Market Insights and Company Analysis

Broker: Lim & Tan Securities

Date: 19 February 2025

Overview of Financial Markets

The financial markets have shown a mixed performance recently, with the FSSTI Index closing at 3,925.6, reflecting a daily increase of 0.5% and a year-to-date increase of 3.6%. Meanwhile, the US markets displayed stability, with the Dow Jones at 44,657.0 and the S&P 500 at 6,148.8, both showing slight changes in their daily performances. The commodities market also witnessed fluctuations, with gold slightly down and crude oil showing a modest increase.

Company Analysis

UOB (United Overseas Bank)

UOB reported a record net profit of S\$6.0 billion for the financial year ending 31 December 2024, marking a 6% increase compared to the previous year. This growth was primarily driven by strong net fee income and trading and investment income. The bank’s net interest income remained steady at S\$9.7 billion, achieving a loan growth of 5% despite the impacts of interest rate movements on the net interest margin. UOB’s net fee income grew by 7% to S\$2.4 billion, supported by a double-digit growth in wealth management fees. The asset quality remained robust, with a non-performing loan (NPL) ratio at 1.5%. The Board has recommended a final dividend of 92 cents per ordinary share, bringing the total dividend for FY24 to S\$1.80 per ordinary share, with a payout ratio around 50%.

As part of its capital distribution strategy, UOB announced a S\$3 billion package for surplus capital distribution over the next three years, which includes special dividends and share buybacks. A special dividend of 50 cents per ordinary share is recommended for 2025. The bank’s market capitalization is currently S\$65.2 billion, trading at a forward PE of 10.3x and a PB of 1.3x, with a dividend yield of 4.6%. The consensus target price stands at S\$40.63, indicating a potential upside of 5.1% from the current share price. UOB is recommended as a constructive investment opportunity due to its attractive yields.

DBS Bank

DBS Bank’s performance has also been noteworthy, with a normalized yield of 5.2% at 2.4 cents per share, which increases to 6.6% considering a capital return of S\$0.60. The bank trades at a price-to-earnings (PE) ratio of 11.7x and a price-to-book (PB) ratio of 1.9x. The consensus target price for DBS is S\$48.25, reflecting a potential upside of 5.3% from its current levels. The bank is positioned favorably within the Singapore banking landscape, appealing to investors seeking stable income streams.

OCBC Bank

OCBC Bank offers a yield of 4.8% and trades at a PE ratio of 10.4x and a PB ratio of 1.4x. The consensus target price for OCBC stands at S\$17.76, which implies no expected upside at current levels. Despite this, OCBC remains a solid choice for income-focused investors.

AEM Holdings

AEM Holdings saw a surge in its share price after being highlighted in Prime Minister Lawrence Wong’s Budget 2025 speech. The company’s stock climbed over 5% to S\$1.64, reflecting investor confidence despite recent operational challenges. AEM reported a significant revenue decline of 36.9% year-on-year for the first half of the 2024 financial year. The company has also faced inventory shortfalls due to internal errors, which are projected to affect profitability. Nevertheless, the government’s recognition of AEM underscores its importance in the semiconductor industry and could lead to improved investor sentiment moving forward.

Singapore Exchange (SGX)

Shares of Singapore Exchange fell 1.2% to S\$12.81 following the announcement of tax incentives aimed at attracting more companies and fund managers to list in Singapore. This initiative is part of broader measures to enhance the local equities market’s attractiveness. The exchange is critical in facilitating capital flows and enhancing market liquidity.

SATS Ltd

SATS Ltd closed at S\$3.35, up 1.8%, benefitting from its mention in the Budget 2025 speech. The company continues to demonstrate resilience amidst market fluctuations, supported by its diversified operations in food solutions and gateway services.

Venture Corporation

Venture Corporation saw its shares close at S\$12.95, marking a slight increase. The company operates in the technology and manufacturing sectors, positioning itself well to capitalize on growth in these areas.

Frasers Logistics Trust

Frasers Logistics Trust is noted for its robust dividend yield and stability in the real estate sector. The trust offers a yield of 6.64% and is focused on growing its asset base through strategic acquisitions and developments.

Mapletree Logistics Trust

Mapletree Logistics Trust is another key player in the logistics real estate sector, with a strong focus on enhancing its portfolio and delivering consistent returns to unitholders.

CapitaLand Integrated Commercial Trust

CapitaLand Integrated Commercial Trust has shown resilience in the retail and commercial property sectors, adapting to changing consumer behaviors and market dynamics.

Conclusion

The analysis highlights a favorable environment for Singapore banks and selected companies in the real estate and technology sectors. Investors are encouraged to consider UOB, DBS, and OCBC for their attractive yields and growth potential. AEM Holdings, despite short-term challenges, retains long-term value due to its strategic importance in the semiconductor industry. Overall, maintaining a diversified portfolio that includes these companies could provide both stability and growth opportunities in the current market climate.