Singapore Daily Financial Analysis

Broker: UOB Kay Hian

Date: Thursday, 07 November 2024

Welcome to the comprehensive analysis of the latest financial performances and updates of several key companies as reviewed by UOB Kay Hian. In today’s deep dive, we will cover Frasers Logistics & Commercial Trust, Singapore Post, SIA Engineering, and CapitaLand Investment. Each company is analyzed in detail, ensuring you have all the information needed to make informed investment decisions.

Frasers Logistics & Commercial Trust (FLT)

2HFY24: Logistics Properties Propel Growth and Rental Reversion

Frasers Logistics & Commercial Trust (FLT) has shown significant growth in 2HFY24, driven primarily by its logistics properties. The trust reported a positive rental reversion of 39%, 58.1%, and 31.1% for logistics properties in New South Wales, Victoria, and Queensland respectively in 4QFY24. The occupancy for its logistics properties in Australia has been restored to 100%, underlining its operational efficiency.

FLT’s ability to grow via acquisition is backed by a low aggregate leverage of 33.0% and a substantial debt headroom of S\$801 million. The trust provides an FY25 yield of 6.3%. Despite finance costs increasing by 45.6% yoy, the trust maintains a strong position with a distributable income of S\$124.9 million and a DPU of 3.32 S cents for 2HFY24.

The logistics properties have maintained full occupancy, and FLT has strategically backfilled vacant spaces, particularly in Victoria and Queensland. The trust’s Singapore properties, such as Alexandra Technopark, have also shown stable occupancy rates. However, challenges remain, particularly with competition from other business parks.

FLT’s portfolio valuation stood at S\$6.8 billion, with logistics properties in Australia seeing a 2.9% increase in valuation. The trust has significant plans to pivot more towards logistics, aiming for an allocation of 70-85%. Recent acquisitions include a prime logistics property at 2 Tuas South Link 1 for S\$140.3 million, which is expected to be DPU-accretive.

Singapore Post (SPOST)

1HFY25: Results Miss Despite Strong Growth

Singapore Post (SPOST) reported higher core PATMI (+87.6% yoy) for 1HFY25, driven by increased contributions from its Australia and Singapore businesses. The Singapore segment saw notable gains from a postal rate hike, while the Australia business benefited from the consolidation of Border Express (BEX). Despite these gains, overall results were below expectations due to higher interest costs and underperformance in the Singapore letter & mail and Australian 3PL businesses.

The company’s 1HFY25 revenue grew by 20.0% yoy to S\$992.4 million, with significant contributions from Australia (+44.1%) and Singapore (+13.0%). However, the international postal business faced challenges, leading to a revenue decline of 26.8%. SPOST declared a higher interim dividend of 0.34 S cents, reflecting a 30% core PATMI payout ratio.

SPOST’s Singapore postal business saw a 12.4% revenue increase, driven by higher postal rates and improved profitability. The property segment also performed well, with a 11.7% increase in operating profit. However, the international postal and Famous Holdings segments faced declining margins due to increased competition and higher operating costs.

For the Australian business, the consolidation of BEX led to robust revenue growth, but overall performance was below expectations due to weaknesses in the 3PL business. SPOST expects continued growth from BEX and other Australian operations through strategic integration and synergy realization.

SIA Engineering (SIE)

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

SIA Engineering (SIE) reported a 1HFY25 core net profit of S\$70.4 million (+20.4% yoy), slightly below projections. The miss was largely due to supply chain constraints and gestation costs related to new business expansion initiatives. Despite these challenges, the company remains optimistic about its long-term growth prospects.

Revenue for 1HFY25 increased by 12.1% yoy to S\$576.2 million, but core operating profit was weaker than expected at S\$4.6 million. Contributions from JVs and associates were strong, totaling S\$58.6 million. SIE’s net cash position stood at S\$488 million at the end of 1HFY25, with an interim dividend of 2 S cents declared.

Flight activities at Changi Airport are recovering, reaching 96.0% of pre-pandemic levels in September 2024. The company sees healthy demand for MRO services but continues to face supply chain challenges. SIE’s expansion initiatives, including a new airframe MRO facility in Malaysia, are expected to bolster future growth despite near-term cost pressures.

CapitaLand Investment (CLI)

Executing Well Operationally But Cautious on 2025

CapitaLand Investment (CLI) announced a 3Q24 business update, reporting revenue of S\$2.26 billion (+1% yoy) and exceeding its capital recycling target with S\$4.1 billion in divestments ytd. The company remains operationally strong but anticipates a challenging 2025 on the earnings front.

CLI’s 9M24 revenue was driven by improved commercial and lodging management segments, with revenues up 12% and 14% yoy respectively. The company has been active in capital recycling, with significant divestments including ION Orchard and its US multifamily assets. CLI’s fund management business continues to attract strong investor interest, raising S\$1.6 billion in private capital ytd.

In China, CLI faces operational challenges with negative rental reversion and a decline in tenant sales. However, the company is optimistic about balance sheet divestments and expects to achieve S\$1 billion per year in divestments over the next three years. CLI remains committed to its share buyback program, having repurchased nearly S\$343 million of its stock ytd.

We have adjusted our earnings estimates for CLI down by 2-9% for 2024-26, reflecting lower funds fee rate estimates and revenue growth assumptions. Despite these adjustments, we maintain a BUY rating with a target price of S\$3.85, recognizing CLI’s strong operational performance and active capital recycling efforts.

Stay tuned for more detailed financial insights and updates in our next report.