Shekhar Jaiswal of RHB Bank Singapore has maintained his “buy” call on Singapore Technologies Engineering(ST Engineering), citing how the year-to-date share price has lagged regional peers.
“Given its growing potential for international defence contract wins, diversified orderbook, and increasing capabilities in conventional and digital defence”, the company should benefit from the global surge in defence spending, says Jaiswal.
The analyst is applying a higher valuation multiple on this counter, leading to a higher target price of $8.90 from $8.30.
On May 7, the company announced it won a contract from Singapore’s Navy to deliver a suite of mine countermeasure (MCM) unmanned systems. The MCM suite will include a fleet of unmanned surface vessels, autonomous underwater vehicles and a command & control (C2) centre.
See also: S’pore, global markets focused on July 9, when US tariff pause ends: CGSI
On the same day, ST Engineering announced the progression of the European Protected Waveform (EPW) project to its second phase. The project aims to enhance secure satellite communications for military operations and critical government functions across Europe.
Additionally, Saab Australia and ST Engineering signed an agreement to deliver deployable health solutions for combat field hospitals in Asia Pacific.
Jaiswal points out that relative to regional peers, its year-to-date gain of around 70% has lagged. For example, Austal is up 106%, Hanwha Aerospace is up 170%, Korea Aerospace is up 77% and Hyundai Rotem is up 281%.
See also: PhillipCapital upgrades Sembcorp to ‘buy’, increases earnings by 5% due to Senoko acquisition
Excluding India and China defence names, these regional peers trade at around 30 times 2FY P/E and 17.5 times 2FY EV/Ebitda, both above ST Engineering’s current forward multiples, even though it matches their ebitda and net margins, and is better in its return on equity and dividend yield. — The Edge Singapore
Nanofilm Technologies International
Price target:
OCBC Investment Research ‘hold’ 59.5 cents
Steady upward grind by tariff uncertainty remains
Nanofilm Technologies International’s share price and that of many Asia-based tech companies have been hit following the US tariffs announced on April 2.
After the US put a halt on the tariffs as multiple negotiations took place, Nanofilm’s share price has been on a “steady upward grind” but has yet to recover to the last closing price of 63 cents as of April 2.
Citing the uncertainty, Ada Lim of OCBC Investment Research believes investors should adopt a “wait and see” approach. “In the absence of significant positive developments and with the tariff outlook remaining uncertain, we now see Nanofilm’s shares as being close to fairly valued,” says Lim in her June 13 note.
Lim, citing Nanofilm, says there is 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. However, second-order implications are challenging to quantify, she warns.
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Nanofilm’s operating sites are in China and it has smaller sites elsewhere, such as Vietnam, Europe and Singapore. From these various sites, Nanofilm provides coating services for customers in consumer electronics and builds equipment sold to various customers.
For Lim, current data points paint a “mixed picture”. Citing data from Canalys, there was a slight 0.2% y-o-y growth in global smartphone shipments in the first quarter of this year, though this was the third consecutive quarter of declining growth.
Meanwhile, Apple’s 2QFY2025 results were modestly better than consensus estimates despite limited pull forward in demand due to tariffs, says Lim. Apple is believed to be a key end customer of Nanofilm.
“We prefer to stay conservative for now and leave our forecasts intact,” says Lim.
Her fair value remains 59.5 cents but she has downgraded her call from “buy” to “hold” on valuation grounds. — The Edge Singapore
UMS Integration
Price target:
UOB Kay Hian ‘buy’ $1.32
Bursa dual listing to help narrow valuation gap
UMS Integration is on track to complete its Bursa dual-listing in late July and its valuation gap with its Malaysia-listed peers should narrow thereafter, according to UOB Kay Hian’s John Cheong in his June 11 note, where he has kept his ‘buy’ call and $1.32 target price.
Cheong notes that UMS, trading at 16 times FY2026 earnings, is a discount of around 30% versus 23 times fetched by its Malaysian peers like UWC and Sam Engineering.
