Oversea-Chinese Banking Corporation (OCBC) group CEO Helen Wong’s surprise retirement announcement last week “could have come in earlier than investors’ expectations”, says Citi Research analyst Tan Yong Hong.
While succession planning at OCBC increasingly came up during conversations with investors, the timing of the announcement was unexpected, he writes in a July 14 note.
OCBC announced on July 11 that Tan Teck Long, head of global wholesale banking, will be appointed its group CEO as of January 1, 2026.
Tan will succeed Wong, who is retiring on Dec 31. He has been appointed deputy CEO at OCBC.
Tan joined OCBC in March 2022 from DBS Bank, where he was the chief risk officer.
Similar to Wong, Tan has experience as head of wholesale banking and understands Greater China, notes Citi’s analyst.
How might investors react? Citi’s Tan notes that OCBC outperformed peers the day after Wong was appointed group CEO on Jan 8, 2021. That said, United Overseas Bank (UOB) closed the underperformance by the end of that month.
Year to date, OCBC saw the heaviest net institutional outflows compared to DBS Group Holdings and UOB.
Citi is “neutral” on OCBC, with a target price below its current trading price; Citi’s Tan has a $15.80 target price on OCBC, with an expected dividend yield of 5.8% and an expected total return of –0.7%.
Citi’s Tan has opened a “short-term upside view” after the Great Eastern Holdings (GEH) offer lapsed on July 8, potentially forcing the insurer to resume trading on the Singapore Exchange. This upside view expires Aug 8, according to the analyst. — Jovi Ho
Genting Singapore
Price targets:
DBS Group Research ‘hold’ 80 cents
CGS International ‘add’ $1.05
Macro uncertainties may dampen uplift
DBS Group Research is downgrading its call on Genting Singapore (GENS) to “hold” from “buy” with a lower target price of 80 cents from 90 cents, due to a lower valuation peg and lower earnings given heightened macro uncertainties and potential MSCI SG Index exclusion.
GENS is one of the most profitable and diversified gaming operators in a duopoly market. It operates Resorts World Sentosa (RWS), one of the largest integrated resorts in Southeast Asia. It enjoys a strategic location in Singapore, a thriving tourism hub with strong domestic demand. The duopoly market structure supports relatively low competitive intensity.
For more stories about where money flows, click here for Capital Section
RWS further benefits from business diversification (greater non-gaming revenue share) and a broad geographical reach of its visitor base — factors that underpin its typically higher ebitda margins.
However, macroeconomic uncertainties may dampen the uplift expected in 2HFY2025 from post-renovation launches.
“We believe 2HFY2025 could see y-o-y improvement, supported by the debut of the Laurus luxury hotel, the reimagined The Weave retail experience, and the opening of the Oceanarium,” say analysts Chee Zheng Feng and Jason Sum.
The analysts believe any uplift could be subdued given escalating macroeconomic risks and uncertainties, particularly high US tariffs set to take effect from Aug 1. Notably, US tariffs on exports from Southeast Asia range from 25% in Malaysia to 36% in Thailand as of the time of writing.
With uncertainties looming, the analysts have cut GENS’s FY2025/FY2026 adjusted ebitda by 2%/3% on softer gaming revenue, as regional macro conditions continue to weigh on inbound tourism.
RWS’s core clientele, comprising mainly regional tourists, is likely to be disproportionately affected by economic pressures and more cautious with discretionary gaming spend compared to their Western counterparts. “As these macro uncertainties are expected to persist into FY2026, we have accordingly revised down our earnings forecasts,” adds Chee and Sum.
CGS International’s Tay Wee Kuang is not as bearish. He is keeping his “add” rating on GENS with an unchanged target price of $1.05, following a site visit to Universal Studios Singapore (USS), where he observed a sizeable crowd with a queue build-up prior to the attractions’ opening hours.
“Our ground checks also suggest that tour groups do visit USS on a frequent basis, although we are unsure if USS markets directly to such groups and agencies,” he adds.
While the Minion Land attraction was newly opened in February this year, Tay did not observe a noticeable difference in crowd size for the rides, although there was a larger crowd for its minion-themed arcade games.
Meanwhile, RWS reopened its retail space after closing it for redevelopment since May 2023. “During our visit, we noted that less than half of its tenants have started operations. We believe visitor volume to RWS will only pick up when other key attractions, such as the Singapore Oceanarium and The Laurus Hotel, open in 3Q2025,” says Tay.
Overall, Tay expects 2QFY2025 performance to hinge on gaming operations and believes GENS will see stronger 2HFY2025 profitability, benefiting from the opening of its new attractions from 3QFY2025.
“We think investors should look past a potentially weaker q-o-q 2QFY2025 financial performance, as well as seasonally weaker gaming operations contribution post-Chinese New Year festivities,” he says. — Samantha Chiew
Frencken Group
Price target:
Phillip Securities ‘buy’ $1.76
Undervalued counter with clear growth ahead
Phillip Securities analyst Yik Ban Chong initiated coverage of semiconductor player Frencken Group in his July 11 report, assigning a “buy” call and a target price of $1.76, citing the company’s undervalued status and its poised for clear growth ahead.
In the 1QFY2025 ended March, revenue in Frencken’s semiconductor segment grew 34% y-o-y from a strong rebound in sales from its Asia operations.
This was possibly due to its Netherlands-based customer broadening its product portfolio, conducting tests in Asia for lithography machines used to produce two-nanometre (nm) chips.
