Overview of Financial Markets
The financial markets showed varied performance, with key indices reflecting mixed results. The FSSTI Index showed resilience, closing at 3,720.3 with a year-to-date (YTD) gain of 14.8%. The Dow Jones and S&P 500 also recorded positive movements, with YTD gains of 16.6% and 21.6% respectively. However, the Nasdaq saw some profit-taking, closing slightly lower at 21,169.3. Notably, the UKX Index and Nikkei Index experienced mild declines, indicating a diverse market environment.
Centurion Corp Analysis
Performance Highlights
Centurion Corp reported a robust performance for the third quarter and nine months ended 30 September 2024. Revenue increased by 25% year-on-year to S\$186.5 million, driven by strong occupancy rates and healthy rental revisions across its portfolio. The PBWA segment saw a 27% revenue increase to S\$143.8 million, while the PBSA segment recorded a 20% rise in revenue to S\$42.1 million.
Segment Analysis
The PBWA segment’s average financial occupancy dropped slightly to 95%, primarily due to ongoing enhancement works in Malaysia. Singapore’s portfolio achieved a 99% occupancy rate, reflecting strong demand. In Malaysia, excluding beds unavailable due to enhancement works, the financial occupancy stood at 90%.
In the PBSA segment, overall financial occupancy increased to 98%. The UK and Australia portfolios showed significant improvements in occupancy, reaching 99% and 95% respectively.
Expansion and Developments
Centurion is set to expand its PBWA and PBSA offerings with new developments in Singapore and Australia. Notable projects include the Westlite Ubi dormitory and the redevelopment of Westlite Toh Guan and Westlite Mandai, adding thousands of beds by 2026. The PBSA segment will see new accommodation projects in Melbourne and Sydney.
Future Outlook
At S\$0.915, Centurion is valued at S\$769 million, trading at 8.3x core forward P/E and 0.82x P/B with a 3.3% dividend yield. The company remains well-positioned to benefit from positive rental reversions and new market entries. The recommendation is to “Accumulate on Weakness” given the recent strong share price performance.
Valuetronics Holdings Limited Analysis
Performance Highlights
Valuetronics reported a 10.2% year-on-year increase in net attributable profit for the first half of FY2025, despite a slight dip in revenue to HK\$862.1 million. The ICE segment achieved a 1.8% revenue growth, offsetting weaker demand in the CE segment. Improved profitability led to higher earnings per share of 22.1 Hong Kong cents.
Segment Analysis
The ICE segment’s revenue growth was driven by contributions from a new customer in network access solutions, while the CE segment faced softening demand, resulting in a 17.6% revenue decline. The gross profit margin improved to 16.8%, supported by lower material and labour costs.
Financial Position
Valuetronics maintains a strong financial position with no bank borrowings and cash reserves of HK\$1,174.5 million. The net asset value improved to HK\$3.5 per share, translating to a 1.06x price to book ratio. The company declared an interim and special interim dividend, reflecting a payout ratio of 36%.
Future Outlook
Valuetronics anticipates continued profitability for FY2025, supported by its diversification strategy and new customer acquisitions. The establishment of Trio AI positions the company to tap into the AI industry, enhancing its growth prospects. The recommendation is to “Accumulate” with a potential upside of 20%.
Macro Market News
US Market
BCA Research highlights that while a soft landing is possible, it is already reflected in asset pricing. Low household debt, a housing shortage, corporate resilience, and fiscal buffers have helped avert a recession. Government bonds are increasingly appealing for long-term investors.
China/HK Market
The regulatory environment in China poses challenges for companies seeking to carry out transactions, affecting M&A and IPO activities. High-profile companies like Shein and ByteDance face regulatory hurdles, impacting their listing plans. Despite Beijing’s stimulus, 2024 remains a challenging year for deals and public offerings.
Acquisitions and Disposals
Significant acquisitions include Volare Group AG acquiring 22.5 million shares of Sabana Industrial REIT and Loo Choon Yong acquiring 1.5 million shares of Raffles Medical Group Ltd. Notable disposals include Global Alpha Capital Management Ltd selling 175,800 shares of Raffles Medical Group Ltd and Quarz Capital Asia selling 22.5 million shares of Sabana Industrial REIT.
Share Buybacks
Companies like Capitaland Investment Ltd, Seatrium, and OCBC engaged in substantial share buybacks, indicating confidence in their future performance. Capitaland Investment Ltd repurchased 1,750,900 shares, representing 18.7% of its mandate.
Institutional and Retail Fund Flow
Institutional Investors
Institutional investors net bought DBS (S\$161.1 million) and UOB (S\$78.8 million) while net selling CapitaLand Ascendas REIT (S\$34.2 million) and OCBC (S\$32.4 million).
Retail Investors
Retail investors net bought CapitaLand Ascendas REIT (S\$35.7 million) and CapitaLand Integrated Commercial Trust (S\$27.2 million) while net selling DBS (S\$306.6 million) and UOB (S\$218.1 million).
Dividends and Special Distributions
Several companies declared dividends, including DBS (54 cents for 3Q’24), Netlink NBN Trust (2.68 cents interim), and Singtel (8.9 cents interim). Valuetronics declared an 8.0 Hong Kong cents interim dividend, consisting of a 4.0 Hong Kong cents interim and a 4.0 Hong Kong cents special dividend.
What’s Ahead
Upcoming events include financial results announcements from companies like Frasers Property Ltd, Valuetronics, Starhub, and Singtel. Investors should stay tuned for these updates to make informed decisions.
SGX Watch-List
34 companies are currently under the SGX watch-list, including recent additions like Addvalue Technologies, Renaissance United, and Telechoice. Investors should monitor these companies closely for any significant changes.
Conclusion
The financial markets present a mixed landscape with opportunities and challenges. Companies like Centurion Corp and Valuetronics show robust performance and growth prospects. Investors should remain vigilant and consider expert recommendations to navigate the complexities of the market.
