Market Overview
The market in early 2025 is characterized by heightened volatility across regions as geopolitical tensions and economic data continue to drive investor sentiment. In the United States, stocks turned negative following President Donald Trump’s threat to impose steep tariffs on Canada, Mexico, and additional levies on China. The tech-laden Nasdaq Composite experienced its sharpest rout in a month, while core indices such as the S&P 500 and Dow Jones recovered earlier gains amid softening consumer and business sentiment. European and Asian markets, too, displayed muted performances, with automakers and tech giants feeling the impact of trade disputes and slowing growth expectations. Global indices and commodities like gold further reflected the wider caution in the investment community.
In-Depth Company Analysis
City Developments Ltd (CIT SP) – Muted Results and Potential Share Price Overhang
City Developments Ltd (CIT SP) reported a challenging FY24 performance marked by a significant decline in profitability and revenue. The profit after tax and minority interests (PATMI) fell by 36.6% year-on-year to SGD201.3 million, while revenue dropped by 33.8% to SGD3,271.2 million. The underperformance was partly attributed to the absence of contributions from the Piermont Grand Executive Condominium project, which had delivered a substantial revenue boost in FY23, and the sale of a freehold land site in Tokyo. Although PATMI surpassed the internal forecast of SGD192.3 million, it fell considerably short of LSEG consensus estimates of SGD274.4 million.
Management has focused on capital recycling and unlocking portfolio value through strategic initiatives. However, a notable board disagreement, publicly cited as a reason for the abrupt trading halt and cancellation of the analyst briefing, has raised concerns over the company’s governance and share price outlook. The net gearing ratio remained unchanged at 69% half-on-half, although it increased from 61% at the end of FY23. In light of these risks, the revalued net asset value (RNAV) discount was widened from 45% to 60%, resulting in a downward revision of the fair value estimate from SGD6.57 to SGD6.02.
Recommendation: BUY
Sembcorp Industries (SCI SP) – Opportunities in Energy Transition, AI and Industry
Sembcorp Industries (SCI SP) has demonstrated resilience amid softer price action following the stellar returns seen in 2022 and 2023. The company delivered a 6.5% year-to-date return in 2025 after recording exceptional total returns of 7% in FY24, 62% in FY23, and 73% in FY22. In FY24, despite a 9% decline in revenue to SGD6.4 billion, net profit rose by 7% to SGD1.0 billion, with the Gas and Related Services segment proving especially robust by maintaining net profit at SGD727 million. The Integrated Urban Solutions segment also posted a marked turnaround with a net profit before exceptional items of SGD169 million.
A key corporate move was raising the payout ratio from 23% in FY23 to 40% in FY24, which boosted the full year dividend to SGD0.23 per share from SGD0.13 per share previously. Alongside its focus on greenfield projects and renewables expansion—reflected in the SGD1.3 billion increase in net debt to SGD7.8 billion—the company is poised to benefit from the increasing incorporation of artificial intelligence (AI) and industrial realignment. With these substantial initiatives factored in, the updated fair value estimate was raised from SGD6.70 to SGD7.20.
Recommendation: BUY
Bumitama Agri Ltd (BAL SP) – A Strong Finish to the Year
Bumitama Agri Ltd (BAL SP) concluded FY24 on a high note, with revenue and PATMI outperforming forecasts largely due to stronger-than-expected Q4 results. For the quarter, revenue surged by 30% quarter-on-quarter and 42% year-on-year to IDR5.2 trillion, driven by robust performance in both the crude palm oil (CPO) and palm kernel (PK) segments. CPO revenue grew by 27% quarter-on-quarter (36% YoY) to IDR4.5 trillion, bolstered by a marked increase in production, sales volume, and average selling prices. PK revenue also enjoyed impressive growth, jumping by 46% quarter-on-quarter and doubling year-on-year.
Despite challenging weather conditions affecting annual fresh fruit bunches (FFB) production and yields, the combination of higher selling prices and improved EBITDA margins—a 3.8 percentage point expansion observed in the quarter—helped sustain profitability. On an annual basis, revenue expanded by 8% to IDR16.7 trillion, while EBITDA and net profit were slightly down, evidencing a margin compression of 3.6 percentage points to 26.4%. Management highlighted potential upward pressure from increased fertilizer costs and rising minimum wages, while forecasting some margin pressures if production targets are not met.
Reflecting these dynamics, the revised fair value estimate was adjusted upward from SGD0.915 to SGD0.965. Additionally, BAL has outlined ambitious ESG initiatives targeting a 30% reduction in GHG emissions intensity by 2030, full Roundtable of Sustainable Palm Oil (RSPO) certification for all units by 2025, and robust community and biodiversity management measures.
Recommendation: BUY
Singapore REITs – Stick to Domestic Assets
Focusing on domestic assets, the report emphasizes a cautious yet opportunistic stance on Singapore REITs. Among the various sub-sectors, retail and industrial continue to be favored, largely due to their healthy demand dynamics and constrained supply. Retail properties have witnessed resilient rental returns, with island-wide prime retail rents rising by 3.6% in 2024 and key submarkets such as Orchard Road and City Hall/Marina Centre benefiting from a recovering tourism sector and normalized office attendance.
