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Phillip Singapore Monthly – Nov24
Election time, place your bets
• Singapore equities were down 0.7% in October after the stellar 4.1% jump the prior month. REITs sold down by 5.5%, but banks were resilient, inching up by 0.8%. The best-performing sectors were marine and shipping.
• Interest rate-sensitive names sold off as the global economies underwent a reflationary wave from strong US employment, higher oil prices, and a rebound in the renminbi in October. Expectations of interest rate cuts lowered from three to two rate cuts for the rest of 2024.
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First REIT
Hurt by the weak IDR and JPY
▪ 3Q24/9M24 DPU of 0.58/1.78 Singapore cents (-6.5%/-4.3% YoY) was in line with our estimates, forming 25%/75% of our FY24e forecast. The drop in DPU was due to the depreciation of the IDR and JPY against the SGD. 3Q24 DPU was 3.3% lower than the two preceding quarters of 0.60 cents per quarter.
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Far East Hospitality Trust (FEHT SP)
3Q24: Healthy Seasonal Strength Driven By Chinese Tourists
RevPAR for FEHT’s hotels grew 2.8% yoy and 10.8% qoq to S$154 in 3Q24, driven by a higher volume of Chinese tourists, while hotels that exited government contracts continued to ramp up. Serviced residences provide stable contributions with RevPAR rising 2.5% yoy and 6.1% qoq to S$245. FEHT’s low aggregate leverage of 30.8% provides ample debt headroom for acquisitions locally and gateway cities overseas. It provides 2024 distribution yield of 6.6%. Maintain BUY. Target price: S$0.82.
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STRATEGY – MALAYSIA
Alpha Picks: Gearing Up For The Reporting Season
Our Alpha Picks outperformed the FBMKLCI in Oct 24 (-0.5% vs -2.9%). While the equity market still lacks conviction, our Alpha Picks should still outperform in Nov 24, driven by expected winners in the upcoming reporting season (MYEG), as well as beneficiaries of dividends (RGB) and M&A activities (Yinson). Nov 24 picks: EcoWorld, Gamuda, Lagenda, MYEG, Pekat, RHB Bank, RGB, Top Glove (replacing Sime Darby), VSI and Yinson.
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Aztech Global (AZTECH SP)
Key customer drops orders
Downgrade to HOLD with a lower TP of SGD0.78
Aztech’s 3Q24 revenue fell 41% to SGD166.7m and 13.7m, down 41.2% and 55.7% YoY was significantly below ours and consensus estimates mainly due to a drop in order volume received from its key customer in the US. They also expect 4Q224 to likely be slower than 3Q24. This is a key risk which we have previously highlighted and we expected outlook to remain muted in the near term. As a result, we cut our FY 24E and 25E PATMI estimates by 35.8% and 38.9% respectively, resulting in a lower TP of SGD0.78, pegged to a PE of 8x for FY25E. We also downgrade from a BUY to HOLD.
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CapitaLand Ascott Trust (CLAS SP)
Portfolio rebalancing continues
Higher gross profit; Maintain BUY
CLAS released 3Q24 business updates. Gross profit for the master lease, MCMGIs and long-stay assets were higher by 4%, 47% and 11% YoY, driven by RevPAU growth and contribution from newly acquired assets. While performance of the hospitality sector continues to track the travel seasonality, higher visitor flow is expected to drive incremental demand growth. Meanwhile, we expect capital top-ups during the upcoming AEI of the Cavendish London to maintain a stable DPU profile. Our forecasts, TP and BUY are unchanged.
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