Citing multiple “tailwinds”, Vijay Natarajan of RHB Bank Singapore has turned more bullish on Suntec REIT, where, along with his “buy” call, he has raised his target price from $1.35 to $1.48.
Along with a sharp decline in interest rates year to date, Suntec REIT has lowered its finance costs by 6% in 1HFY2025.
With the Singapore overnight rate average or Sora continuing its decline in 2HFY2025, this will continue to have a positive impact on its unhedged loans, around two-thirds of the total, says Natarajan in his Sept 8 note.
In addition, following a ruling from the Australian tax authorities, it is deemed to have retained its managed investment trust (MIT) structure in Australia for FY2025.
This will result in the REIT’s Australian income, which makes up 18% in 1HFY2025, being taxed at 10% or 15% on distributions, compared to the effective Australian tax rate of 30%–45%.
To recap, earlier this year, the REIT announced that it would not qualify for MIT as the stakes of its major shareholders had crossed 10%. Since then, they have restructured their holdings, and Suntec REIT is now compliant.
Natarajan says: “The Australian Taxation Office has ruled that the inability to meet the requirements was only temporary and beyond the control of the REIT, and that it was fair and reasonable to treat the trust as an MIT. As a result, Suntec REIT will be reversing the $4 million tax provision made in 1HFY2025 and will continue to enjoy lower tax rates moving forward. In addition, it has joined the UK REIT regime in April, which will lower its UK tax rates by 10 percentage points and result in an estimated GBP1 million ($1.74 million) to GBP1.5 million tax savings per year.”
In addition, Suntec’s operating performance remains resilient, with its Singapore portfolio achieving committed occupancy of more than 98% and a stable outlook. In 1HFY2025, Singapore rent reversions were strong at the office, up 10% while retail has been hiked by 17.2%.
Further revisions are expected to remain in the high single-digits in the near -term, says Natarajan.
Over in Australia and the UK, the portfolios are seen for improvements too, with the REIT currently in active leasing discussions, he adds.
For the current FY2025 and coming FY2026, Natarajan estimates Suntec’s DPU to increase by 5% and 4%, after taking into account lower tax and finance costs. Between FY2025 and FY2027, Natarajan expects the distribution per unit to see a CAGR growth of 5%.
“Suntec remains a potential M&A and internalisation candidate, given its high-quality portfolio size and 35% discount to book,” says Natarajan. — The Edge Singapore
BRC Asia
Price target:
UOB Kay Hian ‘buy’$4.69
Strong earnings visibility
For more stories about where money flows, click here for Capital Section
Heidi Mo of UOB Kay Hian believes that steel supplier BRC Asia will continue to benefit from rising demand as construction activity accelerates.
Besides keeping her “buy” call, Mo, in her Sept 5 update, has raised her target price for this stock from $3.29 to $4.69. Just over three months ago, Mo’s price target for this counter was $2.76.
“Its record $2 billion orderbook, boosted by major wins like Changi Airport T5, provides strong multi-year earnings visibility.
“With favourable tailwinds, BRC Asia’s earnings momentum is expected to continue going into FY2026,” says Mo, adding that this stock has a “decent” FY2026 yield of 5.3% as well.
According to Mo, BRC Asia commands a 55%–60% market share in Singapore’s steel market, which makes it a prime proxy to benefit from rising construction activity.
Last month, it completed the acquisition of a 55% stake in Southern Steel Mesh (SSM), which operates four manufacturing plants in Malaysia, producing welded wire mesh and reinforcement products.
“The acquisition provides BRC with a strategic foothold in Malaysia, diversifies its revenue and enhances its scale in Southeast Asia. Management aims to enhance value by upgrading SSM’s operations to better compete with other leading downstream steel manufacturers,” says Mo.
She notes that the company, within Singapore, is benefiting from tailwinds generated by major infrastructure spending and housing developments.
All in, BRC Asia has built up a record order book of $2 billion, including a recent boost of $570 million for Terminal 5.
The orders are to be filled within five years, although the majority is expected to be completed within the next three years.
“This provides earnings visibility, cost advantage and improved procurement, positioning BRC to defend margins even in a volatile steel price environment.
“While execution risk remains, the large orderbook provides a solid foundation for the coming years, and underpins BRC’s ability to sustain growth,” says Mo.
