism that its diversified mix of a majority of Singapore-centric industrial assets can help weather market headwinds.
"We are also positive on its sharpened focus on redeveloping existing assets to extract value," says Natarajan in his April 17 note, where he reiterates this counter as one of his top industrial S-REIT picks.
"Its gearing remains modest, and we see the potential for opportune divestments as well as selective acquisitions. Interest cost pressures have likely peaked," he adds.
CLAR's latest property, 1 Science Park, received its TOP in early March. About 76% of the total 1.1 million sq ft of NLA has been committed, with advanced negotiations on another 19%.
This property is 34% owned by CLAR, with CapitaLand Development holding 66%. It was redeveloped for $883 million and has a remaining land tenure of around 55 years.
Natarajan estimates stabilised net property income yields from the redevelopment to be at mid-6%, which is higher than its existing portfolio yield of 6%.
"CLAR could also acquire the remaining stake in the asset once stabilised and further strengthen its Singapore market exposure," he adds.
There is another potential angle for this REIT. Natarajan believes there is potential to unlock value from Singapore data centre assets, specifically Telepark.
This property, valued at $270 million, is expected to be vacated by April and has an underlying higher-value commercial land lease, presenting value-unlocking potential via redevelopment.
"We believe CLAR may divest the asset instead at a premium, and use the proceeds to fund ongoing redevelopments," says Natarajan, referencing CLAR's track record where it divested four logistics assets for $177 million at a 38% premium above the latest valuation in FY2024.
Meanwhile, Natarajan believes that CLAR's portfolio is relatively shielded from the ongoing tariff war and that positive rent reversions will continue in FY2025, while occupancy rates could soften slightly.
Singapore accounts for two-thirds of its assets by value, with around 50% in the business park and life sciences segment and the remainder in the industrial/logistics segment.
While industrial demand could slow down, CLAR's diversified profile of 96 assets in strategic locations will likely mitigate the impact.
Meanwhile, in the US, which constitutes 11% of CLAR's asset value, the majority of its assets are in business spaces and life sciences, which could benefit from US President Donald Trump's emphasis on boosting domestic industries.
In Australia, the UK and Europe, 13% and 10%, respectively, the assets are mainly in the data centre and logistics segments, which the analyst expects to be less impacted.
Natarajan has kept his earnings estimates for CLAR unchanged, with a 2% growth in distribution per unit expected this year. - The Edge Singapore
United Overseas Bank
Price target:
CGS International 'add' $38.80
Softer loans and non-interest income growth likely for rest of FY2025
CGS International analysts Tay Wee Kuang and Lim Siew Khee have lowered their target price on United Overseas Bank(UOB) to $38.80 from $43 after the bank is likely to see lower earnings in FY2025, FY2026 and FY2027. Tay is taking over coverage from analyst Andrea Choong.
In their report dated April 18, Tay and Lim have lowered their earnings per share (EPS) estimates for all three years by 6%, 3.7% and 4%, respectively.
While the analysts believe UOB's 1QFY2025 ended March 31 results may be supported by its previous FY2025 guidance, they see that the bank may report softer loan growth and non-interest income growth amid volatile macroeconomic conditions for the rest of FY2025.
During the year, loans are expected to grow by 4.9% y-o-y, down from 7.2%, while fee and commission income is expected to grow by 7.3% y-o-y compared to the analysts' previous estimate of 14.9%.
The analysts write that total credit cost is also expected to increase 35 basis points (bps) for FY2025, compared to 28 bps previously. The higher estimate is to account for potential general provision (GP) recognition, given the deteriorating global economy. That said, UOB is still likely to see a 3.4% y-o-y growth in its overall net profit for FY2025.
In 1QFY2025, Tay and Lim estimate UOB's total income to come in at $3.69 billion, 4.7% higher y-o-y and 6.6% up q-o-q,
"Given UOB's previous loan growth guidance of the high single-digits for FY2025 during its FY2024 results briefing in February, we expect loan growth to see a slight q-o-q growth in 1QFY2025 to support its flat q-o-q net interest income (NII) and higher loan and trade-related fee income," they write.
"UOB's double-digit fee growth guidance for FY2025 should also be supported by wealth management fees," they add.
That said, the bank could adopt a "more prudent approach" by recognising a higher GP during the quarter from the macroeconomic uncertainties. This comes after a write-back of GP of around $277 million in 4QFY2024.
