Sasseur REIT
Price targets:
CGS International ‘add’ 85 cents
PhillipCapital ‘buy’ 81 cents
Portfolio occupancy improved, but DPU estimates lowered
Analysts at CGS International (CGSI) and PhillipCapital have both kept their respective “add” and “buy” calls on Sasseur REIT, with the former lowering the target price (TP) to 85 cents from 93 cents previously and the latter to 81 cents from 84 cents previously.
In 2HFY2024 ended Dec 31, 2024, Sasseur REIT reported an entrusted management agreement (EMA) rental income of $62.2 million, a marginal 0.3% y-o-y dip, dragged by weaker foreign exchange (forex) and lower variable income.
After factoring in around $4 million in retained income, 2HFY2024 income to be distributed to unitholders was up 0.8% y-o-y to $39.3 million. This translates to a distribution per unit (DPU) of 2.929 cents, which remained flat y-o-y after accounting for 20% of the management base fee and a lower payout ratio of 90.2%.
Portfolio occupancy improved to 98.9% at end-2024 due to higher take-up at the REIT’s Chongqing Bishan, Hefei and Kunming outlet malls. Although tenant sales declined 3.9% y-o-y in 2HFY2024, tenant sales rose by 4.8% y-o-y in 4QFY2024, led by improved sales at Chongqing Liangjiang and Chongqing Bishan.
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Lock writes in her Feb 20 report: “Shopper traffic improved 4.1% y-o-y in 2024 due mainly to the golden week holidays in October 2024 and a strong rebound in shopper footfall in Kunming, post tenancy reconfiguration work in September 2024.”
Sassuer REIT’s VIP membership also continued growing in 2024 to reach 4.2 million members, while RMB8.4 million ($1.55 million) of asset enhancements were undertaken in the same year. Lock adds that the REIT plans to spend another RMB25.5 million of capital expenditure (capex) to improve the airconditioning system at Chongqing Liangjiang.
Meanwhile, as at end-2HFY2024, Sasseur REIT’s gearing stood at 24.8%, while interest cost was lower y-o-y at 5.3% at end-FY2024.
“In terms of capital management, Sasseur REIT targets to achieve above 60% of RMB-denominated loans in FY2025. In December 2024, Sasseur REIT had extended its RMB308 million sponsor loan till 2030, repriced to floating interest rate pegged to the China five-year loan prime rate, thus completing its refinancing needs for FY2025,” writes Lock.
According to the REIT’s management, a new sponsor loan of up to RMB430 million has already been secured in preparation for refinancing its debt maturing in FY2026.
On this, the analyst writes: “In addition, Sasseur REIT said it has obtained an ‘AAA’ investment-grade rating from China Lianhe Credit Rating Co. This would enable Sasseur REIT to diversify its funding options and cushion its overall cost of debt, in our view.”
With this, Lock has lowered her FY2025 to FY2026 dividend per share (DPS) estimates by 4.62% to 6.15% due to the REIT’s management’s guidance to receive a lower 70% of management fees in units, lower payout ratio of 90% and slower tenant sales growth assumption of 2% to 5% over FY2025 to FY2026.
She concludes: “We maintain our ‘add’ rating as we like Sasseur REIT for its exposure to the more resilient outlet mall segment, while its EMA rental income structure provides a stable base.”
Re-rating catalysts noted by her include better-than-projected tenant sales and improvements in discretionary consumption in China, while downside risks include the high cost of capital eroding the REIT’s positive accretion yield gap and slower-than-expected outlet mall sales.
PhillipCapital analyst Liu Miaomiao notes that Sasseur REIT expects sales to grow at a low-single-digit rate in FY2025, supported by more aggressive stimulus measures from the central government, including a 50 basis point (bps) mortgage rate cut and consumption vouchers in Shanghai.
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She also sees that the REIT’s borrowing cost decreased by 0.3% percentage points (ppts) y-o-y to 5.3% with more onshore debt, leveraging on the lower loan prime rate (LPR) in China.
Liu writes: “Onshore loans account for 53% of the total borrowing as of December 2024, and Sasseur REIT aims to increase the portion to around 60% in FY2025, for which we expect the cost of borrowing to trend down further.”
