Singapore Market Analysis – Comprehensive Company Insights

Broker: UOB Kay Hian, Date: Wednesday, 06 November 2024

Market Overview

US stocks experienced an upward trend on Tuesday, driven by gains in the consumer discretionary, industrials, and utilities sectors. The Dow Jones closed with a gain of 1.02%, the S&P 500 rose by 1.23%, and the NASDAQ Composite advanced by 1.42%. In Singapore, the FSSTI index saw a rise of 9.57 points, settling at 3,581.61. Key active stocks included Singapore Telecommunications, Genting Singapore, Rex International, SATS, and Japfa.

CapitaLand Integrated Commercial Trust (CICT)

3Q24: Increasing Dominance Of Singapore’s Retail Scene

CapitaLand Integrated Commercial Trust (CICT) is making significant strides in Singapore’s retail sector. The company reported a positive rental reversion of 9.2% for retail and 11.7% for office spaces in 9M24. The NPI margin improved by 2.5 percentage points year-on-year to 72.8% in 3Q24, primarily due to cost savings from lower utility expenses and a new property management agreement.

Key Financials

• Gross Revenue: Retail revenue grew by 3.2%, office revenue declined by 1.6%, and integrated developments saw a 3.5% increase, totaling S\$397.9 million (+1.7% yoy).
• Net Property Income (NPI): Retail NPI increased by 5.6%, office by 5.3%, and integrated developments by 5.3%, totaling S\$298.8 million (+5.4% yoy).

Business Update

CICT is enhancing its cost efficiency, with gross revenue rising due to higher rental income, despite the absence of income from Gallileo, which has been undergoing an asset enhancement initiative (AEI) since February 2024. The retail portfolio achieved a positive rental reversion of 9.2% in 9M24, with stable office occupancy at 97.4% for Singapore and 88.4% for Australia. The company completed the acquisition of a 50% stake in ION Orchard, expected to be DPU accretive by 0.9%.

Future Plans

CICT is focused on expanding in integrated developments, which are resilient throughout economic cycles. Management aims to reconfigure retail space at ION Orchard to increase rental income, with a plan to achieve tax transparency for ION Orchard within the next 12 months. The company remains solidly anchored in Singapore, accounting for 94.2% of its portfolio valuation.

Valuation and Recommendation

CICT maintains a BUY rating with a target price of S\$2.59, based on a dividend discount model. The company offers steady recovery in shopper traffic and tenant sales, driven by a recovery in tourist arrivals and work-from-office momentum.

NetLink NBN Trust (NETLINK)

2QFY25: A Slight Miss As Margins Compress

Despite higher 2QFY25 revenue (+2.5% yoy), Netlink posted lower EBITDA (-5.1% yoy) and PATMI (-7.4% yoy), slightly below expectations due to higher operating costs and one-off expenses. However, with stable revenue streams and operating cash flows, Netlink remains an attractive high-yielding, safe-haven stock.

Key Financials

• Revenue: S\$103.9 million (+2.5% yoy), driven by increased connections.
• EBITDA: S\$70.1 million (-5.1% yoy), impacted by higher operating costs and asset write-offs.
• Profit After Tax: S\$22.8 million (-7.4% yoy), forming 45% of full-year forecasts.

Business Update

Netlink declared a higher 1HFY25 final dividend of 2.68 S cents/share, implying an annualized dividend yield of around 5.9%. The effective average interest rate remained stable at 2.7%, with borrowings increasing to S\$810 million. The company sees growth opportunities from the digital economy, 5G rollout, connectivity into data centers, and Singapore’s Smart Nation initiatives.

Valuation and Recommendation

Netlink maintains a BUY rating with a target price of S\$0.98, trading at around 14x FY25 EV/EBITDA. The stock is considered a good shelter amid market volatility, given its strong earnings visibility and healthy balance sheet.

Wilmar International

Recovery Is On, But Uncertainty Ahead

Wilmar International’s management anticipates a better 4Q24 qoq, although lower yoy. The company expects a one-off gain from the sale of its 6.5% stake in Adani Wilmar, but faces uncertainties due to US elections and weak consumer spending in China. The recovery trend observed in 3Q24 is likely to continue, driven by improved sales volumes and lower raw material costs.

Key Financials

• Net Turnover: US\$73,399 million in 2022, expected to reach US\$83,582 million by 2026.
• EBITDA: US\$4,442 million in 2022, projected to grow to US\$4,284 million by 2026.
• Net Profit: US\$2,402 million in 2022, forecasted to be US\$1,864 million by 2026.

Business Update

Wilmar’s food products segment is expected to see gradual growth, supported by stimulus measures and improved sales volumes. The feed & industrial products segment anticipates better refining margins and increased soybean meal demand. The plantation & sugar mill segment benefits from high CPO prices and better sugar milling earnings.

Valuation and Recommendation

Wilmar maintains a HOLD rating with a target price of S\$3.00, derived using the SOTP valuation. The stock offers a decent dividend yield and potential for a special dividend from the Adani-Wilmar stake sale. Greater recovery in China and improvement in tropical oil processing margins could act as positive catalysts.