Analysts have stayed positive on Parkway Life REIT (PLife REIT) after it reported a higher distribution per unit for its 1QFY2025 ended March 31, in line with expectations.
In 1QFY2025, PLife REIT's DPU was 3.84 cents, up 1.3% y-o-y and 6.1% q-o-q, thanks to contributions from recent acquisitions and step-up leases, but somewhat offset by a larger unit base and a weaker yen.
Net property income for 1QFY2025 was $36.8 million, up 7.5% y-o-y, on the back of a 7.3% y-o-y increase in revenue to $39 million. Interest costs increased by 26% y-o-y because of a heavier debt load related to acquisitions, ongoing asset enhancement initiatives and higher yen base rates.
Gearing was steady at 36.1% while its cost of debt rose to 1.5% in 1QFY2025, versus 1.48% in 4QFY2024, while the coverage ratio was lower at 9.3 times, versus 9.8 times in 4QFY2024.
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In his April 23 note, Krishna Guha of Maybank Securities believes that the outlook for the next four quarters for this REIT remains "positive", as he kept his "buy" call and $4.50 target price on this stock.
"Income from completed asset enhancement initiatives (AEIs) will offset higher financing cost," says Guha, referring to ongoing work at the REIT's Singapore hospitals.
According to Guha, citing the REIT's manager, it is keen to diversify away from Japan, where it owns a portfolio of nursing homes, into other markets, given limited growth.
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PLife REIT has already expanded into France and potential deals in Europe "will help", although "given macro uncertainties, management is holding back on M&A."
For now, Guha is keeping his forecasts and ratings, as he describes the "consistent delivery" of this REIT.
"While PLife REIT continues to trade at a tight yield of 3.6% and 70% premium to book, visible DPU growth, strong track record and attractive sub-sector thematic keep us on 'buy'," says Guha.
Separately, Lock Mun Yee and Li Jialin of CGS International are also bullish on this counter, calling it "in the pink of health". Besides their "add" call, they have a higher target price of $4.91.
"We like PLife REIT for its stability, backed by its defensive income structure with in-built rent escalation features," the CGSI analysts state in their April 22 note. For them, re-rating catalysts include accretive acquisitions.
Ada Lim of OCBC Investment Research, meanwhile, has raised her fair value estimate on this stock slightly from $4.60 to $4.65, along with her "buy" call.
"Amidst the ongoing market volatility and tariff uncertainty, PLife REIT stands out to us for its defensive portfolio and steady track record of DPU growth," says Lim in her April 23 note.
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She likes how the REIT has put in place yen and euro net income hedges till 1QFY2029 and 1QFY2030, respectively, to mitigate income forex risk.
"The fact that 1QFY2025 DPU registered positive growth despite an increase in unit base is also a testament to management's prudence and ability to execute, in our view," says Lim.
She observes that its yield is lower relative to other S-REITs, but this is a "reasonable" compromise given its track record and quality of management.
"We also think PLife REIT has multiple avenues to further grow its distributions in the medium to long-term, including asset enhancement initiatives at other Singapore hospitals and making further inroads into Europe," she adds. - The Edge Singapore
Frencken Group
Price target:
CGS International 'add' $1.15
Tariff-induced uncertainties
CGS International analyst William Tng has lowered his target price estimate on Frencken Groupto $1.15 from $1.40 due to the US tariff-induced uncertainties.
About 9% of Frencken's sales are shipped from Singapore, will likely be subjected to the baseline 10% tariffs after the 90-day pause ends, Tng notes.
The remaining 91% of the group's sales are for locally-based customers or non-US destinations, he adds. At present, Frencken's customers are bearing most of the tariffs, if applicable, and there are minimal export sales from Frencken's factories in China into the US, the analyst continues.
Yet, the group has kept its revenue outlook for the 1HFY2025 ending June 30, which it first guided in its results commentary in FY2024. In 1HFY2025, the group expects its revenue to be stable h-o-h. Segmentally, Frencken's management expects revenue to grow for its semiconductor segment and sees stable performance for its medical, analytical and life sciences, as well as automotive and industrial automation segments.