With a 6.5% y-o-y decline in the valuation of Chongqing Bishan due to underperforming sales of the valuer’s expectations, the analyst has taken on a more cautious outlook for FY2025.
“However, portfolio valuation in Singapore dollar terms remained stable, improving 0.1% y-o-y to $1.58 billion, supported by a more favourable exchange rate at year-end.”
On her outlook, Liu notes that Sasseur REIT will be drawing RMB25.5 million from a sponsor loan over the next three years to construct a cooling tower-based central chiller system, which will reduce maintenance costs and energy consumption.
The REIT has also actively introduced VIP-exclusive discounts and promotional events to enhance customer stickiness and VIP conversion rates. Liu writes: “We expect FY2025 sales to remain supported by VIP members, with membership increasing 18% y-o-y in FY2024 and achieving a three-year CAGR of 18.7%.”
Sasseur REIT will also continue its brand rebalancing strategy to better align with evolving consumer preferences, with Chinese consumers continuing to favour local Chinese brands and value-for-money products as international brands underperform.
“We anticipate low-single-digit tenant sales growth in FY2025, assuming no disruptions from unforeseen events like heatwaves. Our FY2025 to FY2026 DPU forecasts have been revised down by 2% to 6.0 cents and 6.36 cents,” adds Liu. — Douglas Toh
PropNex
Price targets:
DBS Group Research ‘buy’ $1.25
UOB Kay Hian ‘buy’ $1.30
Maybank Securities ‘hold’ $1.14
OCBC Investment Research ‘hold’ $1.14
Lower earnings but higher target prices
PropNex, Singapore’s largest real estate agency, reported lower FY2024 earnings, which missed estimates as well. However, analysts, citing improving prospects and a generous dividend, have raised their respective target prices.
PropNex reported earnings of $40.9 million for FY2024 ended Dec 31 2024, down 14% from FY2023. Revenue in the same period was down 7% y-o-y to $783 million due to a smaller number of new launches.
However, in 4Q2024, new launches picked up significantly and the momentum is seen to continue into this year, with new launches nearly doubling to 13,000 units. With PropNex’s market share of project launches, this will translate into improved numbers in 1HFY2025, analysts reason.
PropNex plans to pay a final dividend of 3 cents per share, plus a special dividend of 2.5 cents to mark its 25th anniversary. This brings PropNex’s FY2024 payout to 7.75 cents a share, equivalent to a payout ratio of 140% and a yield of 6.8% based on the Feb 25 closing price.
“We do not rule out the possibility of another special dividend from its 1HFY2025 results, which we expect to be strong,” writes UOB Kay Hian’s Adrian Loh in his Feb 26 note.
Loh is keeping his earnings projection for the current FY2025 and FY2026 but has raised his target price from $1.18 to $1.30, which is based on a target P/E of 17.6 times or 1.5 standard deviations (s.d.) above the company’s average P/E since 2021.
Derek Tan and Tabitha Foo of DBS Group Research are similarly bullish. They’ve kept their “buy” call along with a higher target price of $1.25, up from $1.15, which is based on 15 times FY2025 earnings, which is 1 s.d. above the five-year average.
They believe that PropNex’s expected dividend yield of around 6.5%, based on a payout ratio of 80%, could be higher if the group distributes more of its cash reserves estimated at 15 cents per share.
Eric Ong of Maybank Securities is more restrained. He notes that developers “tactically” deferred their mega new launches to 4Q2024 to captalise on Fed rate cuts and pent-up demand. The resultant spill-over effect has inspired Ong to raise his FY2025–FY2027 earnings forecasts by 9%–23%.
Ong has raised his target price from 87 cents to $1.14 but has kept his “hold” call given PropNex’s compelling dividend yield. — The Edge Singapore
Aztech Global
Price targets:
CGS International ‘hold’ 67 cents
Maybank Securities ‘buy’ 82 cents
DBS Group Research ‘fully valued’ 52 cents
Uncertain order book but supported by dividend
Aztech Global has reported lower earnings than expected, but the company is trying to compensate with special dividends. However, given near-term uncertainties over the company’s order wins, CGS International and DBS Group Research analysts have trimmed their target prices while keeping their “hold” or equivalent calls. Maybank Securities, on the other hand, has upgraded the stock to “buy”.
