Global Market Overview
The report opens with a detailed review of market conditions across regions. In the United States, stocks experienced significant declines as investors took profits from high‐flying technology shares, while defensive sectors were favored amid concerns over elevated borrowing costs and persistent inflation. European equities enjoyed a strong start to the year, with chemicals and healthcare stocks leading gains. In Asia, gains were propelled by key names such as Alibaba, Tencent, TSMC, and Xiaomi, with Hong Kong and China equities posting healthy advances.
Deep Dive Analysis: Alibaba Group – Firing on All Cylinders
Alibaba Group emerged as a standout in the report, showcasing a robust re‐acceleration of core business growth. The 3QFY25 results beat expectations, with total revenue rising 8% year-on-year and adjusted earnings up 11% relative to consensus. Key highlights of the report include:
- Re-acceleration of Core Business Growth: The growth was driven by a revived Customer Management Revenue (CMR), a positive turnaround in Taobao Tmall Group (TTG) EBITDA, and an acceleration of Cloud revenue. TTG’s revenue increased by 5.4% YoY, underpinned by a 9.4% growth in CMR driven by improved gross merchandise value (GMV), the benefit of an increased Taobao take rate, and the new digital marketing tool, Quanzhantui.
- AliCloud as a Bright Spot: Alibaba’s cloud segment witnessed significant improvement with Cloud Intelligence Group revenue growing 13% YoY and double-digit performance in public cloud segments. Cloud EBITDA advanced 33% YoY, with an improved margin of 9.9%. AI-related products have now posted triple-digit YoY revenue growth for six consecutive quarters. The flagship APSARA conference in 2H24 demonstrated Alibaba’s determination to leverage AI capabilities to enhance content recognition and prioritize high commercial potential content.
- Stepping Up Investments in AI: Management has announced a major step-up in CAPEX for cloud and AI infrastructure over the next three years – potentially exceeding CNY300 billion. The focus will be on advancing AI foundation models, native applications, and transforming eCommerce operations with AI technologies.
- Turnaround and Shareholder Returns: Alibaba’s International Digital Commerce Group (AIDC) is on track to achieve its first quarterly profitability in FY2026. The company also remains committed to shareholder returns, having repurchased USD1.3 billion worth of shares during 3QFY25, with an outstanding repurchase program effective until March 2027.
The report maintains a positive outlook on Alibaba, stating that the company is well positioned to benefit from the structural growth of AI computing and applications. As a reflection of accelerated earnings growth and an improved valuation metric, the research team has lifted the sum-of-the-parts fair value estimate to HKD160.00, with the stock currently trading at an attractive 12.5x forward P/E. The recommendation for Alibaba Group remains a BUY.
Deep Dive Analysis: Seatrium Limited – Eyes on the Target
Seatrium Limited’s FY24 performance, as detailed in the report, exceeded forecasts with robust revenue and profitability improvements. Key details of the company’s performance and outlook include:
- Strong Earnings Beat: FY24 net profit of SGD157 million marked a significant turnaround from a net loss of SGD2.0 billion in the previous year. Revenue surged 26.6% YoY to SGD9.2 billion, bolstered by higher turnover and increased activities in repairs and upgrades. Particularly, 2H24 revenue of SGD5.2 billion surpassed expectations, while EBITDA more than doubled to SGD627 million – expanding margins from 3.2% in FY23 to 6.8% in FY24.
- Cost Optimization and Uniform Pricing: Management achieved improved pricing consistency with customers along with significant cost efficiencies from utilities and labor optimization. These initiatives were instrumental in driving profitability and restoring confidence in the company’s turnaround trajectory.
- Order Wins and Pipeline Strength: Seatrium secured SGD15.2 billion worth of new orders from both new and repeat customers throughout FY24 and the year-to-date in FY25. Notable contract wins include the Memorandum of Understanding with BP for the Tiber floating production unit and a contract with Penta-Ocean Construction for a Heavy Lift Vessel. Moreover, the contract win for the construction of the LeTourneau Super 116E Class Self-Elevating Drilling Unit from International Maritime Industries further highlights an active order pipeline with a net order book at SGD23.3 billion for deliveries through 2031.
- Legacy Projects and Cost Synergies: Although legacy projects in US shipyards experienced delays into FY24, management remains confident in achieving recurring savings of SGD300 million from synergies and SGD200 million from procurement by the end of the year. The company is also making progress towards its FY28 targets.
- Dividend and Capital Management: Seatrium proposed a final dividend of 1.5 Singapore cents per share, reflecting the company’s commitment to returning value to shareholders.
With an underlying net profit improvement and favorable improvements in EBITDA, Seatrium Limited is well positioned for future growth. The fair value stands at SGD2.82, and the company’s strong operational recovery and order book reinforcement underpin the recommendation to BUY.