Besides a lower valuation, UMS, giving a yield of 4%, is dishing out its dividends more frequently on a quarterly basis, which makes it more appealing to its peers. “We also understand that the majority of the institutional funds in Malaysia have a mandate of investing only in Bursa-listed stocks.
“Moreover, UMS will engage the service of market makers at the initial phase to help enhance the liquidity of Malaysia-listed entity before more shares are transferred from Singapore to Malaysia,” adds Cheong.
The dual-listing aside, UMS is seeing healthy orders, which gives it the confidence to maintain its revenue guidance of 10% growth q-o-q. According to Cheong, a new customer for UMS is giving it a “strong order flow” as it diverts its US supply source to Asia.
In addition, the company’s capability to complete most of the manufacturing processes in-house, such as plating, anodising, brazing, welding and chemical cleaning, will help to maintain healthy margins and achieve prompt delivery.
“UMS has not seen any impact from the US trade tariffs, as semiconductors are exempted. UMS has several measures to resolve its labour issues, including training foreign workers and enhancing its staff retention strategy,” adds Cheong.
His target price of $1.32 is based on an unchanged P/E-based valuation of 17.5 times FY2026 earnings, which is pegged to one standard deviation above UMS’s historical mean P/E to reflect the better production ramp-up from UMS’s new customer and improvement in its earnings quality from new contributions from its new customer.
For Cheong, catalysts that might help the share price move include higher-than-expected factory utilisation rates, return of orders for aircraft components to benefit its subsidiary JEP Holdings and better-than-expected cost management. — The Edge Singapore
CapitaLand China Trust
Price target:
DBS Group Research ‘buy’ 85 cents
Impending IPO of CLCR to help narrow yield spread
DBS Group Research has maintained its “buy” call and 85 cents target price on CapitaLand China Trustfollowing news that it is taking an initial 5% stake in CapitaLand Commercial C-REIT (CLCR), which is slated for a separate listing in China by the end of the year. Both CLCT and CLCR are backed by CapitaLand Investment.
According to CLCT, it will divest one of its properties, CapitaMall Yuhuating, into CLCR for RMB748 million ($133.5 million), or an exit yield of 6.8%. Yuhuating in Changsha will help form the initial portfolio of CLCR, which will also consist of CapitaMall SKY+ in Guangzhou.
CLCT will also subscribe to a 5% strategic stake in CLCR’s initial public offering, alongside CLI and CapitaLand Development, which will collectively hold over 20% of initial IPO units as required under regulations. “We see this as a forward-looking and strategic move for CLCT, offering a differentiated growth path via CLI’s broader ecosystem,” says DBS.
“Over time, the success of CLCR could help narrow the yield spread between the two platforms. However, if CLCT continues to trade at a steep discount to book, questions around its long-term structure or potential privatisation may resurface.
According to DBS, the inclusion of Yuhuating, one of CLCT’s smaller assets, appears to be a “test case” to gain exposure to the onshore REIT market.
With net proceeds of some $107 million, CLCT can reduce its gearing by 1.2 percentage points to 41.4%. However, doing so may be DPU-dilutive given its low borrowing costs.
Instead, DBS believes that unit buybacks will feature more prominently as a capital recycling channel, especially with CLCT trading at just 0.6 times P/B, to enhance net asset value and support unit price. — The Edge Singapore
Singapore Airlines
Price target:
Maybank Securities ‘hold’ $6.85
Air India accident will not be a ‘material’ financial risk
Singapore Airlines remains a “hold” for Eric Ong of Maybank Securities following two recent adjacent events: the crash of a Boeing 787 operated by its associate Air India and the closing of Jetstar Asia, one of the three airlines based out of Changi.
On June 12, Air India’s Flight 171, heading to London from Ahmedabad, crashed, killing more than 200 people and marking the first fatal accident involving a Boeing 787 since it started service in 2011. “Given SIA’s strong balance sheet and profitability, this unfortunate incident is not expected to be a material financial risk to the group,” suggests Ong in his June 13 note.