In FY2024 ended Dec 31, 2024, Aztech Global reported earnings of $70.5 million, down 29.5% y-o-y on the back of a 30.6% y-o-y drop in revenue to $621.6 million. According to William Tng of CGS International, Aztech’s management tried to manage the revenue drop by cutting employee benefits. In addition, higher interest income, write-back of bad debt, and fair value gain on derivative financial instruments helped improve the bottom line.
Tng points out that Aztech has flagged “demand volatility” from customers amid rising trade restrictions, geopolitical tensions and global economic uncertainties. “Aztech did not provide an order book guidance for FY2025, which we believe is due to the normalising of order lead time.”
Tng acknowledges that he had been “too bullish” on Aztech’s pace of order book recovery.
As such, Tng has cut his revenue projection for FY2025 by 17% and FY2026 by 20%, leading to 18% to 25% reductions, respectively, for his earnings estimates.
As a result, he has downgraded his call from “add” to “hold” along with a reduced target price from 82 cents to 67 cents but adds that the stock would still be supported by decent dividend returns in the interim. Besides a final dividend of 3 cents per share, Aztech plans to pay a special dividend of 7 cents as well.
Tng sees possible upside from potential new customer wins and clinching more projects from its main customer, and a potential one-time gain if Aztech disposes of a vacated plant.
On the other hand, Maybank Securities analyst Jarrick Seet has upgraded his call to “buy” from “hold”, along with a higher target price of 82 cents from 78 cents. According to Seet, the new customers will help Aztech reduce its reliance on its key customers. “As a result, we believe they are in a transition phase to grow their customer and product base.”
Following the coming special dividend payout, Seet expects dividends for the current FY2025 to decline but still offers an “attractive” yield of 9.8%, with any excess likely to continue to be distributed to shareholders, resulting in further dividend upside potential.
Ling Lee Keng, on her part, maintains her “fully valued” call but with a lowered target price of 52 cents from 63 cents as she pencils in slowing orders from Aztech’s key customer, which will hurt future earnings. — Douglas Toh
Singapore Airlines
Price targets:
OCBC Investment Research ‘hold’ $6.50
DBS Group Holdings ‘hold’ $6.30
UOB KayHian ‘hold’ $6.09
Stellar quarter, but ‘neutral’ outlook
Flag carrier Singapore Airlines (SIA) saw earnings grow 2.7% y-o-y to a record $5.2 billion in 3QFY2025 ended Dec 31, 2024. This improvement came “on the back of robust travel demand and SIA’s sustained lead in capacity post-reopening (of air travel),” says Ada Lim of OCBC Investment Research in her Feb 24 report.
The record earnings can be attributed to a 1.7% y-o-y growth in passenger flown revenue credited to a record of 10.2 million passengers flown and a cargo flown revenue growth of 9.7% y-o-y, given a 14.6% increase y-o-y in cargo load.
SIA also saw improved operating results across all their three main businesses in this quarter. Net profit was boosted by a 3.3% y-o-y growth in operating profit along with a one-off $1.1 billion non-cash accounting gain following the $1.6 billion Air India-Vistara merger in November 2024. On top of this, SIA also saw a slowing growth in their total expenditure of 2.6% y-o-y to $4.6 billion, given lower fuel prices.
Despite such a favourable quarter, Lim still has reservations about the outlook for the airline. “We think SIA is nearing the end of the runway for exceptionalism, given that passenger yields are likely to have peaked and are on a moderating trajectory as other airlines progressively return capacity to the market, especially in the region,” she states in the report.
The report also provides limitations on the usefulness of this stellar quarterly performance as a good reflection of the growth potential of SIA. Lim notes that without the exceptional gain from the Air India-Vistara merger, net profit would have been 19.8% lower y-o-y at $598.1 million. This would be due to lower interest income on a lower cash balance with the redemption of mandatory bonds along with the share of losses, including losses from Air India and higher tax expenses.