Deep Dive Analysis: Singapore Property Sector – Modest Growth in Physical Market Conditions
The analysis on the Singapore Property Sector provides a comprehensive review of market dynamics across both private and public segments. Key insights include:
- Residential Market Trends: Singapore’s private residential property prices recorded a 3.9% increase in 2024, while the public market performance, as measured by the HDB Resale Price Index, surged by 9.7%. This marked the sixth consecutive year of growth in the public segment. The narrowing of the price gap between private and public housing to 5.8% reflects robust buyer sentiment and improved market conditions.
- Transaction Volumes: Both private new residential and resale transactions witnessed positive developments. Private new home sales in 2024 stood at 6,469 units, predominantly buoyed by a surge in 4Q24. Meanwhile, the secondary market saw a remarkable rebound with resale volumes jumping 24.0% to 14,053 units, effectively reversing previous declines. Sub-sales increased by 10.4% to 1,428 units, collectively propelling overall transactions to a substantial 15.3% increase year-on-year.
- Economic Correlation and Demand Drivers: The sector’s growth is expected to be closely tied to Singapore’s economic expansion, which grew at a robust 4.4% in 2024. Forecasts posit that private residential price growth in 2025 will lie between 2% and 4%. The improved sentiment is further supported by the commencement of the rate cut cycle by the US Federal Reserve and subsequent declines in mortgage rates.
- Sector Recommendations: Despite a positive outlook, the report cautions about the downside risks of property cooling measures, particularly if price increases outpace underlying economic fundamentals. Demand from foreign buyers is anticipated to remain lackluster. In this environment, the report advises that property players focus on developing recurring income streams. An ordered preference is provided for key players in the sector, with CapitaLand Investment Limited being the most preferred, followed by UOL Group, City Developments Limited, and PropNex Ltd.
The Singapore Property Sector analysis offers valuable insights into market transitions and strategic investment considerations, guiding investors on the optimal path for exposure to real estate dynamics in Singapore.
Latest OIR Reports – Additional Company and Sector Analyses
The report also includes a comprehensive roundup of recent analyses covering a broad range of companies and sectors. Key highlights are as follows:
- Singapore Post: Reporting a mixed set of results, the analysis maintains a HOLD recommendation with a fair value of SGD0.560.
- China Tower Corporation: The report emphasizes clarity on long-term strategy with a HOLD rating and a fair value of HKD12.80.
- Singtel: With positive guidance revisions, Singtel is recommended as a BUY with a fair value of SGD4.00.
- China Telecom: Positioned to leverage growth opportunities in AI, the recommendation for China Telecom is BUY with a fair value of HKD7.22.
- United Overseas Bank Ltd: Noted for record profits, UOB retains a HOLD stance with a fair value of SGD41.50.
- SIA Engineering: In a bid to overcome significant operational pressures, SIA Engineering is rated BUY with a fair value of SGD2.64.
- Equinix, Inc.: Despite soft guidance, secular growth trends remain intact, leading to a BUY rating with a fair value of USD1,035.00.
- Sea Limited: Demonstrating strong momentum, Sea Limited is recommended as a BUY, trading at a fair value of USD154.00.
- HSBC: With a strategy update that signals robust prospects, HSBC is given a BUY rating with fair values of HKD96.00 and GBp995.33.
- First REIT: The analysis anticipates a potential portfolio refresh, maintaining a HOLD rating at a fair value of SGD0.270.
- Other Reports: Additional analyses cover themes including palm oil performance, Singapore REITs growth challenges, China Strategy in internet and platform sectors, and broad market commentary on the Singapore Budget 2025.
The assortment of reports provides investors with a multifaceted view of market trends and opportunities, ensuring a balanced and in-depth understanding of each sector’s dynamics.
STI Stocks Sorted by Market Capitalisation Snapshot
A detailed table in the report outlines the STI stocks by market capitalisation. This comprehensive snapshot includes major players such as DBS Group, OCBC, UOB, Singtel, Singapore Airlines, and others – with each company’s beta, dividend yield, P/E ratios, and aggregated recommendation ratings provided. This serves as an invaluable tool for investors in assessing market positioning and peer comparisons.
Conclusion
The OCBC Investment Research Market Pulse Report dated 24 Feb 2025 delivers a comprehensive analysis of key companies and sectors across global markets. In-depth reviews on market leaders such as Alibaba Group and Seatrium Limited, alongside an insightful outlook on the Singapore Property Sector, are supported by a broad spectrum of additional coverages from recent OIR reports. Each analysis underscores critical performance metrics, strategic initiatives, and forward-looking guidance that empower investors to make informed decisions in a dynamic market environment.
