Singapore Exchange Ltd (SGX SP): Broad-Based Growth Powers Strong Earnings
The Singapore Exchange (SGX) delivered stellar results for 1HFY25, with its core profit after tax and minority interests (PATMI) surging by 27.3% year-on-year (YoY) to SGD320.1 million. This impressive performance surpassed expectations and was driven by a 15.6% YoY increase in net revenue, amounting to SGD646.4 million. Growth was robust across all segments, including Equities-Cash, Equities-Derivatives, Fixed Income, Currencies and Commodities (FICC), and Platform and Others.
Key highlights include a strong double-digit increase in the securities daily average traded value (SDAV) for its cash equities business and the daily average volume (DAV) for its derivatives business. Cost control measures were exemplary, with operating expenses rising only 0.4% YoY. Management declared a quarterly interim dividend per share of 9.0 Singapore cents, culminating in a 1HFY25 total of 18.0 Singapore cents, a 5.9% YoY increase.
Looking ahead, SGX aims to expand its product suite, strengthen its derivatives franchise, and enhance bulk cargo and freight risk management solutions, leveraging its position as the world’s largest dry forward freight agreement venue. Its healthy balance sheet, with a leverage ratio of 0.9x, further supports its growth trajectory. OCBC Investment Research raised its fair value estimate for SGX from SGD12.21 to SGD13.68 and maintained a “HOLD” recommendation.
Bumitama Agri Ltd (BAL SP): Healthy Retracement and Bright Prospects
Bumitama Agri Ltd’s (BAL) share price experienced a retracement from its December 2024 highs, in tandem with broader crude palm oil (CPO) prices. Factors such as lower demand and a shift towards cheaper soybean oil contributed to this decline. Despite this, BAL remains fundamentally strong, with supportive demand expected to keep CPO prices elevated.
The Malaysian Palm Oil Board forecasts a 4.2% YoY increase in palm oil output to 19.5 million tons in 2025, but demand catalysts like Indonesia’s B40 biodiesel mandate and Ramadan are likely to provide support. BAL is also expected to declare a healthy dividend, with a forward yield of 5.8%.
On the sustainability front, BAL is making significant progress, including a commitment to reduce greenhouse gas emissions intensity by 30% by 2030 and achieving full Roundtable on Sustainable Palm Oil (RSPO) certification by 2025. These efforts, combined with its superior productivity, make BAL an attractive investment. OCBC Investment Research reiterated its fair value estimate of SGD0.915 and upgraded the stock to “BUY.”
CapitaLand Ascendas REIT (CLAR SP): Portfolio Rejuvenation on Track
CapitaLand Ascendas REIT (CLAR) posted a 3.2% YoY increase in its 2H24 distribution per unit (DPU) to 7.681 Singapore cents, culminating in a FY24 DPU of 15.205 Singapore cents, which slightly exceeded expectations. CLAR achieved robust rental reversions of +11.6% in FY24, although this moderated compared to FY23. Portfolio occupancy improved sequentially to 92.8%, marking a reversal after four quarters of decline.
Management guided for mid-single-digit rental reversions in FY25, which appear achievable. However, the potential non-renewal of leases from major tenants like Singtel could pose risks. CLAR plans to offset these challenges by converting properties and expanding into new industries. The REIT’s aggregate leverage ratio declined to 37.7%, with 82.7% of borrowings hedged, providing resilience in a high-interest-rate environment.
CLAR is focusing on development and asset enhancement initiatives, with SGD803.6 million in projects underway. These are expected to boost gross revenue by 3-4% annually. OCBC Investment Research revised its fair value estimate slightly downward from SGD3.32 to SGD3.30 and maintained a “BUY” recommendation.
Amazon.com Inc (AMZN US): Heavy Investments Fuel Growth
Amazon delivered a strong 4Q24 performance, with overall revenue rising ~10% YoY to ~USD187.8 billion and operating income growing ~11% YoY to ~USD21.2 billion. The company’s earnings per share (EPS) surged to USD1.86, reflecting an ~86% YoY increase. Notably, AWS revenue grew ~19% YoY to ~USD28.8 billion, with an impressive operating margin of 36.9%.
Amazon continues to benefit from the growth of generative and non-generative AI workloads, although management cautions that AWS growth may be uneven in the near term due to enterprise adoption cycles and technology advancements. The company plans to increase its 2025 capital expenditure, focusing on technology infrastructure to support AI and cloud services.
Amazon’s retail margins also show promise, driven by innovations in inventory management, same-day delivery, and robotics. Despite challenges in supply chain labor standards, Amazon leads in greenhouse gas emission reduction efforts. OCBC Investment Research maintained a “BUY” rating with a revised fair value estimate of USD274.
CapitaLand Integrated Commercial Trust (CICT SP): Resilient Performance
CapitaLand Integrated Commercial Trust (CICT) ended FY24 on a positive note, with DPU increasing by 0.3% YoY to 15.205 Singapore cents. The trust achieved rental reversions of +11.6% for the year and improved portfolio occupancy to 92.8%. Although facing potential non-renewals from key tenants, CICT is exploring asset conversion and redevelopment opportunities.
Valuations remained stable at SGD16.8 billion, with an aggregate leverage ratio of 37.7%. Management plans to enhance its portfolio with development projects worth SGD1.5 billion, aiming for incremental revenue growth. OCBC Investment Research maintained a “BUY” rating with a fair value estimate of SGD3.30.