He points out that despite SIA holding a stake of 25.1% since last November, Air India operates as a standalone entity. Any liabilities arising from the crash, be it aircraft damage, compensation or lawsuits, are likely to be mostly covered via aviation insurance. “Pending investigation outcome, we also think SIA is unlikely to halt its Boeing 787 flights due to its strong safety track record,” says Ong.
He believes the accident should not derail Air India’s plan to turn around and become a “self-sustaining” company in FY2025 on record revenue and lower fuel costs.
“Despite stiff competition, this shows that Air India’s transformation programme is working well as it continues to optimise its operations for efficiency gains along with continued fleet upgrading,” says Ong.
Separately, Jetstar Asia, a Qantas subsidiary, is shutting down. It now runs 180 weekly services out of Changi and carries 2.3 million passengers, or 3% of the airport’s total.
The way Ong sees it, the exit of Jetstar Asia may bring some reprieve in the competitive low-cost carrier market in terms of load factor and yield.
To fill the gap, Scoot, the low-cost airline of SIA Group, plans to ramp up its weekly flights in the region and launch new routes to Okinawa in Japan and Labuan Bajo in Indonesia — both destinations Jetstar Asia serves exclusively from Changi Airport.
According to Ong, with the spike in crude oil prices amid escalating Middle East tension, he expects SIA’s shares to pull back, especially given the recent outperformance.
For now, he has kept his “hold” call and $6.85 target price, which is based on a mid-cycle P/B of 1.25 times as the stock should be somewhat cushioned by a dividend of 30 cents that goes ex on Aug 8. — The Edge Singapore
Suntec REIT
Price target:
RHB Bank Singapore ‘buy’ $1.35
Lower rates and tax issues in Australia addressed
Suntec REIT, the subject of a mandatory general offer by its controlling shareholder late last year, has underperformed since the start of the year due to the combination of higher Australian tax, uncertainty arising from the sponsor’s privatisation and macroeconomic volatility.
Nonetheless, in his June 16 note, Vijay Natarajan of RHB Bank Singapore is upbeat about this counter, not just for its yield of 6%.
“With a positive resolution likely on the tax impact and tailwinds from falling local interest rates, we see the share price bottoming out,” says Natarajan, who has kept his “buy” call and $1.35 target price. “Suntec REIT remains a potential privatisation, internalisation, and M&A target, given its high-quality assets and deep trading discount of 0.55 times P/B,” he adds.
Around four months ago, Suntec REIT announced that it would not qualify for so-called managed investment trust (MIT) status in FY2025, as the stakes of controlling shareholders Gordon Tang and Celine Tang crossed 10%, which disqualifies them from a concessionary tax rate. According to Suntec REIT, they have since restructured their holdings and the REIT is now compliant.
In 1QFY2025, the REIT recorded a tax provision of around $2 million due to the absence of the MIT status. “This could be reversed if the REIT secures the exemption,” says Natarajan.
In addition, the REIT has priced $250 million in perpetual securities that will be issued on June 17, bearing a fixed coupon of 4.48% annually, slightly better than expectations.
Funds raised from this issue will be used to pay down its existing $200 million perps at 3.8% per annum, callable in October. Suntec REIT has another $150 million of perps at 4.25% per annum, which is due for a reset next June.
Given that only 65% of its debt is hedged, Suntec REIT is also a prime beneficiary of falling domestic interest rates, according to Natarajan. The Singapore Overnight Rate Average has declined by 80 basis points since the start of the year.
Natarajan also notes that the REIT’s operational performance remains healthy, with average rent reversions in 1QFY2025 at 8% to 10% across its Singapore office and retail assets, and stable occupancy.
