Market Pulse: In-Depth Analysis of Leading Companies

OCBC Investment Research – 6 Nov 2024

United States Market Commentary

Tech companies spearheaded gains amid a closely contested presidential race between Donald Trump and Kamala Harris. The Nasdaq Composite advanced by 1.43%, while the S&P 500 index rose by 1.23%. A surge in Palantir Technologies, driven by robust demand for artificial intelligence, also contributed to the rally.

The Dow Jones Industrial Average climbed by 427.28 points (1.02%), and small-cap stocks saw gains, with the Russell 2000 up by approximately 1.88%. Investors continue to show an interest in long-term US debt, despite budget deficit concerns. Crude oil futures experienced a volatile session, supported by the OPEC+ decision to delay output increases and geopolitical tensions involving Iran and Israel.

An accommodative Federal Reserve, slowing inflation, and strong earnings provide a favorable backdrop for stocks, with the S&P 500 up more than 21% year-to-date. Analysts predict a burst of volatility post-election but maintain a positive long-term outlook for equities.

European Market Commentary

The Stoxx Europe 600 Index finished the session up by 0.06%, with gains in industrials and media shares offset by declines in autos and healthcare. Investors might rotate back into European stocks if Kamala Harris wins the US election. The Bank of England’s Monetary Policy Committee is set to meet on Thursday, adding to the anticipation.

Asian Market Commentary

Asian stocks climbed, buoyed by positive economic data and expectations for more Chinese stimulus. The MSCI Asia Pacific Index gained 0.86%, with Chinese stocks leading the way. The CSI 300 Index rose by 2.5%, marking its best day in over two weeks.

Japanese markets rebounded after a holiday, whereas Indian stocks faced pressure due to continuous foreign investor sell-offs and disappointing corporate earnings. Despite domestic funds absorbing most of the sell-off, concerns over premium valuations persist.

Singapore Market Statistics

• Straits Times Index: 3,581.6 (+0.3%)
• FTSE ST Financials: 1,376.5 (0.0%)
• FTSE ST REITs: 673.6 (-0.5%)
• FTSE ST Real Estate: 658.9 (0.0%)
• Volume: 1,097.7m (-3.5%)
• Turnover: 1,058.9m (0.0%)
• 52-week range: 3,052.4 – 3,652.6
• Gainers: 332
• Losers: 242

World Indices

• S&P 500: 5,782.8 (+1.2%)
• DJI: 42,221.9 (+1.0%)
• Nasdaq Comp: 18,439.2 (+1.4%)
• FTSE 100: 8,172.4 (-0.1%)
• STOXX Europe 600: 509.5 (+0.1%)
• Nikkei 225: 38,474.9 (+1.1%)
• Hang Seng Index: 21,007.0 (+2.1%)
• SHSE Comp Index: 3,387.0 (+2.3%)
• SZSE Comp Index: 2,047.8 (+3.2%)
• SHSE SZSE CSI 300: 4,044.6 (+2.5%)
• KLCI: 1,620.7 (+0.3%)
• JCI: 7,491.9 (+0.2%)
• SET: 1,481.7 (+1.3%)
• KOSPI: 2,576.9 (-0.5%)
• TWSE: 23,106.8 (+0.6%)

FX & Commodities

• USDSGD: 1.3144 (+0.4%)
• USDJPY: 151.62 (+0.3%)
• USDCNY: 7.105 (-0.1%)
• USDHKD: 7.773 (0.0%)
• WTI Crude: USD 71.99/bbl (+0.7%)
• Brent: USD 75.53/bbl (+0.6%)
• Gold: USD 2,744.0/oz (+0.3%)
• Silver: USD 32.66/oz (+0.6%)

Research Ideas

AIMS APAC REIT (AAREIT SP) – Robust rental reversion outweighs larger unit base

AIMS APAC REIT’s (AAREIT) first-half fiscal year 2025 (1HFY25) distribution per unit (DPU) increased by 0.4% year-on-year (YoY) despite a larger unit base. This growth was driven by a strong rental reversion in the second quarter (2QFY25) of 23.9%, up from 12.8% in the first quarter (1QFY25).

Gross revenue and net property income (NPI) rose by 7.7% and 5.1% YoY to SGD93.5m and SGD67.6m, respectively. The REIT has also more than doubled its electricity sales to the grid, benefiting from investments in solar panels. Management expects high single-digit to low-teens rental reversions in the near to medium term.

The portfolio occupancy saw a slight dip from 97.3% to 96.7%, but this is considered transitory. Aggregate leverage increased to 33.4%, with the all-in cost of debt rising to 4.4%. The REIT has a fixed debt of SGD100m at 3.6% set for refinancing, with the rate potentially affected by the US election outcome.

Management provided positive updates on their asset enhancement initiatives (AEIs), which are expected to complete earlier and at a lower cost. The fair value estimate has been raised from SGD1.46 to SGD1.50 due to increased contributions from AEIs and stronger rental reversions. BUY.

Cromwell European REIT (CERT SP) – Preparing for debt refinancing in 2025

Cromwell European REIT (CEREIT) paused its divestment activities, resulting in a 4.1% quarter-on-quarter (QoQ) increase in distributable income. Gross revenue and NPI for 3Q24 grew by 0.6% and 7% YoY, respectively. Portfolio rental reversion was positive at 2.3%, with occupancy improving slightly to 93.9%.

Aggregate leverage inched up to 41.0%, and the all-in interest rate decreased to 3.16%. CEREIT secured a new debt facility in preparation for its EUR450m bond maturing in November 2025, providing liquidity for refinancing at potentially favorable terms.

The fair value estimate has been raised from EUR1.87 to EUR1.89, reflecting a lower risk-free rate assumption. CEREIT leads peers in sustainable investment efforts, with 82% of its office assets being BREEAM or LEED certified. BUY.

CapitaLand Integrated Commercial Trust (CICT SP) – Solid rental reversions but set for a moderation ahead

CapitaLand Integrated Commercial Trust’s (CICT) 3Q24 net property income (NPI) increased by 5.4% YoY to SGD289.8m, with gross revenue up by 1.7% YoY. Rental reversions for the retail portfolio stood at 9.2%, and 11.7% for the office portfolio. However, overall portfolio occupancy declined slightly to 96.4%.

Aggregate leverage dipped to 39.4%, with 76% of debt hedged. The average cost of debt rose to 3.6%, and management expects it to remain around the high-3% level for FY24 and FY25. The fair value estimate has been increased from SGD2.32 to SGD2.41. BUY.

Xiaomi Corp (1810 HK) – Encouraging growth outlook

Global smartphone shipments grew by 5% YoY in 3Q24, with Xiaomi retaining third place globally and advancing to fourth place in China. Xiaomi’s “Human x Car x Home” ecosystem strategy has helped attract a broader, more stable consumer base.

Xiaomi delivered 39.8k EVs in 3Q24 and is on track to meet its goal of 120k units by the end of FY24. The company is expected to announce its 3Q24 results on 18 Nov 2024, with sequential margin improvements anticipated. The fair value estimate has been raised from HKD26 to HKD34. BUY.

STI Stocks Sorted by Market Capitalisation

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