Her revised target price of $4.69 is based on a 14 times FY2026 earnings, a valuation multiple that is two standard deviations above its long-term average. Previously, she was using 7.6 times FY2025, the historical mean.
“The higher multiple reflects BRC’s strong positioning as the dominant player in Singapore’s steel market and a prime proxy to the ongoing construction upcycle, which should drive sustained earnings growth,” says Mo. — The Edge Singapore
Yangzijiang Financial
Price target:
CGS International ‘add’ $1.25
Yangzijiang Maritime spin-off catalyst
Lim Siew Khee of CGS International (CGSI) has increased her target price on Yangzijiang Financial to $1.25 from $1.09, following its plans to spin off its maritime fund and maritime investment business through a capital reduction exercise and distribution of all its shares into Yangzijiang Maritime Development.
The analyst, who kept her “add” call, likes Yangzijiang Financial for the Yangzijiang Maritime spin-off angle and deems the move a key catalyst.
The spin-off will result in a listing on the Singapore Exchange’s (SGX) Mainboard, with a placement of up to $250 million to institutional and accredited investors. The spin-off will likely be in November. Post spin-off, Yangzijiang Financial will retain its investments, fund management business and debt investments in China, notes Lim.
Lim estimates that the transaction will lower Yangzijiang Financial’s consolidated net tangible assets from $4.07 billion to $1.87 billion and its FY2024 EPS from 8.66 cents to 3.51 cents, with no change to its issued share capital of 3.48 billion shares. Assets to be spun off accounted for around 53.7% of the group’s net asset value and 56% of its net profit in 1HFY2025.
According to Yangzijiang Financial, Yangzijiang Maritime will become a “pure-play” maritime platform focused on maritime investments and services, loan services and imports and exports.
Other positives include Yangzijiang Financial’s inclusion in the Straits Times Index’s reserve list following the latest semi-annual review changes to the FTSE Straits Times Index Series.
Another plus is Yangzijiang Financial’s $100 million commitment that would anchor Singapore ICH Asset Management’s investment fund targeting Singapore small- to mid-cap companies and complementing the Equity Market Development Programme.
Lim’s target price is now based on a sum-of-the-parts formula, a departure from the previous blended P/B and P/E valuations.
Her new target price is based on Yangzijiang Financial’s 2026 P/B of one times for its maritime fund and 0.8 times its 2026 P/B for its remaining business. The maritime fund multiple is pegged to the average of Hong Kong- and Singapore-listed fund management companies, while the latter is pegged to the valuations of Chinese banks.
Lim believes improvements in China’s real estate sector could re-rate Yangzijiang Financial’s remaining business in the medium term, while “significant fair value losses of investments from an unexpected market slowdown” are downside risks. — Douglas Toh
CNMC Goldmine
Price target:
SAC Capital ‘buy’ $1.13
Record gold prices driving record earnings
SAC Capital analyst Matthias Chan has hiked his target price on CNMC Goldmine Holdings to $1.13 from 45 cents following the company’s “stellar” performance in the 1HFY2025 ended June.
CNMC net profit surged 251.4% y-o-y to US$19.4 million ($25 million), outperforming FY2024’s full-year net profit of US$12.2 million. Revenue in 1HFY2025 increased 78.0% y-o-y to US$52.8 million, which Chan notes is the “highest in any half-year period since CNMC’s inception”.
As at June 30, the company has US$37.3 million in net cash, which Chan notes is a “record amount”. This accounts for 62% of its net asset value.
With this set of results, CNMC proposed a dividend of 1.5 cents per share for the 1HFY2025, some three times the dividend payout of 1HFY2024’s 0.4 cents.
To further the company’s competitive positioning, it has completed a significant upgrade of its processing infrastructure in early 2025, expanding the carbon-in-leach (CIL) plant’s capacity by 60% to 800 tonnes of ore per day.
Additionally, CNMC is also constructing a second underground mining facility at Sokor to tap higher-grade gold ore zones.
Importantly for CNMC, the analyst notes that the price of gold has been on a strong upward trajectory, with forecasts from financial institutions projecting it to remain elevated or to even “reach new highs” in the near-term.