Tng says the group kept its outlook as its customers did not change their order indications in 1QFY2025.
However, he believes that the group's automotive segment, which makes up 8% of its FY2024 revenue, could see more "challenging conditions" due to the higher costs from the tariffs.
"Frencken also has a manufacturing facility in Spokane in the US (capacity expanded four-fold in FY2024) to help its US customers, if needed," says Tng in his April 22 report. "We believe higher import cost, if any, will be passed on to customers after discussion."
With this, Tng has maintained his "add" call as he still likes the group's outlook for its key semiconductor segment. The segment is likely to help the group's core earnings per share (EPS) growth in FY2025 to FY2027, he notes.
That said, his lower target price comes as Frencken's valuation is likely to drop to 11.1 times or -1 standard deviation (s.d.) below its five-year P/E average due to investors' concern over any earnings impact from the tariffs. Tng previously valued Frencken at 13.5 times based on his FY2026 forecast EPS and five-year average P/E multiple.
After conversations with Frencken's management, Tng also notes that the group will continue with plans to build a new plant in Singapore to support its key semiconductor customer in the city-state.
"We believe the potential capex involved for the new plant could range between $40 million and $60 million, and a decision should be made within FY2026," he says. - Felicia Tan
Food Empire Holdings
Price target:
RHB Bank Singapore 'buy' $1.67
Earnings growth on capacity expansion
Alfie Yeo of RHB Bank Singapore has kept his "buy" on Food Empire Holdingsand a higher target price of $1.67 from $1.23, on optimism over the coffee and snack maker's longer-term growth prospects underpinned by expanding capacity.
With its domestic-focused businesses, Food Empire is expected to have "minimal" exposure from the impact of the US tariffs.
"We raise FY2025 to FY2026 earnings on better revenue traction, including higher operating costs," says Yeo in his April 24 note.
His revised target price of $1.67 is based on 12 times FY2025 earnings, which is still below the 15 times accorded to regional peers. His previous valuation multiple was nine times earnings.
According to Yeo, Food Empire's growth in the medium term will be driven by more production facilities, which will boost sales volume.
For example, Malaysia's snack production capacity is set to expand by 1HFY2025. Its first new coffee-mix factory in Kazakhstan is scheduled to open by FY2025.
It will also increase its production capacity for coffee mixes by 15%. Finally, a new freeze-dried soluble coffee manufacturing facility in Vietnam is scheduled to open by FY2028.
"With medium-term growth drivers intact, Food Empire is well-positioned for longer-term growth," says Yeo.
"Growth momentum remains strong and revenue continues to be driven by strong demand and sell through existing markets," he adds.
Yeo notes that in FY2024, Food Empire was able to continue to chalk up better sales in its various markets, including Russia, which enjoyed a 7.3% growth in sales in local currency terms in FY2024 but down 1.1% y-o-y in Singapore dollars.
On the back of strong revenue traction and sell-through, Yeo says he now has a more positive revenue forecast.
"We have reduced our margin assumptions to reflect the current cost run rate due to higher coffee prices. We can expect Food Empire to pass through the higher input costs to customers eventually," says Yeo, who has raised his FY2025 earnings estimate by 8% and that for FY2026 by 7%.
For Yeo, downside risks to his forecasts include a disruption in operations due to the Russia-Ukraine conflict and the negative effect of a change in the value of the ruble and other currencies of the former Soviet states. - The Edge Singapore
Singapore Airlines
Price target:
CGS International 'hold' $6
Potentially strong final dividend
CGS International analyst Raymond Yap thinks Singapore Airlines(SIA) could post a weaker set of figures for 4QFY2025 ended March 31, both y-o-y and q-o-q.
In addition, Yap expects SIA to account for a full quarter's share of losses from its 25% equity stake in Air India, acquired in November 2024 through the sale of its 49% stake in Vistara to Air India.
Still, investors are expecting a "potentially strong" final dividend per share (DPS), which "may keep share price elevated for now", says Yap in an April 22 note.
Hence, Yap is maintaining a "hold" on SIA with an unchanged target price of $6, noting that the upcoming final DPS is "key" to its stock price.
