Navigating the Shifting Tides: UOB’s Resilience Shines Amid Global Volatility

UOB’s Resilient Performance Amidst Macroeconomic Headwinds

Weathering the Storm: UOB’s Solid Financials

• Total income for the financial year ended 31 December 2024 grew 3% to \$14.3 billion, while net profit rose 6% to a record \$6.0 billion.
• Net interest income remained stable at \$9.7 billion, as proactive balance sheet management and 5% loan growth cushioned the impact of interest rate cuts.
• Net fee income grew 7% to \$2.4 billion, driven by double-digit growth in wealth management fees and strong performance in card fees and loan-related activities.
• Other non-interest income increased 10% to \$2.2 billion, boosted by robust customer-related treasury income, trading, and liquidity management activities.

Enhancing Productivity and Diversifying Revenue Streams

• Excluding one-off expenses, core operating expenses rose 5% to \$6.1 billion, reflecting UOB’s commitment to cost management and productivity enhancement.
• The bank aims to achieve a cost-to-income ratio in the low 40s% in the next few years through continuous optimization.
• UOB has invested \$800 million over the past decade to build regional capabilities in payments, trade, and cash management, transforming its wholesale business and driving CASA growth.
• The bank is now extending these capabilities to its private banking arm, with the launch of a new digital platform in 2025 to further drive AUM and wealth fee growth.

Shareholder-Friendly Initiatives

• The Board recommends a final dividend of 92 cents per share, bringing the total dividend for the full year to \$1.80 per share.
• Additionally, a special dividend of 50 cents per share is proposed in conjunction with UOB’s 90th anniversary.
• The bank will also use \$2 billion of surplus capital for share buybacks over the next three years, demonstrating its commitment to managing down excess capital.

Stoneweg REIT: Exploring New Frontiers in European Real Estate

A New Sponsor, New Opportunities

• Stoneweg European REIT (\$2.12, up 2 cents), formerly known as Cromwell European REIT, welcomed its new sponsor, SWI Group, in December 2024.
• SWI Group, a partnership between real estate investment group Stoneweg and alternative investment group Icona Capital, brings expertise in data center investments.
• The sponsor’s pipeline of data center development opportunities provides Stoneweg REIT with the potential to co-invest and diversify its portfolio.

Expanding Horizons: Exploring Data Centers and New Geographies

• While other S-REITs typically acquire mature data center assets, Stoneweg REIT’s strategy is to invest in data center developments, leveraging its sponsor’s expertise and pipeline.
• The REIT is also considering expanding into new geographies, such as Switzerland and Spain, where SWI Group has a strong presence.

Resilient Performance Amid Market Challenges

• Stoneweg REIT’s distribution per unit for the second half of 2024 fell 10.7% to 0.07056 euro, as revenue declined 1.4% to 106.6 million euros.
• However, the REIT’s manager believes that with the current supply crunch in the European logistics market and investors’ increasing interest in the region, Stoneweg REIT is well-positioned to capitalize on these trends.

Attractive Valuation and Upside Potential

• Stoneweg REIT’s market cap stands at S\$1.2 billion and currently trades at 0.7x P/B.
• The REIT offers an attractive dividend yield of 9.5% (12.3 European cents normalized dividends and 1.77 European cents per share due to return of capital).
• Consensus target price stands at \$2.64, representing a 24.5% upside from the current share price.

Given the REIT’s attractive valuation, high dividend yield, and potential upside, we recommend an “Accumulate” rating on Stoneweg REIT.