In a sign of its growing confidence, the company is expected to double its capex this year. The key initiative is a $63 million investment in a new manufacturing facility in Singapore, scheduled for completion in 1QFY2027.
As such, Chong believes the group is “well-positioned” to take on more products and processes from its customers’ Asia expansion plans.
“The new facility has clean rooms with higher floor-to-ceiling heights, enabling Frencken to take on new programmes with key wafer fabrication equipment customers in the following years,” says Chong.
Frencken has benefited from its key semiconductor customers experiencing high revenue growth in the first quarter, driven by high demand for artificial intelligence (AI) chips and investments in leading-edge foundries.
Industry giant Taiwan Semiconductor Manufacturing Company (TSMC) has maintained its guidance for this year, with most of its capital expenditure budgeted for advanced process equipment.
All three equipment makers, ASML, Applied Materials and Lam Research, have provided positive revenue guidance, with an average y-o-y increase of 18% for the second quarter, driven by increased leading-edge foundry investments.
Chong expects Frencken to benefit from new products and processes used by its key semiconductor equipment customers for research and development (R&D) to advance both front-end and back-end semiconductor equipment.
Frencken is attractively valued too, trading at 13 times FY2025 P/E, a 35% discount compared to its local peers’ average valuations of around 20 times FY2025 P/E.
“We believe Frencken is undervalued because of strong manufacturing capabilities for its key customers in Asia, high customer demand for testing new products, and low exposure to direct impact from tariffs, with shipments to the US making up about 9% of FY2024 revenue,” writes Chong. — Douglas Toh
ESR-REIT
Price target:
RHB Bank Singapore ‘buy’ $3.25
‘Turning around’ with interest savings, ‘sharp’ turnaround in DPU
With a recent 10-to-1 share consolidation exercise and expectations of a sharp turnaround in core distribution per unit (DPU), ESR-REIT is “turning around”, says RHB Bank Singapore analyst Vijay Natarajan.
He is keeping his “buy” call on the REIT in a July 11 note, with a higher target price of $3.25 from $3.15.
Natarajan notes that there has been “muted” tariff impact so far across the industrial REIT’s portfolio in Singapore, Australia and Japan; and management is eyeing more divestments on the cards.
There are also potential interest cost savings from refinancing the FY2026 loans, he adds, with overall interest costs for FY2025 expected to be at 3.5% levels, a 35-basis-point decline from FY2024.
“ESR-REIT’s share price has shown greater price stability post the recent 10-to-1 share-consolidation on May 5, with the tighter bid-ask spreads reducing share price volatility and speculative activities, in our view,” writes Natarajan.
ESR-REIT plans to divest another $400 million in assets over the next two years, with the proceeds primarily going towards debt repayment, share buybacks, and asset enhancements.
Year to date, ESR-REIT has divested two assets for $17 million at a 3.5% premium to valuation, and management is currently in “advanced stages” of divesting its non-core hotel asset located at 2 & 4 Changi Business Park Avenue 1.
According to Natarajan, ESR-REIT has identified “more shorter-lease non-core Singapore assets” of $300 million to $400 million, which management plans to divest by next year.
“Acquisitions are currently not a priority, with management’s focus on asset enhancements to unlock value,” he adds.
Natarajan notes that certain ESR-REIT tenants have requested slightly shorter lease renewals, such as two years instead of a typical three-year lease. “However, such renewals are typically signed at a slightly higher rent (5% higher).”
ESR-REIT’s management claims that there have been no impacts or tenant shifts in its portfolio due to the upcoming Johor-Singapore Special Economic Zone (JS-SEZ).
Overall, industrial demand remains firm across ESR-REIT’s markets, says Natarajan, with rental reversions expected to remain in the positive mid-single digits, ranging from 5% to 7%, and stable occupancy above 90%.
ESR-REIT also recently issued $125 million in perpetual securities at an annual interest rate of 5.75%. Partial proceeds have been used to redeem the more expensive $75 million perpetual securities at 6.632% per annum in May. — Jovi Ho
Sembcorp Industries
Price target:
OCBC Investment Research ‘buy’ $8.45
Higher fair value following higher stake in Senoko Energy
OCBC Investment Research has maintained its “buy” recommendation for Sembcorp Industries, along with a revised fair value of $8.45, up from $7.40.
In its July 14 report, OCBC notes that Sembcorp's share price has gained 35% year to date, outpacing the Straits Times Index, which has reached a new high with its 8% gain in the same period.
“We attribute SCI’s strong share price performance year to date to stable growth outlook, healthy dividend and payout growth, and strategic renewables expansion,” says OCBC.
In a recent positive development, Sembcorp completed a deal on June 13 to raise its stake in Senoko Energy from 30% to 50%.
“The increased stake in Senoko Energy reinforces Sembcorp’s commitment to supporting Singapore’s energy security and ensuring the delivery of reliable energy solutions for customers and the nation,” says OCBC.
Senoko Energy, as described on its website, has a licensed capacity of 2,644 megawatts (MW) and supplies about 20% of Singapore’s electricity needs.
OCBC expects SCI’s earnings to be supported by the incremental stake in Senoko Energy, as well as Sembcorp’s own expansion in renewable capacity.
Longer-term growth in power demand is expected from the increasing application of artificial intelligence capabilities, a trend that Sembcorp is well-positioned to capitalise on, according to OCBC. — The Edge Singapore