SIA will announce its financial results for FY2025 ended March 31 on May 15 after trading hours. CGSI's Yap expects SIA to announce 4QFY2025 core net profit of between $200 million and $250 million, which is about 60% lower q-o-q, owing to softer passenger yields but partially compensated by lower jet fuel prices.
The timing of aircraft maintenance expenses, however, could impact the accuracy of the estimates, adds Yap.
Yap expects SIA's final dividend to be at least 20 cents per share. In addition to the earlier interim DPS of 10 cents, this represents a payout ratio of 59% - broadly in line with FY2023's 58% and FY2024's 56%.
But Yap has also pencilled in a final DPS of 30 cents, as he thinks SIA may pay some of the 37 cents per share exceptional gain of some $1.1 billion from the disposal of Vistara, even though the gain is non-cash in nature.
In FY2024, SIA had declared a bumper final DPS of 38 cents on May 15, 2024 and its share price remained "well-supported" until the ex-date on Aug 1, 2024.
"Similarly, we expect SIA's share price to stay elevated until the final DPS ex-date (likely to be in late-July/early-August)," writes Yap. - Jovi Ho
Raffles Medical Group
Price target:
Maybank Securities 'buy' $1.13
Better re-rating catalysts
Maybank Securities is reiterating its "buy" recommendation on Raffles Medical Group(RMG) but with a higher target price of $1.13 from $1.03, given the group's more optimal capital structure. RMG is also the research house's top pick in the Singapore healthcare sector.
Analyst Eric Ong notes that the group has recently signed an agreement with an affiliate of Shanghai Jiao Tong University School of Medicine to work on a new collaborative model between public hospitals and international medical groups.
The affiliate, Renji Hospital, and RMG will establish a "dual circulation" medical resource service system to advance a new collaborative development model and promote Shanghai as an international medical tourism hub.
The group's international-standard service system will be integrated into China's domestic healthcare system, and Renji's Chinese medical expertise will be promoted through RMG's global network. Two initiatives will be launched - the Renji International Cloud Clinic, which will enable cross-border telemedicine consultation with Renji physicians, and collaborative activity between the medical teams of both institutions.
The group's China hospitals look set to continue their positive trajectory in terms of patient volumes and revenue on increased service offerings and community engagement efforts.
Ong says, in particular, Shanghai has seen steady growth in FY2024 ended December 2024 by partnering with insurance companies and corporations to offer tailored healthcare packages.
Despite potential competition amid China's new health policy allowing wholly-foreign-owned hospitals, RMG remains optimistic about the immense opportunities in the country, given its growing brand recognition. Management expects its China operations to achieve ebitda breakeven by end-FY2026 as it continues to ramp up its bed utilisation there.
"Despite macroeconomic uncertainty, we leave our FY2025-FY2027 forecasts intact due to its largely non-discretionary and domestic demand resilience," says Ong, who has forecast FY2025 revenue and ebitda of $767 million and $133 million.
As Ong sees it, re-rating catalysts are higher-than-expected dividends and earnings growth, as well as faster turnaround of its China operations.
In view of the group's strong operating cash flow, the group has updated its dividend policy to pay out at least 50% of core earnings annually. It is also committed to returning any excess capital (net of capex and M&A) to shareholders via special dividends.
Since the group announced in February to pledge to buy back up to 100 million shares in the next two years, it has so far acquired 7.7 million shares in the open market at an average cost of 98 cents (cumulatively 33.8 million treasury shares held). "This ongoing share buyback should help to further optimise its capital structure, improve ROE and achieve EPS accretion," says Ong. - Samantha Chiew
Nanofilm Technologies International
Price targets:
OCBC Investment Research 'buy' 59.5 cents
DBS Group Research 'hold' 50 cents
CGS International 'reduce' 49 cents
UOB Kay Hian 'sell' 46 cents
Mixed views following 1QFY2025
Analysts are mixed following Nanofilm Technologies' (Nanofilm) latest 1QFY2025 ended March 31 results.
