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CGS CIMB |
LIM & TAN |
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Navigating Singapore
As we head into 2025F, we think Singapore market investors should remain nimble as the market focuses on digesting the implications of rising tariffs and trade uncertainties, and the consequential inflationary impact on interest rate outlook.
Our three investment themes include: i) high-yield, high-growth stocks; ii) value-up plays, and iii) interest rates and bond yields. The Singapore market is offering c.4.1% CY25F dividend yield and trading at high ROEs of 12.3-12.4%, based on our estimates, which should sustain the high dividend yield trajectory. Potential positive outcome from the MAS review to strengthen the equities market development in Singapore could catalyse value-unlocking/restructuring activities in the market, in our view. While the interest rate cut expectations have been tempered in the US, we think this has largely been factored into the share prices of REITs.
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CapitaLand Investment Limited / CLI ($2.77, up 0.01), a leading global real asset manager, announced that its self-storage platform, Extra Space Asia (ESA) has formed a strategic partnership with Ambitious Co. Ltd. (Ambitious), the largest indoor self-storage manager in Japan. Ambitious’ self-storage business, “Syuno-Pit”, operates 681 self-storage facilities across 126 cities and districts in Japan. ESA is set to expand its portfolio in CLI’s focus market of Japan by leveraging Ambitious’ strong track record and on-the-ground expertise to source, develop and manage self-storage facilities in Osaka and Tokyo. We maintain our “Accumulate” rating on CLI given its pro-growth and accretive asset monetization program underway where they are recycling capital from matured assets (Ion Orchard) to higher growth assets. We expect some special dividends on top of their usual 12 cents and consensus target is $3.55, implying a potential 1 year return of 29%. |
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LIM & TAN |
MAYBANK KIM ENG |
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OKH Global Ltd (1.8 cents, up 0.2 cents) announced that it has on 4 December 2024 entered into a conditional sale and purchase agreement to acquire the entire issued and paid-up share capital of Chip Eng Seng Construction Pte. Ltd. (the “Target Group”), the construction business of Acrophyte Pte. Ltd. (“APL”) (formerly known as Chip Eng Seng Corporation Ltd.). The acquisition price of up to approximately S$118.5 million will be satisfied solely by the issuance of new shares in OKH Global Ltd. at an issue price of S$0.05252 per share, which represents a premium of approximately 212.43% over the volume weighted average price of S$0.01681 per share for the preceding market day At 1.8 cents, OKH Global is capitalized at $20mln and trades at 5x historical PE and 0.34x price to book. The deal makes strategic sense, but is significantly dilutive to existing shareholders and also dilutive to both earnings per share and also net asset value per share. OKH Global’s earnings of $3.6mln (0.32 cents profit per share) before the deal would swing into losses of $11.8mln (to loss of 0.35 cents per share) after the completion of the deal while its Net Asset Value per share would decline from 5.25 cents to 3.67 cents per share. Assuming the deal goes through, minority shareholders would thus have to suffer short term pains to await for longer term gains to materialize as the company executes on its more than $2bln worth of new orders.
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Kuala Lumpur Kepong (KLK MK) Looking forward to a better FY25E indeed
Positives priced in; maintain HOLD We hosted KLK on a post-results brief, and felt reassured that FY25E will be a better year with YoY earnings growth emanating from both the upstream and manufacturing divisions. The lumpy impairment on Synthomer is unlikely to recur in FY25E. The group effective tax rate should normalise too. We keep our +69% core EPS growth estimates for FY25E. Trading at 19x FY25E PER, the positives are priced in. Maintain HOLD & TP of MYR21.30 on 19x FY25E PER, its -0.5SD of 6Y mean. We prefer SDG MK (BUY, CP: MYR5.06, TP: MYR5.41).
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