SIA’s management is still confident that demand for passenger and cargo will remain robust in 4QFY2025, although yields are very likely to continue declining on the continued injection of capacity across passenger and cargo.
DBS Group Research also expects US-China trade tariffs to weigh on air cargo demand, exacerbated by easing shipping disruptions, which could act as a headwind for SIA’s cargo demand moving forward.
“Nonetheless, we remain confident that SIA’s brand proposition, service quality and product innovation will allow it to navigate the transition from recovery to growth going forward,” Lim writes.
On the back of strong quarterly results, Lim raised her target price to $6.50 from $6.30, maintained at a forward price-to-book ratio of 1.09 times. “We maintain our ‘hold’ rating but see upside risks to final dividends on the back of the strong quarterly results,” states Lim in the report.
DBS also raised its SIA target price to $6.30 from $6.00 while maintaining its “hold” rating.
Roy Chen of UOB KayHian has turned more positive on SIA from a previous “sell” call. Over the next two years, he expects SIA’s earnings to stabilise at a level higher than pre-pandemic levels. Along with his new “hold” call, Chen has raised his target price to $6.09, based on a higher valuation of 1.15 times FY2026 P/B, representing 0.5 standard deviations above the long-term historical mean of 1.06 times.
Given SIA’s “strong” balance sheet, Chen believes that it has the flexibility to raise its dividend payout ratio to 60% of core earnings in FY2026 from 53% in FY2025. In fact, SIA can pay a higher dividend for FY2025 if delays in aircraft deliveries result in lower capex, he adds. — Michael Ryan Tan
Sats
Price targets:
OCBC Investment Research ‘add’ $4.11
CGS International ‘add’ $4.35
DBS Group Research ‘buy’ $4
Near-term tariff uncertainty
OCBC Investment Research analyst Ada Lim has kept her “add’ call on Sats, but at a lower fair value of $4.11 from $4.38 over near-term uncertainty on the impending impact of US tariff. She notes that with the removal of the “de minimis” exemption by the Trump administration, though challenging to quantify, will likely impact Sats’ volumes between China and the US.
As a result, Lim has reduced her target FY2025 EV/Ebitda multiple from 8.4 times to 8.0 times to reflect the overhang of tariffs.
She writes in her Feb 24 report: “Sats confirmed that there will be an impact on its business from tariffs announced to date, though management is not expecting this to be significant. Volumes from Canada and Mexico are minimal, while those from China are more sizeable.”
In 3QFY2025 ended Dec 31, 2024, the group’s revenue grew 12.5% y-o-y to $1.5 billion on higher business volumes, rate increases, and a seasonal year-end peak. Revenue from its gateway services business increased 10.1% y-o-y to $1.2 billion, as air cargo volumes grew 6.8% q-o-q to 2.4 million tonnes, supported by e-commerce demand and a shift from ocean to air freight due to disruptions in the Red Sea.
Flights handled improved a further 0.3% q-o-q to 161,000. Meanwhile, revenue from Sats’ food solutions jumped 21.2% y-o-y to $356.7 million, driven by a 20.7% y-o-y increase in aviation meal volumes to 16.3 million.
On the other hand, non-aviation meals served during the quarter fell 14.3% and 5.8% q-o-q and y-o-y, respectively, to 9.8 million, as a result of the termination of some operations in Kunshan and tapering of food provision for the Singapore Army’s Exercise Wallaby in 2QFY2025.
Operating expenses in the quarter grew at a slower 10.3% y-o-y to $1.3 billion, although Lim notes that this includes an unrealised foreign exchange (forex) gain of $5.1 million.
With this, Sats’ ebitda and operating profit for the quarter grew 24.2% and 52.6% y-o-y to $263.9 million and $127.3 million, respectively. Together with a 20.2% y-o-y decline in associates and joint ventures to $27.6 million, Sats reported a patmi of $70.4 million for 3QFY2025, more than double the $31.5 million in 3QFY2024.
For 9MFY2025, revenue and patmi constituted 74% and 71.2% of Lim’s initial full-year forecasts, respectively. “We deem this to be slightly below our expectations due to a 7% q-o-q decline in share of associates and joint ventures, net of tax, in 3QFY2025, on the back of an adjustment of purchase price allocation, which provided a boost to 3QFY2024 figures.”
