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PHILLIP SECURITIES |
UOB KAYHIAN |
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Singapore Banking Monthly The capital return story
▪ February’s 3M-SORA was down 13bps MoM to 2.82%, the lowest since Nov 2022 and 47bps lower than the 4Q24 average, reflecting the Fed Rate cuts. January’s loan growth of 5.3% reached a 28-month high, and we expect mid-single-digit loan growth for 2025.
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Seatrium (STM SP) Well-positioned To Take Advantage Of Growth Opportunities
Seatrium’s competitive position in Brazil remains strong and we believe that it should be able to take advantage of some of the recent unsuccessful tenders by its competitors. In the medium to long term, earnings growth in its R&U segment could be bolstered by the MRO business. A key near-term share price catalyst is the conclusion of the MAS/CAD investigation. Maintain BUY. Target price: S$2.96.
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MAYBANK KIM ENG |
LIM & TAN |
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ST Engineering (STE SP) Investor Day Takeaways
Plotting efficient growth; Maintain BUY, raise TP to SGD7.10 STE has set high single-digit top line and low-to-mid teen bottom line growth targets for the next five years. Defense, digital businesses and smart city projects will anchor growth. Efficiency improvement will lead to improved bottom lines. From 2026 onwards, STE will pay out a third of earnings growth as incremental dividends. Surplus cash will be reinvested or used to enhance balance sheet flexibility. We raise our DCF-based TP to SGD7.1 on higher operating cash flows and lower WACC. While valuation is steep at 23.4x PE, visibility of earnings/dividend growth and strong thematic of defence keeps us on BUY.
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We highlight the key points from Far East Hospitality Trust’s ($0.56, down 0.01) FY2024 annual report: For the year, Far East H-Trust delivered a stable financial performance, with gross revenue increasing 1.8% year-on-year to S$108.7 million. The Commercial Premises segment showed a marked improvement while the master lease rentals from the Hotels and Serviced Residences portfolio recorded a modest increase. Despite higher property tax expenses, net property income grew 0.6% year-on-year to S$99.3 million. However, income available for distribution declined to S$66.6 million due to higher net finance costs and a strategic reduction in the proportion of the REIT Manager’s fee paid in Stapled Securities from 90% to 60%, aimed at mitigating longer-term dilution effects. Excluding this adjustment, income available for distribution would have been 4.8% higher at S$69.8 million. In anticipation of these impacts, we had announced various pro-active initiatives earlier. At Far East Hospitality Trust’s last traded price of 56 cents, it is capitalized at $1.1bln and trades an undemanding price to book of 0.6x, dividend yield of 7.2% while consensus 1 year target price is 70 cents, implying a potential 1 year return of 25%, justifying an “Accumulate” rating. |
| LIM & TAN | UOB KAYHIAN |
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The Edge Singapore: Catalist-quoted Oiltek International ($1.16, up 2 cts) seems to be checking all the right boxes lately. So far this year, it has announced a two-for-one bonus issue, proposed moving to the mainboard of the Singapore Exchange (SGX), and found a business partner that can help it generate a stream of recurring income for the long haul. Oiltek International’s market cap stands at S$166mln and trades at FY24 PE of 18.7x and 6.5x PB, with a dividend yield of 2.3%. We continue to like Oiltek as a tech-driven edible oil processing company that continues to benefit from rising palm oil production and this has been continually shown via Oiltek’s string of contract wins. Consensus TP of S$1.43 represents a 23.3% potential upside. We expect Oiltek to continue its order book winning momentum by riding on the biodiesel megatrend and maintain a BUY recommendation on Oiltek.
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Prudential (2378 HK) 2024: Solid Results; Enhancing Shareholder Returns
Prudential’s results were broadly within our expectations with NBP growing at 11% yoy. OPAT per share and DPS were ahead of consensus estimates. Management provided an upbeat 2025 guidance with double-digit growth in NBP, OPAT per share, gross OFSG and DPS. They will announce a new capital management plan during the 1H25 results. We expect a new round of buybacks which will elevate Prudential’s yield to high single digits in 2025. Maintain BUY. Target price: HK$123.00.
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