Retail Market Monitor: Comprehensive Analysis of Singapore and Hong Kong Companies

Date: Thursday, 07 November 2024

Broker: UOB Kay Hian Private Limited

Introduction

Welcome to our in-depth analysis of the latest financial performances and market trends of prominent companies in Singapore and Hong Kong. This report delves into the details of Frasers Logistics & Commercial Trust, Singapore Post, SIA Engineering, CapitaLand Investment, and several others. Read on to discover the comprehensive insights into each company’s performance, strategic initiatives, and future outlook.

Frasers Logistics & Commercial Trust (FLT)

2HFY24: Logistics Properties Propel Growth and Rental Reversion

Frasers Logistics & Commercial Trust (FLT) experienced significant growth driven by its logistics properties in New South Wales, Victoria, and Queensland. The trust achieved positive rental reversions of 39%, 58.1%, and 31.1% respectively in these regions during 4QFY24. FLT’s overall occupancy for logistics properties in Australia rebounded to 100%, supported by robust acquisition capabilities due to a low aggregate leverage of 33.0% and a substantial debt headroom of S\$801 million.

Key Financials

• Revenue: S\$230.6 million (+8.4% yoy), supported by positive rent reversions, rental escalations, and acquisitions.
• Net Property Income (NPI): S\$161.3 million (+3.7% yoy).
• Distributable Income: S\$124.9 million (-5.1% yoy), impacted by increased finance costs (+45.6% yoy).
• DPU: 3.32 S cents (-5.7% yoy), including a capital distribution of S\$29.6 million.

Operational Performance

FLT reported stable occupancy rates across various regions with full occupancy achieved in logistics properties across Europe and the UK. The trust is also working on backfilling vacant space in Singapore, with significant efforts being made to address the dip in occupancy at Alexandra Technopark (ATP).

Future Outlook

With plans to increase the allocation for logistics properties to 70-85%, FLT aims to further enhance its portfolio. The trust recently completed a DPU-accretive acquisition of a prime logistics property in Singapore, expected to provide NPI yields of up to 6.9%. FLT’s strategic focus remains on its core developed markets while exploring expansion opportunities in Japan.

Singapore Post (SPOST)

1HFY25: Results Miss Despite Strong Growth

Singapore Post (SPOST) posted higher core PATMI (+87.6% yoy) for 1HFY25, driven by increased contributions from its Australia and Singapore businesses. Despite the strong growth, the results were below expectations due to higher-than-expected interest costs and softer-than-expected performances in certain segments.

Key Financials

• Revenue: S\$992.4 million (+20.0% yoy).
• Operating Profit: S\$51.2 million (+62.9% yoy).
• Core PATMI: S\$25.2 million (+87.6% yoy).
• Interim Dividend: 0.34 S cents (1HFY24: 0.18 S cents).

Operational Highlights

The Singapore postal business saw a significant revenue increase due to a postal rate hike, while the international postal business faced ongoing headwinds. The property segment performed well with improved rental income and high occupancy rates at SingPost Centre.

Future Outlook

SPOST is expected to see a stronger performance in the second half of FY25, driven by seasonal factors and strategic initiatives to improve profitability. The company maintains a positive outlook on its core segments while exploring potential divestments of non-core assets.

SIA Engineering (SIE)

1HFY25: Earnings A Slight Miss; Investing for Long-Term Growth

SIA Engineering (SIE) reported a slight miss in its 1HFY25 earnings, with core net profit at S\$70.4 million (+20.4% yoy), forming 45% of the full-year forecast. The company faced challenges due to supply chain constraints and gestation costs related to new business expansion initiatives.

Key Financials

• Revenue: S\$576.2 million (+12.1% yoy).
• Operating Profit: S\$3.4 million (1HFY24: S\$0.1 million).
• Core EBIT: S\$4.6 million (1HFY24: -S\$0.6 million).
• Core Net Profit: S\$70.4 million (+20.4% yoy).

Operational Highlights

JVs and associates remained key contributors to SIAEC’s performance, with a broad-based growth across various subdivisions. The company continues to invest in new business initiatives, including the development of an airframe MRO facility in Subang, Malaysia.

Future Outlook

SIAEC expects a moderate pace of growth in its line maintenance business as regional flight activities continue to recover. The company is also focusing on digitalisation and lean principles to tackle supply chain constraints and rising costs.

CapitaLand Investment (CLI)

Executing Well Operationally But Cautious on 2025

CapitaLand Investment (CLI) reported a 3Q24 business update with operational performance in line with estimates but slightly lower-than-expected revenue. The company exceeded its capital recycling target of S\$3 billion, divesting S\$4.1 billion of assets year-to-date.

Key Financials

• 9M24 Revenue: S\$2.26 billion (+1% yoy).
• Fee Related Revenue: S\$845 million (+5.8% yoy).
• Real Estate Investment Business Revenue: S\$1.42 billion (-1.6% yoy).

Operational Highlights

CLI’s commercial and lodging management segments performed well, with significant revenue growth driven by improved asset performance and higher RevPAU. The company remains active in capital recycling and plans to lower its leverage to fuel new funds and M&As.

Future Outlook

CLI is cautious about 2025 profitability but maintains a positive outlook on operational performance. The company continues to focus on strategic expansions and capital recycling efforts, with a particular interest in thematic funds targeting Japan, Australia, and Korea.

Prudential (2378 HK)

Solid NBP Growth on Improved Sales and Margins Across Few Markets

Prudential reported an 11% yoy growth in new business profit (NBP) for 9M24, driven by improved sales momentum in China, Hong Kong, and Indonesia. The company also saw an increase in NBP margin due to a favorable product mix and channel mix shift.

Key Financials

• 9M24 NBP: US\$2,347 million (+11.3% yoy).
• NBP Margin: 50.6% (+1.8ppt yoy).

Operational Highlights

Prudential experienced strong sales growth in key markets, with notable improvements in China and Hong Kong. The company also announced a capital injection into CITIC Prudential Life to support its solvency ratio and future growth.

Future Outlook

Prudential targets 9-13% NBP growth in 2024, indicating a stronger performance in 4Q24. The company remains committed to its long-term growth strategy and continues to execute share buybacks to enhance shareholder value.

Conclusion

This comprehensive analysis highlights the strategic initiatives and financial performances of key companies in Singapore and Hong Kong. With a focus on growth and resilience, these companies are well-positioned to navigate future challenges and capitalize on emerging opportunities.