Alpha Picks: Adding PROP, CD and Removing SATS, MINT, GENS

Our Alpha Picks portfolio outperformed the Straits Times Index (STI) by 0.3 percentage points (ppt) in January 2025, increasing 2.1% MoM on a market cap-weighted basis. However, on an equal-weighted basis, it rose 1.2% MoM, underperforming the STI by 0.6ppt due to continued strength in banking stocks, which were the primary contributors to the STI’s performance.

Performance Review

The portfolio’s January 2025 performance was mixed, with notable outperformers and underperformers:

Outperformers:

1. CSE Global (+8.4% MoM)
   • Benefited from strong contract wins.
   • Increasing demand for engineering solutions.
2. Seatrium (+7.7% MoM)
   • Gained from positive sentiment surrounding offshore oil & gas.
   • Support from US energy policies under the new administration.
3. OCBC (+4.3% MoM)
   • Lifted by the banking sector rally.
   • Expectations of higher-for-longer interest rates benefiting net interest margins (NIMs).

Underperformers:

1. SATS (-6.9% MoM)
   • US de minimis tax rule changes negatively impacted sentiment.
   • Concern over logistics headwinds.
2. Venture Corp (-3.9% MoM)
   • Weakness in the electronics manufacturing services (EMS) sector.
   • Impact from global semiconductor slowdown.
3. Mapletree Industrial Trust (MINT) (-3.4% MoM)
   • Industrial REIT sector headwinds.
   • Uncertainty over interest rate movements affecting REIT valuations.

Portfolio Adjustments for February 2025

Given sector dynamics and stock-specific developments, we are making the following adjustments to our Alpha Picks portfolio:

Additions:

1. PropNex (PROP SP)
   • PropNex is expected to benefit from sustained property demand.
   • Government cooling measures in 2024 have not significantly affected overall transaction volumes.
   • Resilient earnings outlook for 2025.
   • Potential for a special dividend to support share price momentum.
2. ComfortDelGro (CD SP)
   • Earnings are expected to recover in 2025 as transport demand normalizes.
   • Government support and cost pass-through mechanisms provide earnings visibility.
   • Diversification into overseas transport markets strengthens its earnings base.

Removals:

1. SATS (SATS SP)
   • Limited near-term catalysts for share price growth.
   • Impacts from the US de minimis tax rule changes remain uncertain.
   • Potential earnings drag from weaker cargo volumes.
2. Mapletree Industrial Trust (MINT SP)
   • Challenging outlook for industrial REITs due to interest rate uncertainty.
   • Valuations are not attractive at current levels.
3. Genting Singapore (GENS SP)
   • Headwinds in the gaming and hospitality sector.
   • Limited catalysts to drive share price performance.
   • Uncertainty over tourism recovery trends in key Asian markets.

Current Alpha Picks Portfolio (Post-Changes)

Following these adjustments, our revised Alpha Picks portfolio for February 2025 now includes:

CSSC, CD, CVL, CSE, CENT, LREIT, MPM, OCBC, PROP, STM, SCI, VMS, YZJSGD.

Market Outlook & Strategy

Key Factors Influencing Singapore’s Market in 2025:

1. Global Economic Conditions:
   • Stronger-than-expected US corporate earnings provided a boost to equity markets in January 2025.
   • The Federal Reserve’s stance on interest rates has become a key market driver, with investors expecting no immediate rate cuts.
   • US-China trade tensions remain an overhang, particularly with the imposition of new import tariffs.
2. Singapore Market Performance:
   • The Straits Times Index (STI) rose 1.8% MoM in January 2025.
   • Gains were largely driven by banking stocks, as higher interest rates benefited net interest margins (NIMs).
   • The industrial REIT sector struggled, reflecting uncertainty over rate cuts.
3. Sector Rotation:
   • Financials continue to outperform, supported by interest rate stability.
   • Industrials and REITs face headwinds due to macroeconomic uncertainties.
   • Property and transport-related stocks are seeing renewed interest as earnings recovery takes shape.

Investment Rationale for Alpha Picks Adjustments

Why We Added PropNex (PROP SP)

• Resilient property demand despite government cooling measures.
• Sustained transaction volumes in the private residential and HDB resale markets.
• Attractive dividend yield potential.

Why We Added ComfortDelGro (CD SP)

• Earnings normalization expected in 2025.
• Strong overseas expansion strategy supporting revenue growth.
• Defensive stock amid macroeconomic uncertainties.

Why We Removed SATS (SATS SP)

• US trade policy changes impacting logistics business.
• Lack of earnings momentum in the near term.

Why We Removed Mapletree Industrial Trust (MINT SP)

• Industrial REITs facing sector-wide weakness.
• Lack of strong catalysts for growth.

Why We Removed Genting Singapore (GENS SP)

• Gaming sector faces macroeconomic headwinds.
• Tourism recovery remains uncertain.

Conclusion & Investment Stance

• The Singapore market remains supported by strong financial sector earnings.
• We continue to favor property-related and transport stocks, which have more resilient earnings growth.
• Banking sector remains a stronghold, while industrial REITs and logistics-related stocks face pressures.
• Our Alpha Picks strategy focuses on selective, high-quality names with clear earnings visibility and defensive characteristics.

Key Themes for February 2025:  Property stocks (PropNex) supported by resilient demand.
Transport stocks (ComfortDelGro) benefiting from post-pandemic normalization.
Avoid industrial REITs until rate-cut clarity emerges.
Stay cautious on gaming and hospitality stocks due to uncertain regional tourism recovery.

Thank you