As such, the analysts expect UOB's 1QFY2025 net profit to grow by 5.1% y-o-y with limited leverage from its total income growth.
In addition to their lowered EPS forecasts, the analysts are also reducing their return on equity (ROE) assumptions to 12.5% from 13.5% to account for the uncertain economic outlook.
Despite the downgrades, the analysts are maintaining their "add" call on the bank as they see UOB's FY2025 yield of 7.2% as "attractive and defensible". The bank pledged a special dividend of 50 cents per share as part of its $3 billion package to return surplus capital, which will be paid out in May and August, respectively. - The Edge Singapore
Singapore Airlines
Price target:
UOB Kay Hian 'hold' $6.22
Lower fuel costs
UOB Kay Hian (UOBKH) analyst Roy Chen is keeping his "hold" call on flag carrier Singapore AirlinesGroup (SIA) at a higher target price (TP) of $6.22 from $6.09 following a March operation data update.
In March, passenger load dropped 0.8% y-o-y to 104.9% of pre-pandemic levels, partly due to the shift in the Easter holiday from March 2024 to April while group passenger load factor stood at 84.7%, down 3.0 percentage points (ppts) y-o-y.
On a quarterly basis, 4QFY2025 passenger capacity and passenger load rose 2.9% y-o-y and 2.8% y-o-y, respectively, with passenger load largely flat y-o-y at 86.4%.
In regards to cargo, cargo load in March rose 2.0% y-o-y to 85.4% of pre-pandemic levels. Cargo capacity expanded 7.6% y-o-y, but cargo load grew at a slower rate of 2.0% y-o-y, to which Chen notes that volume strength in the East Asia route was offset by weaknesses of cargo demand in the Americas and Europe.
With this, the cargo load factor dropped 3.1 ppts y-o-y in March. On a quarterly basis, 4QFY2025 cargo load was largely flat y-o-y, while capacity expanded 7.2% y-o-y.
As for the group's passenger network, the flag carrier now covers 128 destinations, compared with 137 destinations pre-pandemic. In March, the group suspended services of its budget carrier, Scoot, to Berlin.
Chen expects the group to report a net profit of around $400 million for the 4QFY2025 on May 15 after the market closed, which is a 30% y-o-y from $575 million in 4QFY2024 and a 24% q-o-q fall from $528 million in 3QFY2025.
He writes in his April 17 report: "Our estimate is based on the following assumptions: the reported 4QFY2025 operating statistics, low-single-digit percentage y-o-y moderation in both passenger and cargo yields, a 5% y-o-y drop in average fuel cost per unit of capacity and y-o-y largely flat-ish or marginally higher non-fuel operating cost per unit of capacity."
Meanwhile, Chen also expects SIA to see a lift in FY2026 earnings thanks to savings in fuel costs.
He notes that jet fuel prices have dropped about 8% over the past two weeks due to fears of a global recession triggered by the US tariff war.
"Assuming jet fuel prices stay at the current level of about US$84 ($110) per barrel throughout FY2026, SIA's FY2026 average fuel cost per unit of capacity after hedging would be about 9% lower than FY2025 average levels, leading to about $500 million savings in fuel costs in FY2026," writes Chen.
The analyst highlights that this should support SIA's FY2026 earnings, partially offsetting continued pressure on passenger and cargo yields.
Overall, Chen does not expect a major slowdown in air travel demand after factoring in the Ministry of Trade and Industry (MTI) cut in 2025 GDP from 1% to 3% to 0% to 2%.
"In our financial model, we have pencilled in a 1.5% y-o-y growth in passenger load for FY2026, slower than FY2025's 6.4% y-o-y growth, driven by SIA's continued network recovery and capacity growth," writes Chen.
Cargo outlook, on the other hand, is more uncertain.
Although the US tariffs present significant uncertainties to the global air cargo outlook in the medium term, the analyst sees that the 90-day pause for negotiation provides a window for manufacturers in Asia to expedite shipments to the US, mitigating uncertainties beyond the 90-day period.
He continues: "As such, SIA's 1QFY2026 cargo performance may benefit from some shipment frontloading, though there is no concrete data point available to quantify the impact at this stage."
Based on Chen's preliminary estimate, SIA's 1QFY2026 results could achieve mid-single-digit growth at the operating profit levels. However, this estimate will be subject to operating statistics disclosure and the development of jet fuel prices in the next two months.
