Overview of Market Indices

The FSSTI Index closed at 3,875.1, marking a 0.4% increase for the day. Month-to-date (MTD) gains stood at 0.5%, with a year-to-date (YTD) improvement of 2.3%. Comparatively, the Dow Jones and S&P 500 indices displayed mixed results, with the Dow Jones slightly retreating by 0.2% to close at 44,509.0, while the S&P 500 gained 0.1% to reach 6,075.3.

The Nasdaq showed resilience, closing at 21,784.8 despite a 0.3% daily dip, with MTD and YTD growth of 0.9% and 2.6%, respectively. Gold prices rose 0.4% to \$2,918.6, while crude oil increased by 1.9% to \$72.3. The Baltic Dry Index surged by 2.8%, supported by strong shipping demand.

Netlink Trust: Financial Performance and Outlook

Netlink Trust, trading at \$0.855, saw a marginal decline of 0.5 cents. Revenue for the nine months ending December 31, 2024, was down by \$1.3 million compared to the same period in the previous year. This dip was attributed to reduced ancillary project revenue in the non-regulated asset base (non-RAB) segment, partially offset by higher installation-related revenue. RAB revenue remained stable during this period.

The company reported growth in residential connections from 1,501,032 to 1,517,326 year-on-year. Non-residential connections also increased slightly from 53,222 to 53,454, while NBAP connections rose from 2,920 to 3,065. Segment connections expanded from 3,397 to 3,832 compared to the previous year. However, EBITDA and Profit After Tax (PAT) dropped by 5.1% and 12.9%, respectively, due to higher operating costs and lower non-operating income.

Credit metrics remain robust, with total gross debt at S\$835 million and a weighted average debt maturity of 1.6 years. The company’s net debt/EBITDA ratio stands at 2.6x, with 71.9% of borrowings on fixed terms and an effective interest rate of 2.72%. The EBITDA interest cover is strong at 13.0x.

Netlink Trust’s key focus areas for FY25 include:

• Expanding NBAP and segment connections to support Smart Nation and cloud services.
• Lowering connection costs for SMEs to aid digitalization.
• Enhancing co-location facilities to upgrade the Nationwide Broadband Network for up to 10 Gbps per connection.
• Completing the new Central Office by 2025 to serve northern Singapore.
• Implementing sustainability initiatives for emissions reduction.

With a market cap of S\$3.3 billion, the company trades at 33x PE and 1.4x PB with a dividend yield of 6.3%. The consensus target price of S\$1.00 implies a 19% upside. Lim & Tan Securities recommends a “HOLD” for Netlink Trust, citing its defensive business model and strong dividend yield.

Paragon REIT: Privatisation Proposal and Competitive Challenges

Paragon REIT, currently trading at \$0.89, has announced a proposed privatization and delisting under a trust scheme of arrangement. The Scheme Consideration is set at S\$0.9800 per unit in cash, representing a 7.1% premium to its Adjusted NAV and a Price/Adjusted NAV multiple of 1.07x. This valuation exceeds peer benchmarks and historical averages, offering a 34.2% premium over the current trading multiples of Singapore retail REITs.

Further, Paragon REIT will declare 2H FY2024 cash distributions of 2.33 Singapore cents per unit, which will not reduce the Scheme Consideration. The privatization is deemed necessary due to limited growth potential, low trading liquidity, and reliance on the Paragon mall, which accounts for 72% of the REIT’s appraised value.

While Paragon remains a premier upscale mall, it faces growing competition from nearby redevelopments, such as Ming Arcade and Tanglin Shopping Centre. Additionally, post-pandemic luxury spending has slowed, reaching only 74% of its 2019 peak.

The Offeror suggests a Potential Asset Enhancement Initiative (AEI) for Paragon to maintain its competitiveness. This could involve significant upgrades, including façade improvements, reconfiguration of retail spaces, and improved connectivity. However, the AEI may require a capital outlay of S\$300–600 million over three to four years, posing execution risks and potential disruptions to income.

At the offer price of S\$0.98, the trailing yield is 4.7%, with a Price-to-Book ratio of 1.1x, aligning closely with the consensus target price of S\$1.02. Lim & Tan Securities recommends holding the stock until the Independent Financial Adviser releases its full analysis.

China’s Box Office Boom and Macro Insights

China’s box office hit a record US\$1.3 billion during the Chinese New Year holiday, a significant 18% increase from the previous year. Top-performing movies included “Ne Zha 2,” which grossed 4.8 billion yuan, and “Detective Chinatown 1900,” which collected 2.3 billion yuan.

The record-breaking performance also benefited Imax China, which saw US\$53 million in sales, a 57% increase from its 2023 record. This surge underscores China’s efforts to boost consumer spending through subsidies and vouchers, aiding its economic recovery.

US and Canadian Macro Market Developments

In the US, strategists anticipate the implementation of “Bessenomics” under a hypothetical Trump 2.0 administration. This policy aims to stimulate economic growth while stabilizing public debt by lowering interest rates below nominal GDP growth and enacting fiscal cutbacks. A weaker US dollar is expected to enhance manufacturing competitiveness.

Meanwhile, Canada presents an intriguing macro case. Despite rate cuts after aggressive hikes, the Canadian dollar remains undervalued against the US dollar. Analysts recommend building small long positions in the CAD, given its oversold status and depressed sentiment.

Dividend Announcements

Several companies have announced dividends, including:

• Parkway Life REIT: Final dividend of 2.38 cents, payable on March 11, 2025.
• CapitaLand Integrated Commercial Trust: Final dividend of 3.29 cents, payable on March 21, 2025.
• DBS Group Holdings: Final dividend of 60 cents, payable on April 16, 2025.