OCBC Investment Research's (OIR) Ada Lim has kept her "buy" call with a fair value of 59.5 cents, after revenue in the period grew 12% y-o-y to $44 million. To her, Nanofilm's gross profit margin "disappointed" at 27% on softer revenue contribution from the group's industrial equipment business unit (IEBU).
Nanofilm's top-line growth was largely driven by its advanced materials business unit (AMBU) and nanofabrication business unit (NFBU), which grew 11% and 49% y-o-y, respectively.
Similarly, the automotive segment grew 15% y-o-y, while the computer, communications and consumer electronics segment grew 6% y-o-y. Finally, revenue from the group's joint venture (JV) with Temasek Holdings, Sydrogen, expanded 158% y-o-y.
Lim notes that while the outlook for tariffs remains uncertain, US President Donald Trump has promised potential action against semiconductors and the electronics supply chain.
She adds that Nanofilm highlights that it has no material direct exposure to the US, and that its Singapore-based headquarters offer optionality to support key customers in multiple geographies and for future (equipment) exports.
"We also maintain our non-consensus 'buy' rating purely on valuation grounds, but caution risks to the downside given that the global tariff situation remains highly volatile with second-order impact being challenging to quantify," writes Lim.
Potential catalysts noted by her include a strong improvement in business sentiment, easing supply chain disruptions, positive revenue and cash flow contribution via Sydrogen and lastly, earlier-than-expected rollout of new products.
Conversely, investment risks include persistently weak demand from industries, a failure to defend proprietary intellectual property rights, prospective growth dependent on the success of research and development (R&D), and the possible emergence of competing suppliers.
Meanwhile, Ling Lee Keng of DBS Group Research has maintained her "hold" rating but with a lowered target price of 50 cents from 72 cents. She was expecting higher contribution from the IEBU segment going forward and has cut her gross margin assumption for FY2025 and FY2026, leading to earnings estimates reduced by 39% and 19%, respectively.
Nanofilm's regional expansion is on track. In Vietnam, the facility serves as a core manufacturing and R&D hub for both the group's AMBU and NFBU segments, while in India, Nanofilm is investing in establishing local capabilities to support longer-term automotive and industrial opportunities.
The integration of EuropCoating Group, acquired in late 2023, is progressing well, deepening Nanofilm's customer engagement across Germany and Italy.
Lastly, CGS International's (CGSI) William Tng and UOB Kay Hian's (UOBKH) John Cheong and Heidi Mo have the most bearish view on Nanofilm.
Tng has kept his "reduce" call with a lower target price of 49 cents from 63 cents previously, while Cheong and Mo have also kept their "sell" call with a lower target price of 46 cents from 50 cents previously.
Although Nanofilm has indicated that the impact of US tariffs will be limited, Tng believes it will still feel a broader indirect impact.
"The group will simultaneously leverage its operational presence in Singapore, China, Vietnam and Europe to help customers address the challenges arising from the tariff situation," says Tng, who has cut his FY2025 to FY2027 earnings per share (EPS) by 37.9% to 41% following lower gross margin assumptions.
Noting that earnings could be uncertain, he has also switched to using a price-to-book value valuation, using book value per share as support for determining the target price.
Upside risks noted by him include new order wins from customers, faster operational progress at JVs ApexTech and Sydrogen Energy in FY2025 to FY2026 and a strong demand upturn.
On the other hand, de-rating catalysts include high customer concentration and higher operating costs as Nanofilm expands into other countries and businesses.
For UOBKH's Cheong and Mo, although Nanofilm's revenue met expectations, its gross profit margin did not.
The pair values Nanofilm based on 23 times FY2025 earnings, pegged to an unchanged 0.5 standard deviations (s.d.) below its long-term forward mean. Currently, Nanofilm is trading at 27 times FY2025 earnings versus global peers' average of 19 times and Singapore peers' average of 15 times.
They conclude: "While Nanofilm's revenue points to a recovery, we think that notable earnings recovery will take some time due to elevated costs from multiple new locations and higher staff count."
Share price catalysts noted by the analysts include a better-than-expected ramp-up of the nanofabrication business and new applications in the advanced material segment. - Douglas Toh
