Comprehensive Analysis of Key Singaporean Companies – November 07, 2024

Broker: UOB Kay Hian

Frasers Logistics & Commercial Trust (FLT SP)

Overview

Frasers Logistics & Commercial Trust (FLT) engages in income-producing properties primarily used for logistics, commercial (CBD office space), and business park (non-CBD office and R&D space) purposes across the Asia Pacific and Europe.

2HFY24 Performance

FLT achieved significant positive rental reversion with 39%, 58.1%, and 31.1% for logistics properties in New South Wales, Victoria, and Queensland. The trust backfilled vacant spaces, restoring occupancy in Australia to 100%. With a low aggregate leverage of 33.0% and a substantial debt headroom of S\$801m, FLT is well-positioned for growth. The trust offers an FY25 yield of 6.3%. Despite a slight miss in DPU expectations, FLT’s revenue and adjusted NPI grew by 8.4% and 3.7% respectively, driven by new developments and acquisitions.

Financial Highlights

FLT reported a DPU of 3.32 S cents for 2HFY24, down 5.7% yoy. Revenue and adjusted NPI were supported by contributions from the Ellesmere Port facility in the UK and the acquisition of four German logistics properties. However, finance costs rose by 45.6% yoy, impacting distributable income.

Future Prospects

FLT’s logistics properties in Australia and Europe maintain full occupancy. The trust is actively working on backfilling vacant spaces in Singapore, notably at Alexandra Technopark. Management aims to increase the allocation for logistics properties to 70-85%, focusing on core markets such as Singapore, Australia, Germany, Netherlands, and the UK. Recent acquisitions, such as a prime logistics property in Singapore, are expected to be DPU-accretive, funded by debt at a cost of about 3.5%.

Valuation and Recommendation

Maintaining a BUY rating, the target price is set at S\$1.44 based on DDM. Key catalysts include acquisitions in Australia and Europe and backfilling vacant spaces in Singapore and the UK.

Singapore Post (SPOST SP)

Overview

Singapore Post (SPOST) is the national postal service provider, offering domestic and international postal and courier services, along with integrated mail solutions.

1HFY25 Performance

SPOST posted higher core PATMI (+87.6% yoy) driven by contributions from Australia and Singapore. The Singapore business saw higher profits due to a postal rate hike, while the Australia business grew robustly with the consolidation of BEX. However, the international business faced headwinds, leading to missed results despite overall strong growth.

Financial Highlights

SPOST’s 1HFY25 revenue grew by 20.0% yoy, with strong performance in Australia (+44.1% yoy) and Singapore (+12.4% yoy). Operating profit increased by 62.9% yoy. However, higher interest costs and softer performances in certain segments affected overall profitability. The interim dividend was increased to 0.34 S cents.

Segment Analysis

• Singapore Postal: Revenue rose by 12.4% yoy, driven by higher postal rates. Operating profit was slightly below expectations due to higher costs and lower letter mail volumes.
• Property: Operating profit grew by 11.7% yoy, supported by improved rental income and higher occupancy rates at SingPost Centre.
• International Business: Despite lower revenue, operating profit increased due to cost-efficiency initiatives. Freight forwarding posted higher revenue but saw falling margins.
• Australia: Revenue and operating profit surged due to BEX consolidation but were below expectations due to weak 3PL business performance.

Valuation and Recommendation

Maintaining a BUY rating, the target price is S\$0.61 based on SOTP valuation. SPOST’s businesses are undervalued, and potential stake sales and divestments could provide upside.

SIA Engineering (SIE SP)

Overview

SIA Engineering is Asia’s leading service provider for aircraft maintenance, repair, and overhaul (MRO), recognized for its aftermarket services and marketing campaigns.

1HFY25 Performance

SIAEC reported a 15.9% yoy increase in net profit to S\$68.8m, although core net profit of S\$70.4m was slightly behind projections. Weaker-than-expected operating profit was due to supply chain constraints and gestation costs for new initiatives.

Financial Highlights

Revenue increased by 12.1% yoy, driven by higher flight activities at Changi Airport and robust MRO demand. However, operating profit was subdued due to supply chain issues and start-up costs for new facilities in Malaysia. Contributions from JVs and associates remained strong, growing by 17.1% yoy.

Future Prospects

Flight activities at Changi Airport are expected to continue recovering, supporting SIAEC’s line maintenance business. The company is tackling supply chain challenges through digitalization and lean principles. Expansion initiatives, including new MRO facilities, are expected to drive long-term growth despite near-term cost pressures.

Valuation and Recommendation

Maintaining a BUY rating, the target price is S\$2.70. SIAEC’s proactive share buybacks and expected earnings recovery provide downside protection and potential for re-rating.

CapitaLand Investment (CLI SP)

Overview

CapitaLand Investment (CLI) is a global real estate manager with a diversified portfolio across retail, office, lodging, and new economy asset classes.

3Q24 Performance

CLI reported stable revenue of S\$2.26b for 9M24, slightly below expectations. The company exceeded its capital recycling target by divesting S\$4.1b of assets. Operational highlights include strong performance in commercial and lodging management, with revenue growth driven by improved asset performance and higher RevPAU.

Key Financials

Revenue from lodging and commercial management grew by 0.8% and 14.2% respectively. However, real estate investment revenue declined slightly due to asset divestments. The company raised S\$1.6b in private capital and remains focused on capital recycling and fund management.

Future Prospects

CLI aims to achieve S\$1b in annual divestments from China over the next three years, despite operational challenges. The fund management business continues to attract strong investor interest, with plans to raise more capital for thematic funds. Potential asset revaluations in 2024 could be affected by economic conditions in China and other regions.

Valuation and Recommendation

Maintaining a BUY rating with a lower target price of S\$3.85. CLI’s share price could benefit from positive newsflow on asset recycling and policy support from China. However, the pace of US Fed rate cuts remains a wildcard.