buysellhold july.23



Singapore Post

Rating BUY (as at 2 Nov 2023)
Last Close SGD 0.450
Fair Value SGD 0.555

Stay patient
• Normalising freight forwarding rates and unfavourable FX fluctuations remain key headwinds
• Continued inroads made in logistics business with new customer acquisitions, volume growth, and inorganic expansion
• Increase in postage rates expected to stem widening loss from domestic postal business; remain patient for long-term, structural solution

Investment thesis
Singapore Post (SPOST) is a Singapore-based postal and
eCommerce logistics provider with a significant presence in Australia. With digitalisation exacerbating the global decline in letter mail volumes, SPOST has been hamstrung by its national duty to provide quality postal services and rising costs of maintaining the domestic postal network. Recognising the need to stay commercially viable, SPOST has been actively pivoting
towards becoming a global logistics enterprise to ride on the next stage of eCommerce growth. Following the increase in domestic postage rates in Oct 2023, which is expected to ease the drag from its Domestic Post & Parcel (DPP) business in 2HFY24 (financial year ending 31 Mar 2024), we await further clarity on the results of SPOST’s discussions with the Infocomm Media Development Authority (IMDA) to ensure the long-term
sustainability of its DPP business, as well as the outcome of its ongoing strategic review. Meanwhile, the fundamentals of the rest of the business remain healthy, in our view, with logistics likely to remain the key growth driver for SPOST, and management staying optimistic on cross-border eCommerce growth opportunities.


Frencken Group Ltd (FRKN SP)

Positive recovery signals


Maintain BUY with a TP of SGD1.27 Qualcomm has just reported better-than-expected 4Q earnings and gave a much stronger forecast, pointing towards a potential recovery in the semi-con sector next year. Despite its key customer ASML expecting flat growth in FY24, we believe Frencken’s Malaysia factory utilisation should still benefit from ASML shifting some production from Europe to Malaysia. We think the worst is possibly over for Frencken and expect its 3Q23 results (due by end-Nov) to show QoQ improvement. We are also more confident of a stronger FY24E, and maintain our BUY rating and SGD1.27 TP. 



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Daiwa House Logistics Trust / DHLT ($0.52, up 1 cent) has today announced the business update for third quarter ended 30 September 2023.

While no leases expired in 3Q FY2023, a lease was renewed in October 2023. This helped DHLT maintained its track record of 100% lease renewal since its listing almost two years ago, in November 2021. There are two remaining leases expiring in FY2023 and the tenants have indicated their intention to renew, with negotiation on the terms underway. As at 30 September 2023, the portfolio is at full occupancy with a weighted average lease expiry (“WALE”) of 6.3 years, by gross rental income (“GRI”).

At 52 cents, DHLT’s market cap stands at S$361mln and currently trades at 0.7x PB, with a dividend yield of 9.8%. Consensus target price stands at S$0.80, representing 54% upside potential. With its stable leverage and 100% fixed borrowings, we believe DHLT provides some protection given its Japanese focused logistics assets and defensive & high dividend yields. We recommend an “Accumulate rating on DHLT.




AIMS APAC REIT / AA REIT ($1.25, up 0.03) is pleased to report a 7.1% year-on-year (“YoY”) increase in distributions to Unitholders to S$36.1 million for the half year ended 30 September 2023 (“1H FY2024”).

Gross revenue rose 4.4% YoY to S$86.8 million. This was supported by higher rental and recoveries from logistics, warehouse and industrial properties and partially offset by lower revenue from the Australian properties due to weakening of the Australian dollar. Correspondingly, NPI increased by 5.1% YoY to S$64.3 million, while NPI margin improved by 0.5% to 74.0%. DPU declined 1.1% YoY to 4.650 Singapore cents due to the enlarged unit base following the Equity Fund Raising (“EFR”) which was completed in July 2023. Despite the enlarged unit base from the EFR, DPU for 1H FY2024 was stable due to the robust operational performance and prudent capital management. The EFR fortifies AA REIT’s balance sheet and ensures it has the headroom to capture future growth opportunities including planned AEIs and acquisitions during this uncertain environment. 


At $1.25, AAREIT is capitalized at $1 billion and trades at 13x PE, 7.6% dividend yield and 0.9x P/B. Bloomberg consensus 1 year target price of $1.48 implies a potential upside of 19%. We maintain an Accumulate rating on AAREIT.


Frasers Logistics & Commercial Trust

Robust balance sheet


■ 2HFY23/FY23 DPU of 3.52 Scts /7.04 Scts were in line, at 49.3%/98.6% of our FY9/23F forecast.

■ Good portfolio metrics, with high occupancy and strong rental reversions.

■ Reiterate Add rating, with a lower TP of S$1.27. 2HFY23/FY23 results highlights

Frasers Logistics & Commercial Trust’s (FLCT) 2HFY9/23 revenue/NPI fell 0.8%/4.9% yoy to S$212.8m/S$157.1m, on weaker A$ vs S$, lower occupancies at Maxis Business Park and 357 Collins St, partly offset by contributions from new acquisitions and Worcester and Connexion II (completed in 1QCY23). 2HFY23 DPU of 3.52 Scts (inclusive of a S$15.5m capital distribution) was 6.6% lower yoy. FLCT revalued its portfolio down by 4.6% yoy at end-FY23, dragged mainly by lower Australian commercial, UK business parks and Europe logistics values, partly offset by higher valuation of its Australia logistics portfolio on strong rental growth. FLCT saw a 48-175bp expansion in cap rates within its portfolio. 



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Paragon REIT

Mild topline growth


■ 9M23 revenue of S$215.6m (+1.2% yoy) was in line at 72.1% of our FY23F. Revenue for Singapore/Australia assets increased 2.4%/5.4% yoy.

■ Portfolio occupancy improved qoq from 97.8% to 98.1%.

■ Reiterate Hold on limited upside. FY24F DPU yield of 5.9% lags peers.


Improvement in operating metrics

9M23 revenue grew S$2.5m or 1.2% yoy to S$215.6m, in line at 72.1% of our FY23F. Gross revenue for Singapore and Australia assets increased 2.4% yoy and 5.4% yoy, respectively. Portfolio occupancy improved qoq from 97.8% to 98.1%, driven by higher occupancy at Westfield Marion (96.1% to 97.1%) but partially offset by lower occupancy at Figtree Grove (99.2% to 96.4%) while occupancy for the Singapore assets was unchanged qoq at 100%. 3Q23 tenant sales grew 1%/9% yoy in Singapore/Australia. No reversion numbers were shared; to recap, 1H23 portfolio reversion turned positive at 6.9% (FY22: - 4.1%). Approximately 4% of leases by rental income will expire in FY23F, attributed to the Australia portfolio. During the 3Q23 analyst briefing, management shared that reversions for its Australian lease renewals since 1H23, while negative, were narrowing. 



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