OCBC Investment Research’s Ada Lim, following Singapore Post’s (SingPost) latest divestment, has reduced her fair value for this stock, and warns that growth prospects remain unclear for now and that investors are to focus on the company’s break-up value instead.
On July 22, SingPost announced the sale of its entire freight forwarding business, comprising Famous Holdings and Rotterdam Harbour, for $177.9 million. The company will book a gain of around $10.5 million and unlock some $104 million in cash to be deployed as determined.
Lim says that SingPost is trying to sell a network of 10 post offices in a sale-and-leaseback deal worth some $50 million.
Besides removing Famous Holdings from her valuation of SingPost, she has included the value of the post offices, and she has also lowered her FY2026 EV/Ebitda valuation multiple from 7.7 times to 6 times. This led to a lowered fair value of 59 cents from 60.5 cents.
Noting that SingPost’s share price has dropped significantly after it went ex-dividend on July 30, Lim has changed her call to “buy”, but this is mainly based on valuation grounds.
She warns that SingPost’s operations are now scaled down “significantly” with the recent divestments. The majority of this company’s value is now in its properties and non-core assets, which are to be sold off eventually.
Meanwhile, the company’s domestic postal business continues to face a structural decline, while the operating environment for the international business remains subdued.
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She also notes that SingPost is now undergoing board renewal and management changes, and there is a lack of clarity over its strategic growth plan at the time of writing. “We urge investors to exercise caution,” says Lim. — The Edge Singapore
Hongkong Land Holdings
Price target:
DBS Group Research ‘buy’ US$7.20
Back in the black, eye on capital recycling
A team of analysts with DBS Group Research have kept their “buy” call on Hongkong Land Holdings following its 1HFYF2025 ended June 30 results, where the company is back profitable.
With ongoing moves by the company to buy back shares, be more active in capital management, and with prospects of higher dividends, they have also raised their target price for this counter.
Year to date, the share price has gained around 40% and is now at a discount of 42% to their appraised current net asset value (NAV), according to Jeff Yau, Percy Leung and Cherie Wong in their July 30 note.
“If the company successfully recycles its maturing assets and scales up its share buyback programme, the stock could trade higher,” they add, giving a new target price of US$7.20 ($9.35), representing a 35% discount to their June 26 NAV estimate.
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On July 29, Hongkong Land reported underlying profit of US$297 million for the half year ended June, versus red ink of US$7 million in the year-earlier period.
The improvement was partly led by lower provisions made for its projects in China, whose property market remains soft. Its Singapore office portfolio, on the other hand, commanded higher rentals.
What generates investors’ recent interest in the company is its active capital recycling efforts, including, most notably, selling nine floors at One Exchange Square to the Hong Kong Exchange. Some US$1.3 billion in capital has been recycled, equal to 33% of its 2027 target.
In addition, Hongkong Land is actively buying back shares, which has the effect of supporting its NAV per share. With US$133 million spent since late April, its NAV per share has increased slightly from US$13.57 as of last December to US$13.62, marking its first increase in NAV per share since 2018.
According to the DBS analysts, continued share buybacks should lend support to its near-term share price performance.
Asset recycling progress, including the disposal of MCL Land, its Singapore-based subsidiary, should dictate its share price performance for the rest of this year, according to DBS.
The company is keeping its interim dividend at 6 US cents. — The Edge Singapore
ISDN Holdings
Price target:
CGS International ‘add’ 44 cents
Improving businesses; hydropower gaining scale
William Tng and Tan Jie Hui of CGS International (CGSI) have upgraded their call for ISDN Holdings from “reduce” to “add” on expectations that it will report improving 1HFY2025 ended June 30 numbers on Aug 11, in line with better business conditions following the tariff uncertainties.
Tng and Tan warn that unrealised forex losses from its hydropower business will likely weigh on the 1HFY2025 headline earnings number. However, revenue is expected to rise by at least 10% y-o-y to $192.1 million as business conditions are likely to improve gradually after the initial tariff surprise.
In their July 31 note, they forecast 1HFY2025 earnings of $6.2 million, up 63% y-o-y.
Tng and Tan suggest that, given how ISDN has built up a certain scale of its hydropower business, the company can consider selling it or spinning off its own listing.
“This should then make it easier for investors to understand the company better and value the company for its core industrial automation business. This should also widen the appeal of the company to investors who prefer companies to focus on their core business,” they add.
From an earlier valuation multiple of 8.8 times FY2026 earnings, they now value the company at 13.5 times FY2026 earnings, which is the 10-year FY2016 to FY2025 average.
Tng and Tan justify this higher multiple as they believe that ISDN’s share price has already discounted some of the tariff impact, and that the underlying business is experiencing some recovery.
In addition, small-cap stocks are enjoying better valuation with the impending $5 billion in market rejuvenation funding.
From an earlier target price of 28 cents, Tng and Tan deem ISDN is now worth 44 cents.
According to the analysts, re-rating catalysts include higher-than-expected net profit contribution from its hydropower business segment, a faster pace of economic growth in China as it stimulates its economy and a stronger recovery of the semiconductor market.
On the other hand, 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