“Management is likely to continue its tactical divestment of the Suntec City Strata office at a premium to book value and look at potential divestments of mature Australian assets to lower its relatively high gearing,” adds Natarajan, who expects between $50 million and $100 million of divestments this current fiscal year. — The Edge Singapore
Thai Beverage
Price targets:
UOB Kay Hian ‘hold’ 45 cents
CGS International ‘add’ 56 cents
Higher alcohol taxes in Vietnam
UOB Kay Hian analysts Llelleythan Tan Yi Rong and Heidi Mo have lowered their target price for Thai Beveragefrom 51 cents to 45 cents, following news that Vietnam, one of the key markets for the company’s beer business, will see a higher consumption tax.
The revised tax from 65% to 70% is a bid to curb alcohol consumption in Southeast Asia’s second-largest beer market. This tax will be increased gradually to 90% in 2031.
“With the beer sector already facing a challenging outlook, we expect ThaiBev is likely to fully pass on the higher excise tax to consumers, resulting in softer beer volumes,” state the analysts in their June 16 note, where they have kept their “hold” call.
Tan and Mo point out that the beer sector in Vietnam is already suffering from low volumes due to stringent drink-driving laws introduced in 2019.
“Coupled with changing domestic preferences, we reckon that the higher alcohol tax would negatively impact beer consumption volumes in the medium-long term, affecting beer producers such as ThaiBev’s Vietnam subsidiary, Sabeco. In FY2025, Sabeco accounted for 15% of ThaiBev’s revenue and 7% of its patmi.
ThaiBev may enjoy better domestic sales, driven by increasing tourist arrivals. In addition, the company has secured raw materials at lower prices and is curbing marketing spend. Overall, they remain pessimistic about ThaiBev’s beer business, which the company has been mulling a spin-off listing for years.
Elsewhere, the recovery of ThaiBev’s spirit, its other key business segment, is not expected to enjoy a recovery till later this year, and even so, at a low single-digit y-o-y pace.
The analysts attribute this to the macroeconomic environment and a weakening domestic economy. “Potential downside may come from an unfavourable product mix, driven by downtrading of the higher average selling prices of brown spirits to white spirits,” they warn.
To reflect these changes, Tan and Mo have maintained their FY2026 patmi forecast and have lowered FY2027’s by 1%. Their revised target price of 45 cents, down from 51 cents, is on the back of lower valuations for most of its business segments, given the lower pegged EV/Ebitda peer multiples since their last update.
“In our view, we expect ThaiBev to remain fairly valued at current price levels. We opine that muted earnings growth, dragged by a challenging outlook, would weigh on share price performance,” state Tan and Mo.
On the other hand, Meghana Kande and Lim Siew Khee of CGS International are not as pessimistic, as they maintained their “add” call and 56 cents target price. They believe that drags on higher beer consumption, such as the tax in Vietnam, have been largely priced in at ThaiBev’s current valuation, which is at its lowest in five years and more than 1.5 standard deviations below its five-year mean. — The Edge Singapore
PropNex
Price target:
PhillipCapital ‘buy’ $1.33
Ramp up of new launches
Paul Chew of PhillipCapital has kept his “buy” call and $1.33 target price on PropNex. He expects more new residential launches in the second half of this year to help sustain growth for Singapore’s largest real estate agency.
In his June 16 note, Chew estimates 2H2025 will see around 50% more new launches than 1H2025’s 4,669 units as the industry builds on the growth momentum. As of May this year, new home sales, excluding executive condominiums, jumped by 168%.
PropNex typically commands a significant market share in helping developers move new projects. Given how revenue recognition of brokerage fees is recognised up to three months after the sale, PropNex is set to report this spike when it reports its results for 1HFY2025 ended June.
Noting that this bullish projection is already factored in, Chew is keeping his FY2025 earnings projections for now but says there’s potential upside to his forecast. “We believe the sentiment for new launches remains healthy and is supported by low interest rates,” he says.
Chew adds that PropNex trades at an attractive dividend yield of 6.1%. The absolute payout of some $48 million per year is backed by the company’s annual free cash flow of $64 million and net cash and fixed-income securities of $152 million.
Possible catalysts for the industry include the relaxation of foreign buyers’ additional buyer’s stamp duty and the reduction of the wait-out period for downgraders. — The Edge Singapore