Sats’ management shared that the group has secured $92 million out of the targeted $100 million of ebitda synergies from the integration of Worldwide Flight Services (WFS), on top of financial and fiscal savings of $53 million per annum. “It is open to reviewing this target and may potentially announce a more ambitious figure in coming quarters,” writes Lim.
“Until there is more clarity around the evolving situation, we expect Sats’ share price performance to remain fairly muted in the near term,” she adds. Potential catalysts include stronger-than-expected cash flow generation ability either due to stronger revenue momentum or effective cost structure optimisation, earnings growth in associates and joint ventures and the resumption of dividends.
Conversely, investment risks include macroeconomic concerns and a recessionary outlook, sticky inflation placing pressure on margins and reducing profitability and execution hiccups. — Douglas Toh
Singapore Telecommunications
Price targets:
PhillipCapital ‘buy’ $3.77
Maybank Securities ‘buy’ $3.72
DBS Group Research ‘buy’ $3.93
HSBC Global Research ‘buy’ $3.70
UOB KayHian ‘buy’ $3.58
Morningstar ‘three stars’ $3.47
Robust 3QFY2025 earnings; ebit and dividend forecasts raised
Singapore Telecommunications (Singtel) reported underlying net profit for 9MFY2025 ended Dec 31, 2024 grew 22% y-o-y to $680 million, driven by improved performance at Optus, NCS and higher contributions from regional associates.
Ebitda in 9MFY2025 rose 6% y-o-y, led by mobile service revenue growth across Singapore and Australia, cost optimisation initiatives and ebitda growth at NCS.
Singtel has raised its FY2025 guidance for core ebit from low double digits to high teens to low 20s. It also plans to pay a total dividend (including value realisation dividend) of 16.5 cents for FY2025, up from the 15 cents per share paid in FY2024.
Following the results announcement, analysts have kept a positive stance on Singtel.
PhillipCapital analyst Paul Chew has maintained his “buy” call with a slightly higher target price of $3.77 from $3.44 due to “mark-to-market gains in associates”. “Multiple growth drivers are underway, including Optus, NCS and Bharti Airtel. We expect $6 billion monetisation to be gradually realised from stakes in Intouch and Bharti Airtel,” he says.
Maybank has also kept its “buy” call with a target price of $3.72, up from $3.65. “We see potential for even higher capital return from Singtel’s various capital-recycling initiatives … a part of which will be realised by divesting a small stake in Bharti Airtel … which management noted remains on track,” wrote analyst Hussaini Saifee in a note on Feb 19.
Similarly, DBS Group Research has retained its “buy” call while raising its target price to $3.93 from $3.82. Analyst Sachin Mittal attributes the revision to an 8% increase in core ebit and a 3% rise in underlying earnings estimates for FY2025.
He also expects the holding company (HoldCo) discount to narrow from 34% to 10% to 15% with improving core ebit. “The HoldCo discount was below 10% before FY18, which, in our view, can be achieved again if the free cash flow of the core business improves sharply.”
Meanwhile, HSBC Global Research and UOBKH reiterate their “buy” calls with unchanged target prices of $3.70 and $3.58, respectively.
“Our target price implies 11% upside from current levels. We expect dividends and profits to rise driven by growth in its core business and higher earnings from regional associates, supported by improving average revenue per user across countries,” note HSBC Research analysts Piyush Choudhary and Rishabh Dhancholia.
HSBC Research analysts also have an “upbeat” outlook for dividends due to rising underlying core earnings and a potential additional value realisation dividend from asset monetisation initiatives. “We forecast distribution per stapled security (DPS) to rise 6.7% y-o-y in FY2025 to 16.0 cents, and 6.1% y-o-y in FY2026 to 17 cents.”
The UOBKH analysts continue to view Singtel as an attractive investment option in a volatile market, supported by improving business fundamentals and a decent FY2025 4.9% dividend yield. Key re-rating catalysts include successful monetisation of 5G, data centres or NCS, and market repair in Singapore.
Dan Baker, senior equity analyst at Morningstar, gave Singtel a three-star rating. He retained his $3.47 per share fair value estimate as Singtel’s associates are “performing well”.
