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PHILLIP SECURITIES |
LIM & TAN |
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Sembcorp Industries Ltd Acquiring growth to fill future gaps
▪ Sembcorp Industries has agreed to acquire Alinta Energy for S$4.8bn to be paid fully in cash. Alinta has 3.4GW power generation capacity in Australia across gas (43%), coal (33%), wind (17%), and solar (7%). A bridging loan will fund the acquisition, and equity fund-raising is not required.
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ESR-REIT ($2.74, up 0.02), is pleased to announce the proposed divestment of a portfolio comprising eight noncore properties (“Proposed Divestment”) in Singapore (collectively, the “Divestment Properties”), for an aggregate sale consideration of S$338.1 million (“Divestment Consideration”). The Divestment Properties comprise: 46A Tanjong Penjuru, 86 & 88 International Road, 120 Pioneer Road, 21 & 23 Ubi Road 1, 24 Jurong Port Road, 13 Jalan Terusan, 60 Tuas South Street 1, and 43 Tuas View Circuit. The Divestment Consideration represents a premium of 2.0% to the independent valuation of the Divestment Properties as at 30 November 2025. We are positive on the proposed divestment by ESR REIT given that its aggregate leverage would improve and WALE would improve, while helping the REIT to reduce it shorter tenure assets on its portfolio. This would also provide them with more flexibility with future proofing their portfolio with longer dated assets and help to increase their WALE in the process. We maintain an Accumulate rating on ESR REIT given its attractive 7-8% dividend yield and $3.30 1-year consensus target price implying potential upside of 20%. |
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LIM & TAN |
MAYBANK KIM ENG |
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The Business Times / BT: It has been a pretty good year for Singaporelisted real estate investment trusts (S-Reits), with softening interest rates and bullish market sentiment enabling some of the leading players in the sector to actively tap investors and expand their property portfolios.
Conclusion and Recommendation BT did a well analyzed piece on Keppel REIT. We believe Keppel REIT had little choice but to pay a more than fair value for Hong Kong Land’s 1/3 stake in MBFC Tower 3 given the limited supply of such prized commerical assets in Singapore. The 3.6%-6.4% estimated DPU dilution has immediately been reflected by the sharp 7% drop in Keppel REIT’s unit price once the trading halt was lifted. We believe mid-long term investors in Keppel REIT should “subscribe” for the preferential given that the longer term potential will likely be positive given opportunities for strategic initiatives given that Keppel REIT already knows the asset very well and also the scarcity of such prized commercial assets in Singapore. This would provide opportunities for Keppel REIT to squeeze value even at such premium valuations that they have paid. Capitalized at S$3.9bln, Keppel REIT trades at 0.8x P/B with a DPU yield of 5.7%.
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Keppel REIT (KREIT SP)
Taking a breather, D/G to HOLD
Deepening SG CBD footprint, but with initial dilution
KREIT announced the acquisition of an additional one-third stake in MBFC Tower 3, a premium Grade A CBD office for SGD937.5m. The purchase will be mostly funded by a SGD886.3m rights issue. While the deal is pro-forma dilutive for DPU and NAV, upside exists from positive rent reversion and lower interest rates. Gearing is relatively unchanged. Notably, the acquisition cap rate is lower than the existing valuation cap rate. We lower our DPU by c.13% and TP to SGD1.0 and D/G to HOLD on limited upside.
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| KGI | CGS INTERNATIONAL |
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Raffles Education Ltd Undergoing a Multi-year Turnaround
Outlook: Raffles Education will focus its expansion efforts on ASEAN markets, particularly in Malaysia, Indonesia, and Thailand. The Group is expected to emerge largely debt-free, except for approximately S$20mn of debt at the OUCHK level. OUCHK is a separately listed entity on the HKEX. With the substantial reduction in borrowings, the resulting interest savings will be significant. The Company also plans to reestablish a dividend policy, which will reward shareholders and further strengthen the alignment between management and shareholder interests. Risks: The student enrolment decline in FY25 highlights ongoing demand volatility amid competitive and cyclical pressures. Operating across multiple jurisdictions also exposes the Group to regulatory shifts, while rising staff costs, inflation, and currency movements pose margin risks. Finally, the business remains highly dependent on brand reputation, where any deterioration in perceived quality could materially impact pricing power and future enrolment.
Valuation & Action: We initiate Raffles Education with an OUTPERFORM recommendation at a fully diluted TP of S$0.34 and a current TP of S$0.54 using a DCF valuation methodology with a WACC of 8.0% and a terminal growth rate of 2.5%. Given the decline in debt levels and lower interest rates, should the Group’s profitability improve substantially onwards with potential increase in school fees. |
Stockbroking & Exchanges Diverging valuations amidst liquidity tailwinds
■ Following recent diverging share price movements, HKEX’s P/E premium to peers is now at 1.8 s.d below 10Y mean, presenting an attractive entry point. ■ Both HKEX and SGX benefit from liquidity tailwinds, but increased liquidity from Southbound flow looks more sustainable than EQDP-driven liquidity. ■ Bloomberg consensus forecast HKEX’s CY25F-27F EPS growth to beat peers; HKEX has also seen the greatest upward revisions since Dec 2024. ■ Reiterate sector OW rating. We prefer HKEX among the Asian exchanges.
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