Comprehensive Analysis of Financial Markets and Key Companies

Date: 6 November 2024

Broker: Lim & Tan Securities

Market Overview

The financial markets have shown varied performance across different indices. The FSSTI Index closed at 3,581.6, marking a 0.3% increase for the day, a 0.6% rise month-to-date, and a 10.5% year-to-date gain. The US indices also displayed positive movements, with the Dow Jones, S&P 500, and NASDAQ rising by 1.0%, 1.2%, and 1.4% respectively. However, the UKX Index experienced a slight decline of 0.1%.

Key Interest Rates

The 3-month SGD SIBOR remained unchanged at 3.3%, while the SG 10-year bond yield increased by 0.7% to 2.9%. The US 10-year bond yield also saw a slight rise of 0.3% to 4.3%.

Commodities

Gold closed at 42,449.0, up by 0.2%, while crude oil saw a minor increase of 0.1%, closing at 5,819.5. The Baltic Dry Index and crude palm oil showed mixed results, with the latter experiencing a decline of 0.9%.

Idea of the Day: SIA Engineering

SIA Engineering’s stock price increased by 4 cents to \$2.49 due to strong demand for maintenance, repair, and overhaul (MRO) services during the first half of the financial year ending 30 September 2024. The company’s revenue grew by 12.1% year-on-year to \$576.2 million, while expenditure increased at a lower rate of 11.5% to \$572.8 million. This led to an improvement in operating performance, with a profit of \$3.4 million.

The share of profits from associated and joint venture companies surged by 17.2% year-on-year to \$58.6 million. The group’s net profit for the first half was \$68.8 million, a significant improvement of \$9.5 million year-on-year. The company declared an interim dividend of 2.0 cents per share, payable on 29 November 2024.

For the second quarter, SIA Engineering achieved an operating profit of \$2.4 million, with revenue growth of 22.0% outpacing a 20.9% increase in expenditure. The company handled 9% more flights in Singapore compared to the same period last year, reaching 95% of pre-pandemic volume by the end of September 2024.

Looking ahead, the company is preparing to increase its hangar capacity in Malaysia, scheduled to begin operations in the second half of 2025. The outlook remains positive, driven by healthy air travel demand and delays in the delivery of new aircraft.

Elite UK REIT

Elite UK REIT, trading at GBP 0.30, reported revenue of £28.0 million for the first nine months of 2024, with distributable income increasing by 2.8% year-on-year to £14.0 million. The 9-month 2024 DPU increased by 3.9% compared to the same period in 2023, thanks to higher distributable income and tax savings.

Mr. Joshua Liaw, CEO of the Manager, highlighted the company’s progress in capital management, refinancing, and hedging. Elite UK REIT completed several significant transactions, including the divestment of Sidlaw House, Dundee, at £1.3 million, which was 42% above its valuation as of 30 June 2024.

Elite UK REIT also submitted a planning application for an 80-megawatt data center campus at Peel Park, Blackpool. The strategic location and access to renewable power supplies are expected to enhance the site’s value significantly.

The REIT’s portfolio occupancy increased to 93.9% as of 7 October 2024, with a weighted average lease expiry of 3.5 years. The net gearing ratio stood at 43.6%, with borrowing costs declining to 5.0%. The REIT’s NAV per unit was £0.39 as of 7 October 2024.

Looking forward, the Office of Budget Responsibility forecasts inflation to average 2.5% in 2024, with a slight increase to 2.6% in 2025. Elite UK REIT is expected to continue providing stable income to its unitholders, supported by a stable government-backed income stream.

Macroeconomic Market News

Chinese provinces accounting for about a third of the economy are experiencing a slowdown, prompting the government to introduce various stimulus measures. GDP nationwide expanded by 4.8% in the first nine months, compared to 5.2% last year. Local governments are facing worsening finances, with deficits continuing to rise despite central government support.

In the US, a resilient consumer is a key component of a successful soft landing. However, new construction fell by 0.5%, extending the recent housing slowdown. Weak housing remains a reliable leading indicator of US recessions, pointing to higher slack ahead.

Crude oil prices have been volatile but trendless in 2024. Our bias is for crude prices to weaken in the next six to nine months, given the absence of significant price appreciation despite geopolitical tensions.

Acquisitions and Disposals

Several companies have made notable acquisitions and disposals recently. Stamford Ty Corp Ltd acquired 2,262,600 shares, while Raffles Medical Group’s Loo Choon Yong acquired 1,000,000 shares. Broadway Industrial Group Ltd’s Patec acquired 196,964,849 shares.

On the disposal side, Ginko AGT Global Growth Fund sold 3,093,700 shares of Beng Kuang Marine, and the estate of Lim Tze Jong sold 3,000,000 shares of Dyna-Mac Holdings Ltd.

Share Buybacks

Several companies engaged in share buybacks, including Capitaland Investment Ltd, which bought back 1,750,900 shares at \$2.96 each. Zheneng Jinjiang Environment bought back 150,000 shares at \$0.40, while SATS Ltd repurchased 1,088,400 shares at \$3.80 each.

Dividends and Special Distributions

Numerous companies announced dividends and special distributions. Avi Tech Holdings Ltd declared a final dividend of 0.75 cents, payable on 26 November. Micro Mechanics announced a final dividend of 3.0 cents, payable on 18 November. SGX declared an interim dividend of 9.0 cents, payable on 15 November.

SIA Engineering declared an interim dividend of 2.0 cents, payable on 29 November, while Netlink NBN Trust announced an interim dividend of 2.68 cents, payable on 29 November.

Upcoming Events

The financial calendar for November 2024 includes several key events. UOB will release its Q3 2024 results on 8 November, followed by SIA’s first-half results on the same day. OCBC will report its Q3 2024 results on 8 November as well.

Other notable events include the dividend distributions by PEC Ltd on 25 November and First REIT on 20 December.

SGX Watch-List

As of the latest update, 34 companies are under the SGX watch-list. Some of the recent additions include Addvalue Technologies and Renaissance United, both entering the watch-list on 5 December 2023. Companies like ASL Marine, ASTI Holdings, and Cosmosteel have been on the watch-list since earlier dates.

Conclusion

The financial markets and key companies have shown varied performance, with several companies demonstrating strong revenue growth and strategic expansions. Investors should closely monitor these developments to make informed investment decisions.