“Singtel looks expensive compared with global peers on a 12-month forward price/earnings ratio of around 20 times. However, we see that as fair, given the higher growth outlook through recovery in Optus and forecast cost reductions,” he says. — Nurdianah Md Nur
Thomson Medical Group
Price target:
PhillipCapital ‘neutral’ 4.8 cents
Earnings recovery to be ‘gradual’
Paul Chew of PhillipCapital has downgraded Thomson Medical (TMG) to “neutral” from “buy” as the healthcare group reported 1HFY2025 ended Dec 31, 2024 results that were below expectations.
In 1HFY2025, TMG reported a net loss of $12.9 million, weighed down by a 90% “collapse” in its earnings in Malaysia operations due to the loss of insurers and heavier discounting.
TMG’s Thomson Hospital Kota Damansara had become “reliant” on an insurance company that demanded steep discounts.
“Without an insurance company, patients have to bear the cost out of pocket rather than cashless,” explains Chew.
In addition, the company had to bear a 50% increase in finance costs.
Chew believes the worst is over for TMG, but the company will continue to be hampered by various operational issues. There are some positive attributes, but a pick-up in earnings will be “gradual”.
In Singapore, Chew sees TMG growing its “revenue intensity”. In Malaysia, six new oncologists will help “significantly” boost revenue and bill sizes. Over in Vietnam, where TMG runs the FV Hospital, the company faces intense competition, and discretionary spending and elective surgery have also been weak.
“TMG’s focus is to improve the hospital’s marketing discovery and visibility. Due to competitive pressure and a delay in expanding bed capacity, we are not expecting a strong improvement in earnings,” warns Chew.
In Johor, tendering activity for a 500-bed general hospital just 1km from Johor checkpoint with Singapore is underway.
Construction could start at year-end, with the new facility becoming operational after three years.
Meanwhile, Chew has cut his FY2025 revenue projection by 12% and ebitda by 23%, leading to his downgrade to “neutral” from “buy” and a lower target price of 4.8 cents from 6.1 cents.
Chew values TMG’s core hospital operations at 13 times EV/Ebitda FY2025, which is in line with peer hospitals, and the company’s Johor land bank at $1 billion.
The 1.5ha earmarked for TMG’s upcoming Johor hospital is valued at its acquisition cost of $80 million. For the remaining 9.5ha, Chew has assigned a gross development value potential of $3.4 billion. — The Edge Singapore
Civmec
Price targets:
Maybank Securities ‘hold’ 89 cents
UOB Kay Hian ‘hold’ 98 cents
Weaker than expected 1HFY2025
Australia-based engineering firm Civmec posted 16.9% y-o-y lower earnings of A$26.5 million ($22.59 million) in 1HFY2025 ended Dec 31, 2024, which missed the expectations of UOB KayHian (UOBKH) and Maybank Securities.
Revenue in 1HFY2025 increased by 2.2% y-o-y to A$502.9 million. However, the company’s gross margin dropped by almost 1.2 percentage points to 11.1% due to a shift in business mix and higher depreciation.
UOBKH’s analysts John Cheong and Heidi Mo, along with Maybank’s analyst Eric Ong, point out that delays in the timing of key project awards and the rescheduling of projects had resulted in a 20.9% q-o-q decline in Civmec’s order books to A$633 million as at end-2024.
On the positive side, despite the lower earnings, Civmec has maintained its dividend payout at A$0.025 per share, translating to a payout ratio of 48%.
The analysts interpret this as Civmec’s sustained confidence in its balance sheet and outlook. The company is actively seeking new projects worth around A$12 billion, suggesting a vibrant activity level.
However, Civmec has observed shifts in market conditions due to nearing national elections and increased geopolitical tensions. These external factors might result in contract delays well into 2HFY2025, lowering activity levels.
Along with a downgraded call of “hold”, UOBKH’s Cheong and Mo have also lowered their target price for this stock to 98 cents from $1.40; Maybank’s Ong, meanwhile, rates this counter “hold” along with a lower target price of 89 cents from $1.20. — The Edge Singapore