As such, the UOBKH analyst has raised his FY2026 and FY2027 earnings forecasts by 17% and 6% to $1.37 billion and $1.18 billion, respectively.
Excluding the gain from the disposal of SIA Group's stake in Vistara, Chen's FY2025 earnings forecast remains at $1.67 billion.
Chen is also hoping for a fine FY2025 dividend yield. He writes: "In view of SIA's strong balance sheet and delayed capital expenditure (capex) due to aircraft original equipment manufacturers' (OEM) delivery issues, we reckon that SIA has the flexibility to raise its dividend payout ratio to 60% to 70% of core earnings in FY2025, from 53% in FY2024."
"A 60% payout ratio will lead to a 23-cent final dividend for FY2025, resulting in a dividend yield of 5.2% for full-year FY2025 based on the current price," adds Chen.
Key risks he noted include a weaker-than-expected macroeconomic environment dampening air travel demand, potential higher US tariffs after the 90-day negotiation period impacting global air cargo volume and finally, geopolitical tensions causing shocks to fuel prices. - The Edge Singapore
Venture Corp
Price target:
RHB Bank Singapore 'buy' $12.50
Impact from tariffs
Alfie Yeo of RHB Bank Singapore has maintained his "buy" call on Venture Corp, but with a less cheery outlook and market volatility due to the US tariffs, he has reduced his target price to $12.50 from $14.70.
"As the US market is one of Venture's key markets, we expect some negative impact on our earnings forecasts over the recently imposed tariffs," says Yeo in his April 16 note.
According to Yeo, Venture does not disclose its sales to the US, but he estimates the exposure is "significant" at between 20% and 40%.
"The additional US tariff imposed now includes a minimum of 10% universal tariffs on production exported from markets that include Venture's plants in Singapore and Malaysia," he adds.
Yeo notes that although the US trade war is mainly targeted at China, the rest of the world is impacted by the universal reciprocal tariffs, too.
"These should largely be less positive to Venture, as customers deliberate on the location of production, quantity, and pricing going forward," says Yeo.
Yeo believes that with the tariffs in place, customers in the US will first avoid purchasing imported products since pricing will generally be less favourable due to the tariffs.
Also, end-demand should likewise reduce, prompting reduced orders by Venture's customers.
"Besides, higher import tariffs into the US would increase customers' product costs and reduce their profitability. This should prompt such customers to reprice their orders in their negotiations with Venture," says Yeo, warning of slower demand and lower margins for the company.
As such, Yeo has lowered his earnings estimates for FY2025 and FY2026 by 9.5% each, along with a lowered valuation multiple of 15 times from 16 times previously, reaching his new target price of $12.50.
Nonetheless, Yeo points out that Venture's balance sheet remains strong while valuation remains attractive at -2 standard deviations of its mean, giving it a yield of 7%. - The Edge Singapore
Singapore Telecommunications
Price target:
Maybank Securities 'buy' $3.96
Safe haven amid tariff woes
Maybank Securities analyst Hussaini Saifee has reiterated his "buy" call on Singapore Telecommunications(Singtel) with a target price of $3.96, up from $3.72. He cited the telco's defensive characteristics amid tariffs, macro uncertainty, and safe-haven flows as key tailwinds.
Despite intensifying competition in Singapore's mobile consumer market from entrants like Simba, the impact on Singtel remains relatively muted. The segment accounts for just 12%-13% of group revenue and contributes less than 5% to the telco's sum-of-the-parts valuation.
Hussaini expects Singtel to post a 15% y-o-y earnings growth in 2HFY2025 when the company delivers its results in late May. The uplift will be driven by profit before tax (PBT) contributions from associates (up 18% y-o-y) alongside y-o-y ebit gains from Optus (up 53%) and NCS (up 44%). "Within associates, Bharti and AIS remain on solid footing and we expect 2H2025 PBT contribution to rise 55% y-o-y and 29% y-o-y, respectively," he notes.
Hussaini also highlights that Singtel's utility-like cash flows remain defensive despite the tariff vagaries. "Backed by a solid 1.6 times net debt to ebitda balance sheet, we see limited risk to Singtel's dividend outlook of 16.6 to 20.2 cents, leading to a 5% dividend yield. Singtel guided capital recycling initiatives of $6 billion, which positions it as a capital return candidate with a solid and defensive dividend yield," he says. - Nurdianah Md Nur
