Singapore Strategy Note: Comprehensive 4Q24 Analysis Date: January 22, 2025 Broker: CGS International Overview The 4Q24 corporate earnings season in Singapore is positioned to deliver largely in-line results for the majority of companies under CGS International’s coverage. This report identifies key outperformers and underperformers across various sectors, providing detailed insights into their financial performance and strategic positioning. The industrials and capital goods sectors are expected to shine, while banks and REITs face mixed outcomes due to external economic factors. Capital Goods: A Promising Quarter SIA Engineering (SIE SP) Recommendation: Add | Target Price: \$2.65 SIA Engineering is expected to achieve a net profit of approximately S\$38 million in 3QFY3/25, marking a 43% year-on-year (yoy) increase from a low base. Revenue growth and EBIT margin expansion are highlighted as key drivers of this performance. Keppel Ltd (KEP SP) Recommendation: Add | Target Price: \$8.78 Keppel is forecasted to see a 70% half-on-half (hoh) improvement in 2H24F core net profit, reaching approximately S\$519 million. This growth is attributed to lower legacy losses and higher asset management fees across its Infrastructure and Connectivity segments. Sembcorp Industries (SCI SP) Recommendation: Add | Target Price: \$7.32 Despite a projected 9% hoh decline in 2H24F net profit to S\$492 million due to weaker renewable energy contributions, Sembcorp Industries is expected to outperform consensus. Its strength lies in improved gas and energy revenues, offsetting seasonal weaknesses. ST Engineering (STE SP) Recommendation: Add | Target Price: \$5.30 ST Engineering is set to post a 24% yoy and 9% hoh net profit growth, amounting to S\$366 million in 2H24F. Key drivers include robust defense-related topline growth and reduced finance costs. Yangzijiang Shipbuilding (YZJSGD SP) Recommendation: Add | Target Price: \$3.62 YZJSGD is anticipated to report a net profit of Rmb3.2 billion in 2H24F, reflecting a 33% yoy and 4% hoh increase. Gross margins are expected to expand to 28%, driven by lower steel costs and RMB depreciation. Seatrium Ltd (STM SP) Recommendation: Add | Target Price: \$2.69 Seatrium is projected to report a core net profit of S\$83 million in 2H24F, reflecting a 152% yoy growth but a 28% hoh decline. FY24F gross margins are anticipated to reach 5%, supported by forex gains and operational improvements. Banking Sector: A Mixed Bag DBS Group (DBS SP) Recommendation: Hold | Target Price: \$43.00 DBS is expected to post a net profit of S\$2.7 billion in 4Q24F, a 13% yoy increase. Margins are projected to improve marginally by 2 basis points to 2.13%. The bank may raise its ordinary DPS to S\$0.60, leveraging its S\$3-4 billion in excess capital. OCBC (OCBC SP) Recommendation: Add | Target Price: \$17.70 OCBC is forecasted to record a net profit of S\$1.8 billion in 4Q24F, up by 13% yoy but down 7% quarter-on-quarter (qoq). The bank’s NIM is expected to hover around 2.2%, with seasonal fee softness impacting the wealth management segment. United Overseas Bank (UOB SP) Recommendation: Add | Target Price: \$39.50 UOB’s net profit is estimated at S\$1.44 billion for 4Q24F, reflecting a 4% yoy and 12% qoq decline. Margins are expected to compress slightly by 2 basis points to 2.03%, but loan growth remains a positive driver. Commodities Wilmar International (WIL SP) Recommendation: Add | Target Price: \$3.47 Wilmar is expected to underperform with a 4Q24F net profit of US\$343.1 million, below consensus estimates. The decline is attributed to weaker profitability in its soybean crushing business in China and the sugar division in Australia. Consumer Sector Thai Beverage (THBEV SP) Recommendation: Add | Target Price: \$0.58 THBEV is projected to report EBITDA of approximately THB20 billion, driven by growth in domestic beer and a recovery in Vietnam. These trends are expected to support its continued momentum in FY25F. REITs: Mixed Performance Frasers Logistics & Commercial Trust (FLT SP) Recommendation: Add | Target Price: \$1.35 FLT is expected to outperform with positive rental reversions for its logistics and industrial portfolio, coupled with accretive new acquisitions. Keppel DC REIT (KDCREIT SP) Recommendation: Add | Target Price: \$2.48 KDCREIT is set to benefit from strong rental reversions in Singapore and contributions from recent acquisitions. CDL Hospitality Trust (CDREIT SP) Recommendation: Add | Target Price: \$1.16 CDREIT may face challenges due to slower RevPAR performance in 3Q24, potentially impacting its 2H24 outcome. Other Highlights iFAST Corporation Ltd (IFAST SP) Recommendation: Add | Target Price: \$9.50 iFAST is forecasted to post a net profit of S\$17.6 million, driven by contributions from onboarding eMPF trustees and sustained trading platform volumes.
