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CSE Global (CSE SP)
Good Buying Opportunity As Company Scales Up In The US
CSE, through its US subsidiary, has initiated legal proceedings against a customer over a US$6m payment under a standby letter of guarantee, which we expect to be recovered. The company also divested a US property for US$29m, with plans to reinvest the proceeds into a larger facility while continuing to lease the divested property. This reflects its plans to capitalise on future opportunities in the electrification sector. Maintain BUY with an unchanged target price of S$0.59.
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China and Hong Kong Property
Review Of The Mainland And Hong Kong Property Markets In 2024
The second-hand home market in Tier 1 cities was strong in 2024, while new home sales and land supplies in major cities continued to drop. In Hong Kong, the primary market outperformed due to attractive pricing. There were higher relative returns from letting out properties in Tier 1 cities and Hong Kong. Stabilisation of the property market will be given higher priority due to rising geopolitical risks in 2025. Maintain OVERWEIGHT/ MARKET WEIGHT on the China/Hong Kong property sectors. Top picks: COLI, SHKP.
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ASEAN Telecom
2025 outlook: Measured restraint; D/G to NEUTRAL
After a bountiful 2024, be selective in 2025
ASEAN telcos delivered a total USD return of 19% in 2024, outperforming the MSCI ASEAN and global telecom index by 7ppt. Except for Indonesia, telcos in 2024 were helped by various tailwinds - reopening (SG/TH), cost/capex cut (True/AIS/ST/GLO/PLDT), less competition/price increases (TH/PH) and M&A/capital return (Intouch/Singtel/AIS). We see most of these catalysts waning in 2025. On the other hand, spectrum auctions (TH/ID) and elevated competition (ID/SG) possess headwinds while change in ownership of smaller telcos (Dito/U Mobile/XLSmart) could bring uncertainty. Given the lack of catalysts, we downgrade our sector view to NEUTRAL. Singtel, Globe and XL are our preferred picks.
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Malaysia O&G and Petrochemicals
O&G: POSITIVE; Petrochemicals: NEGATIVE
For MY O&G, we maintain POSITIVE but are selective to: i) defensive midstream space; and ii) FPSO names with Dialog and BArmada as top picks, respectively. We expect Brent crude oil prices to be lower at an average of USD70/bbl in 2025E (2024: USD80/bbl) while a likely lower PETRONAS capex may impact domestic-centric upstream OGSE names in 2025E. For MY Petrochemicals, we maintain NEGATIVE as we expect polymer ASPs to remain weak in 2025E as start-up of new regional capacities is still looking to flood supply. We have SELLs on both PCHEM and LCTITAN.
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Summary: China Strategy - Navigating a Bumpy Path (2025)
Key View:
- Constructive on Chinese Equities: Despite expected volatility in 2025, macro catalysts such as policy easing, undemanding valuations, and light positioning are supportive.
- Risks: Tariff escalations and geopolitical tensions, particularly following the inauguration of President-elect Trump, may drive market vulnerability in Q1.
Outlook and Policy Implications:
- Policy Delivery: Critical to monitor the timing, size, and scale of policies to mitigate volatility.
- Key Events:
- December 2024 CEWC highlighted a supportive policy tone.
- Detailed targets expected at the March 2025 NPC.
Historical Context:
- Trump 1.0 Tariff Periods (2018–2020):
- Negative returns during tariff escalations.
- Positive returns during trade truces and settled negotiations.
Strategy and Preferences:
Market Focus:
- Overweight Chinese Equities: Prefer onshore A-shares over offshore equities for near-term sensitivity to policy easing.
- Barbell Strategy:
- Defensive yield stocks during tariff escalations.
- Growth/high-beta stocks during trade truces.
Investment Themes:
- Defensive Yield Stocks:
- Preferred Sectors: Energy, telcos, selective state-owned banks, and SOEs with low P/B ratios and high dividends.
- Policy Support: Aggressive rate cuts expected from PBoC and emphasis on corporate governance reforms.
- Internet & Platform Companies:
- Upside Optionality: As proxies for consumption recovery via e-commerce and advertising.
- Growth Drivers:
- Normalized regulatory environment.
- AI integration and cost control boosting earnings growth.
- Valuation: Undemanding, with shareholder returns supported by buybacks and cash flow.
- Policy Beneficiaries:
- Local Government Spending: Enhanced liquidity from debt swap programs and expanded fiscal initiatives.
- Consumer Goods Trade-In Program: Potential upscaling to CNY300 billion, targeting smart devices.
- Civil Servants’ Pay Hike: Supports consumer sentiment, albeit with mild direct impact.
- Preferred Sectors: Construction, transportation, social welfare, and firms benefiting from fiscal stimulus.
High-Beta Opportunities:
- HKEX (388 HK): Expected to outperform during trade truces due to:
- Recovery in daily turnover.
- Increased IPO activity, including dual-listed H-share IPOs by large-cap A-shares.
This strategy aligns with macro themes and historical performance trends, focusing on diversified approaches to mitigate volatility while capturing opportunities from easing policies and geopolitical developments.
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United Hampshire REIT
- Anchor Tenant Performance:
- Walmart: U.S. comparable sales grew 5.3% y-o-y in 3Q 2025, with e-commerce sales surging 22% y-o-y, driven by store-fulfilled pickup, delivery, and digital initiatives.
- BJ’s Wholesale Club: Comparable sales (excluding gasoline) rose 3.8% y-o-y in Q3 2024, with 30% y-o-y growth in digitally enabled sales and a milestone of 7.5 million members.
- Publix Super Markets: Sales reached $14.6 billion in Q3 2024, a 4.9% increase from 2023, with comparable store sales up 3.4%.
- Resiliency in Property Values:
- Strip Center Sector: Benefited from remote work trends, with foot traffic rising 7% compared to pre-pandemic levels. Sector values have grown 20% since June 2020.
- Self-Storage Sector: Work-from-home dynamics drove a 40% increase in property values since June 2020.
- Office Sector: Declined 33% in value since June 2020 due to reduced demand stemming from remote work.
- Portfolio Strength:
- Occupancy rate remains high at 97.6%, with a long WALE of 7.9 years (9.8 years for top 10 tenants).
- Strong leasing activity with 11 new and renewal leases totaling 290,886 Sq Ft.
- High tenant retention rate of 92%, with a focus on essential services.
- Financial Highlights:
- Market cap: US$277.1 million, trading at 0.6x PB.
- Attractive dividend yield: 8.5%.
- Consensus target price: S$0.64, representing 33.3% upside.
- Upcoming Webinar:
- UH REIT will present its outlook in a webinar on 26th February 2025.
This strong performance across key tenants, robust property values in resilient sectors, and consistent portfolio strength highlight UH REIT’s stability and growth potential.
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