Ong writes: “Ongoing geopolitical tensions in Europe and the Middle East, coupled with global trade uncertainties, have driven investors to seek safe-haven assets ... Furthermore, central banks globally have been consistent buyers of gold, reinforcing its status as a store of value and an inflation hedge.”
One potential risk noted by him is the volatility in gold prices, with a sharp decline likely prompting a re-evaluation of CNMC’s fair value, which could lead to underperformance.
Other risks include operational risks related to mining activities, regulatory and environmental risks and foreign exchange risks. Keeping a “buy” call, Chan concludes: “Given CNMC’s strong earnings momentum and increased gold production and higher gold prices, we lifted our FY2025 and FY2026 net profit forecast to US$39.3 million and US$45.8 million, respectively.” — Douglas Toh
Prime US REIT
Price target:
UOB Kay Hian ‘buy’ 31 US cents
‘Depressingly low’ valuation
Jonathan Koh of UOB Kay Hian has kept his “buy” call and 31 US cents target price on Prime US REIT, calling this counter trading at a “depressing low” valuation of 0.36 its price to net asset value ratio. That aside, interest in its properties seems to be picking up.
According to Koh, leasing momentum has recovered, with viewings up since potential new tenants returned from their Labour Day long weekend in early September. The bulk of the new leases is expected to be signed in 4QFY2025.
Specifically, the REIT is in “advanced negotiations” with a California State government agency for 121,000 sq ft at Park Tower in Sacramento, equivalent to 25% of the net lettable asset, which could bring occupancy back to 85%, up from the most recently reported 68% in 2QFY2025.
“The prospective tenant has signed a letter of intent and is in the process of reviewing the first draft of the lease agreement,” says Koh.
Also, there are various leasing discussions underway at Village Center Station 1 (VCS1) in Denver. After signing a 43,000 sqft lease with a global engineering company in 2QFY2025, the REIT continues to engage a financial services company for 39,000 sqft at VCS1, which could improve occupancy at this property from 68% to 84%.
Over at 171 17th Street in Atlanta, the REIT is talking to two prospective tenants. It is in advanced negotiations with a professional services company for 23,000 sq ft, or one floor, which could improve occupancy at this property from 66% to 70%.
According to Koh, the REIT’s manager had previously guided portfolio occupancy to recover to 83%–85% by the end of the year.
“With the recent pick-up in leasing activities, management has become more confident that Prime US REIT could achieve the higher end of the guided range at 85% by the end of 2025,” he says.
Meanwhile, in 1HFY2025, leasing activities surged with 400,000 sq ft of leases signed, up 24% h-o-h, and with positive rental reversion of 3.4% and annual rent escalation of 2%–3%. Koh says there will be more new leases this coming year.
In the most recent 2QFY2025, portfolio occupancy improved 1.3 percentage points (ppts) q-o-q to 80.2; portfolio Weighted Average Lease Expiry was extended by 0.4 years in 2024 and 0.3 years in 1H2025 to 4.7 years as of June.
For 1HFY2025, Prime US REIT kept its payout ratio at a mere 10% of its distributable income so as to keep the funds for refurbishment instead.
According to Koh, the REIT’s management plans to convene a board meeting in November to deliberate on its payout ratio strategy.
He figures a phased approach with gradual step-ups in the payout ratio from 50% in 2026, thereafter increasing by 15 ppts to 65% in 2027 and 80% in 2028.
The REIT had secured a new credit facility of up to US$550 million on Aug 9, comprising a US$400 million term loan facility and a US$150 million committed revolving credit facility.
Koh estimates that the REIT now has a weighted average debt maturity of 2.3 years, with aggregate leverage remaining stable at 46.7% as of June, and no refinancing requirements over the next two years until July.
He expects the cost of debt to trend lower to 5.2% in 2HFY2026 from 5.4% in 2QFY2025.
By applying assumptions of a payout ratio of 50% in 2026, 65% in 2027 and 80% in 2028, Prime US REIT will generate attractive yields of 9.6% for 2026 and 12.7% for 2027.
“We like Prime US REIT for its positive leasing momentum and conviction on improvement in portfolio occupancy,” says Koh. — The Edge Singapore
Food Empire Holdings
Price target:
RHB Bank Singapore ‘buy’ $2.272
Improving margins, bigger capacity, higher earnings
Alifie Yeo has kept his “buy” call on Food Empire and has raised his target price to $2.72 from $1.67, given its longer-term growth prospects driven by capacity expansion.