SIA Engineering (SIE SP) Recommendation: Add | Target Price: \$2.65 SIA Engineering is expected to achieve a net profit of approximately S\$38 million in 3QFY3/25, marking a 43% year-on-year (yoy) increase from a low base. Revenue growth and EBIT margin expansion are highlighted as key drivers of this performance.
Keppel Ltd (KEP SP) Recommendation: Add | Target Price: \$8.78 Keppel is forecasted to see a 70% half-on-half (hoh) improvement in 2H24F core net profit, reaching approximately S\$519 million. This growth is attributed to lower legacy losses and higher asset management fees across its Infrastructure and Connectivity segments.
Sembcorp Industries (SCI SP) Recommendation: Add | Target Price: \$7.32 Despite a projected 9% hoh decline in 2H24F net profit to S\$492 million due to weaker renewable energy contributions, Sembcorp Industries is expected to outperform consensus. Its strength lies in improved gas and energy revenues, offsetting seasonal weaknesses.
ST Engineering (STE SP) Recommendation: Add | Target Price: \$5.30 ST Engineering is set to post a 24% yoy and 9% hoh net profit growth, amounting to S\$366 million in 2H24F. Key drivers include robust defense-related topline growth and reduced finance costs.
Yangzijiang Shipbuilding (YZJSGD SP) Recommendation: Add | Target Price: \$3.62 YZJSGD is anticipated to report a net profit of Rmb3.2 billion in 2H24F, reflecting a 33% yoy and 4% hoh increase. Gross margins are expected to expand to 28%, driven by lower steel costs and RMB depreciation.
Seatrium Ltd (STM SP) Recommendation: Add | Target Price: \$2.69 Seatrium is projected to report a core net profit of S\$83 million in 2H24F, reflecting a 152% yoy growth but a 28% hoh decline. FY24F gross margins are anticipated to reach 5%, supported by forex gains and operational improvements.
DBS Group (DBS SP) Recommendation: Hold | Target Price: \$43.00 DBS is expected to post a net profit of S\$2.7 billion in 4Q24F, a 13% yoy increase. Margins are projected to improve marginally by 2 basis points to 2.13%. The bank may raise its ordinary DPS to S\$0.60, leveraging its S\$3-4 billion in excess capital.
OCBC (OCBC SP) Recommendation: Add | Target Price: \$17.70 OCBC is forecasted to record a net profit of S\$1.8 billion in 4Q24F, up by 13% yoy but down 7% quarter-on-quarter (qoq). The bank’s NIM is expected to hover around 2.2%, with seasonal fee softness impacting the wealth management segment.
United Overseas Bank (UOB SP) Recommendation: Add | Target Price: \$39.50 UOB’s net profit is estimated at S\$1.44 billion for 4Q24F, reflecting a 4% yoy and 12% qoq decline. Margins are expected to compress slightly by 2 basis points to 2.03%, but loan growth remains a positive driver.
Wilmar International (WIL SP) Recommendation: Add | Target Price: \$3.47 Wilmar is expected to underperform with a 4Q24F net profit of US\$343.1 million, below consensus estimates. The decline is attributed to weaker profitability in its soybean crushing business in China and the sugar division in Australia.
Thai Beverage (THBEV SP) Recommendation: Add | Target Price: \$0.58 THBEV is projected to report EBITDA of approximately THB20 billion, driven by growth in domestic beer and a recovery in Vietnam. These trends are expected to support its continued momentum in FY25F.
Frasers Logistics & Commercial Trust (FLT SP) Recommendation: Add | Target Price: \$1.35 FLT is expected to outperform with positive rental reversions for its logistics and industrial portfolio, coupled with accretive new acquisitions.
Keppel DC REIT (KDCREIT SP) Recommendation: Add | Target Price: \$2.48 KDCREIT is set to benefit from strong rental reversions in Singapore and contributions from recent acquisitions.
CDL Hospitality Trust (CDREIT SP) Recommendation: Add | Target Price: \$1.16 CDREIT may face challenges due to slower RevPAR performance in 3Q24, potentially impacting its 2H24 outcome.
iFAST Corporation Ltd (IFAST SP) Recommendation: Add | Target Price: \$9.50 iFAST is forecasted to post a net profit of S\$17.6 million, driven by contributions from onboarding eMPF trustees and sustained trading platform volumes.