Industrial REITs have experienced robust rental reversions, although a moderation may be anticipated given the influx of new warehouse supply and the absorption of previous rent hikes. In the office sector, stable performance is being driven by limited new supply—particularly in Core CBD Grade A office spaces—while the hospitality sector witnessed a normalization in performance after a surge in post-COVID recovery metrics. Given the absence of strong re-rating catalysts and the prevailing higher interest rate environment, a cautious but not bearish approach is advised, with selective accumulation of quality names.
The report highlights several preferred picks within the REIT space, including:
- CapitaLand Ascendas REIT (CLAR SP)
- CapitaLand Integrated Commercial Trust (CICT SP)
- Keppel DC REIT (KDCREIT SP)
- Parkway Life REIT (PREIT SP)
Hong Kong Strategy – The Budget Projects Fiscal Deficit to Narrow Modestly
The Hong Kong Budget for FY2025-26 outlines a strategic push towards fiscal consolidation and balanced growth in the midst of a persistent fiscal deficit. The Financial Secretary has forecasted GDP growth between 2.0% and 3.0% and penciled in a fiscal deficit of around HKD67 billion—roughly 2% of GDP—as compared to the previous fiscal surplus. The budget focuses on reducing operating costs through measures such as a pay freeze for civil servants, planned civil service job cuts, and adjustments to transport subsidy schemes.
Key issuances of government bonds, ranging between HKD150 billion and HKD195 billion, are expected to support infrastructure spending. While some mildly supportive measures for the private residential market were introduced, uncertainties remain over the pace of relaxations under the New Capital Investment Entrant Scheme (CIES). Additionally, efforts to incorporate REITs into the Stock Connect have been announced, although a specific timeline is yet to be provided.
Latest OIR Reports – Comprehensive Company Snapshot
The report also provides concise company snapshots with recommendations and fair value estimates. Below is an overview of the latest OIR reports:
- City Developments Ltd (CIT SP): Muted results and potential share price overhang; BUY; Fair Value: SGD6.02.
- Sembcorp Industries (SCI SP): Opportunities in energy transition, AI and industry; BUY; Fair Value: SGD7.20.
- Bumitama Agri Ltd (BAL SP): A strong finish to the year; BUY; Fair Value: SGD0.965.
- Singapore REITs: Stick to domestic assets with a focus on quality sub-sector picks.
- HK Strategy: Fiscal budget expects a modest narrowing of the deficit with supportive measures for real estate.
- Bank of China (3988 HK / 601988 CH): Margin expected to be better than peers; BUY; Fair Values: HKD5.10 / CNY6.50.
- PropNex Ltd (PROP SP): Salesforce continues to scale; HOLD; Fair Value: SGD1.20.
- Trip.com (9961 HK / TCOM US): Stepping-up overseas expansion; BUY; Fair Values: HKD655.00 / USD84.00.
- Nanofilm Technologies International Ltd (NANO SP): Cautiously optimistic; HOLD; Fair Value: SGD0.735.
- China CITIC Bank (998 HK / 601998 CH): Stable revenue growth; BUY; Fair Values: HKD6.80 / CNY8.00.
- Riverstone Holdings Ltd (RSTON SP): Worn down by FX; BUY; Fair Value: SGD1.100.
- Genting Singapore (GENS SP): More to come in 2H25; BUY; Fair Value: SGD1.03.
- Singapore Airlines (SIA SP): An excellent quarter; HOLD; Fair Value: SGD6.50.
- SATS Ltd (SATS SP): Sequential improvements clouded by near-term turbulence; BUY; Fair Value: SGD4.11.
- Wilmar International (WIL SP): Looking for a better FY25; BUY; Fair Value: SGD3.67.
- Alibaba Group (9988 HK / BABA US): Firing on all cylinders; BUY; Fair Values: HKD160.00 / USD164.50.
- Seatrium Ltd (STM SP): Eyes on the target; BUY; Fair Value: SGD2.82.
- Singapore Property Sector: Expecting modest growth in physical market conditions.
- Singapore Post (SPOST SP): A mixed set of results; HOLD; Fair Value: SGD0.560.
- China Tower Corporation (2943 HK): Clarity for the next two years or so; HOLD; Fair Value: HKD12.80.
STI Stocks Sorted by Market Capitalisation – A Glimpse into the Leaders
The report concludes with an extensive overview of key stocks by market capitalisation. Among the top names, DBS Group Holdings, Oversea-Chinese Banking Corp, United Overseas Bank, and Singapore Telecommunications stand out. Other prominent names include Singapore Airlines, Wilmar International, ST Engineering, and CapitaLand-related trusts and investment companies that contribute substantially to Singapore’s market landscape. The detailed breakdown highlights each company’s price, market cap, beta, dividend yield, P/E ratio, and investment recommendations, serving as a robust guide for investors seeking comprehensive insights into Singapore’s equity market.
Conclusion
The OCBC Investment Research Market Pulse report dated 28 Feb 2025 presents a thorough examination of market trends and detailed analyses of key companies across multiple sectors. From the headwinds faced by City Developments Ltd amid board disagreements to the opportunities unlocked by Sembcorp Industries in energy transition and AI, and the resilient performance of Bumitama Agri Ltd against challenging weather conditions, the report delivers a spectrum of insights tailored for discerning investors. Additionally, with a keen focus on domestic Singapore REITs and supportive fiscal measures in Hong Kong, the comprehensive coverage, including the curated latest OIR reports and market capitalisation analyses, offers an invaluable resource for investors navigating the current market environment.