“We raise FY2026-2027 earnings on better-than expected growth traction, driven by higher manufacturing capacity across Malaysia, Kazakhstan, India, and Vietnam,” says Yeo in his Sept 10 note.
The instant coffee maker’s 1HFY2025 headline earnings were a net loss as it booked a one-off US$33 million ($24.35 million) loss on its redeemable exchange notes. Otherwise, core profit before tax in the same half year to June was above expectations, up 45% y-o-y to US$43 million.
Despite the net loss, Food Empire is paying an interim dividend of 3 cents. The company typically only pays a final dividend.
In conjunction with the higher revenue, Food Empire improved its gross margin to 32.9%, which is above Yeo’s expectation as well.
Having turned more positive on the company’s prospects, Yeo has raised his FY2026 and FY2027 core earnings by 13% each to take into account higher revenue and better margins.
According to Yeo, growth in the medium term should be driven by higher production capacity, which will boost sales volume.
Besides Malaysia, Food Empire is in the midst of boosting capacity in Vietnam, India and Kazakhstan between the end of this year and FY2028.
Yeo observes that Food Empire has also re-rated from 10 times FY2025 earnings to 17 times FY2025 earnings, in line with the broader market since his last update, on optimism over positive fund flows.
In view of the market rerating and his positive forecast, Yeo derives the new target price of $2.72 after pegging the stock to 18 times blended FY2025 and FY2026 earnings, from a lower valuation multiple of 12 times FY2025 earnings previously, which is in line with its peers’ rerating.
Yeo warns that downside risks will come from disruptions in operations due to the Russia-Ukraine conflict, and the negative effect of a change in the value of the ruble and other emerging market currencies. — The Edge Singapore
Geo Energy Resources
Price target:
PhillipCapital ‘buy’ 47 cents
Acquisition of barging companies
Geo Energy Resources has reported 1HFY2025 earnings in line with the expectations of Paul Chew of PhillipCapital.
Separately, the coal miner has announced the acquisition of controlling stakes in two companies owning 27 sets of barges and tugs, which is seen as a “strategic” move to beef up its infrastructure capabilities in moving coal dug up from mines further inland.
On the other hand, he is assuming FY2025 earnings are 10% lower than earlier projected due to coal prices that are trending lower from his forecast. For now, Chew, in his Sept 4 note, is keeping his “buy” call and target price of 47 cents.
In 1HFY2025, Geo Energy reported adjusted patmi of US$20 million ($25.7 million), up 140% y-o-y, thanks to a 144% jump in production to 6.6 million metric tonnes.
Chew warns that coal prices, which are now at US$42 per tonne, are likely to drop further in 2HFY2025. In 1HFY2025, the average was US$47.9 per tonne.
He expects Geo Energy to produce 11.2 million tonnes for the whole of FY2025.
Meanwhile, the construction of the company’s 92-km-long hauling road and jetty is likely to be completed next year, which is within schedule.
When the road is completed, coal production at the TRA mine can then be increased to 25 million tonnes per year by 2028, which means more revenue.
Separately, in an interested party deal, Geo Energy plans to buy over 51% of two barging companies partly owned by its own chairman, Charles Antonny Melatai.
Geo Energy plans to pay US$128 million in a combination of cash, shares and assignment of debtors, which, at a 33 times historical P/E, is “not inexpensive”. The deal requires the approval of other shareholders.
Chew views this deal as “strategic”, as Geo Energy would immediately gain access to the tugs and barges, as well as the operational expertise, and, of course, the “huge profit opportunity” associated with the expected increase in coal volume next year.
Chew assumes each 7,500-tonne capacity barge can fetch a rate of US$5.60 per tonne, with each barge making 60 trips a year, the annual revenue per set of tug and barge will be around US$2.5 million.
Assuming a 25% net margin, that translates into earnings of US$625,000 each, and all 27 tug and barge sets will generate US$17 million, valuing the acquisition at 14 times earnings.
“The considerable upside optionality is when the fleet scales to 100 sets to ship 45 million metric tonnes of coal per year by 2028/29,” says Chew. — The Edge Singapore
