Comprehensive Market Analysis: Key Insights from OCBC Investment Research

Date: 11 Nov 2024
Broker Name: OCBC Investment Research

United Overseas Bank Ltd (UOB SP) – Strong 3Q24, Exploring Share Buyback

United Overseas Bank Ltd (UOB) has announced better-than-expected 3Q24 results, leading to a significant share price boost. UOB management is considering several options, including a share buyback, given its SGD2-2.5b in excess capital. The management’s optimistic outlook, leveraging its geographical business footprint in ASEAN, positions UOB well for growth in the region.

For 3Q24, UOB posted a core net profit before Citi integration costs of SGD1.6b, reflecting a 10% QoQ and 11% YoY increase. This growth was supported by a fee income increase to a new high of SGD630m, a +2% QoQ or +7% YoY rise. The Net Interest Margin (NIM) remained steady QoQ at 2.05%, and loans grew 2% QoQ to SGD5b. Trading and investment income surged by 77% QoQ and 82% YoY to SGD709m in 3Q24, benefiting from high customer-related treasury income.

Non-performing loans (NPL) ratio held steady at 1.5%. For the nine-month period, core net profit improved by 3% YoY to SGD4.69b, with double-digit improvements from fee income and other income. UOB’s wealth management business enjoyed a 17% YoY increase in income to SGD519m, with assets under management of SGD185b. Additionally, credit card income improved by 14% YoY to SGD292m in 9M24.

The dividend yield at 5.3% will support the share price. Based on the interim dividend of SGD0.88 per share, annualizing this gives a yield of 5.3%, surpassing the Singapore 6-month T-bill cut-off yield of 3.04%. This is also ahead of most Singapore blue chips’ average dividend yield of 4.8%.

Given the positive performance, UOB’s fair value estimate has been raised to SGD37.50. UOB shares are trading at an all-time high of SGD33.82 following the announcement of its results and management’s intention to explore capital management initiatives. With an estimated dividend yield of 4.7% and a price-to-book (P/B) ratio of 1.25x, UOB’s outlook remains positive.

SATS Ltd (SATS SP) – Cleared for Take Off

SATS Ltd reported slightly above expectations for 1HFY25, showcasing broad-based growth across all segments and continued EBIT margin expansion in 2QFY25. The company declared an interim dividend of 1.5 Singapore cents per share, though the payout ratio is unlikely to return to the previous 70-80% range as SATS reinvests in long-term growth. However, the dividend quantum will increase alongside profits.

For 2QFY25, SATS reported a revenue increase of 14.1% YoY to SGD1.5b, with Gateway Services revenue growing by 10.3% YoY to SGD1.1b, supported by a 3.2% QoQ increase in air cargo volumes to 2.2m tons. Revenue for Food Solutions jumped by 28% to SGD352.8m due to increased demand for inflight meals. Aviation and non-aviation volumes rose by 25.7% and 2.7% YoY, respectively. Operating profit nearly doubled to SGD127.2m, translating to a QoQ expansion of EBIT margin from 8.2% to 8.8%. PATMI grew by SGD47.5m YoY to SGD69.7m.

Overall, 1HFY25 results were a slight beat, with revenue and operating expenses growing by 14.8% and 9.3% YoY to SGD2.8b and SGD2.3b, respectively. This resulted in an SGD168.1m increase in operating profit to SGD240.1m. SoAJV was up 47.1% YoY at SGD65.3m. The company reported a PATMI of SGD134.7m versus a loss of SGD7.8m in 1HFY24. An interim dividend of 1.5 Singapore cents per share has been declared, payable on 6 Dec 2024.

SATS has updated its fair value estimate to SGD4.38, reflecting optimism for further margin expansion in 2HFY25. The integration of WFS has unlocked a further SGD17m of annualized EBITDA synergies during the quarter, bringing the total to SGD68m. SATS’s strategic pathways to deliver on its targets for FY29 include achieving SGD8b of revenue, a 20% EBITDA margin, and a 15% ROE. While achieving these targets depends heavily on management’s execution capabilities, the outlook remains constructive.

Latest OIR Reports

OCBC Investment Research has recently released several reports, highlighting key insights and analyses on various companies:

• China Strategy: US election impact
• CapitaLand Investment Ltd (CLI SP): Staying focused on divestments and scaling up its private funds business
• DBS Group Holdings Ltd (DBS SP): Share buybacks and strong 3Q results
• Frasers Logistics & Commercial Trust (FLT SP): Solid rental reversions likely to continue
• SIA Engineering Co Ltd (SIE SP): Investing for the future
• NetLink NBN Trust (NETLINK SP): Resilient dividend distribution
• Singapore Post (SPOST SP): Awaiting a break in the clouds
• AIMS APAC REIT (AAREIT SP): Robust rental reversion outweighs larger unit base
• Cromwell European REIT (CERT SP): Preparing for debt refinancing in 2025
• CapitaLand Integrated Commercial Trust (CICT SP): Solid rental reversions but set for a moderation ahead
• Xiaomi Corp (1810 HK): Encouraging growth outlook
• OUE REIT (OUEREIT SP): Stronger foundation for stable growth
• Equinix, Inc. (EQIX US): Strong business momentum
• Apple Inc (AAPL US): Healthy momentum in Apple Intelligence but uncertainty in China’s demand remains
• Amazon.com Inc (AMZN US): AWS and International segment achieve robust operating income
• Wilmar International (WIL SP): Weak results as operations in China stayed weak
• China Strategy: What to expect from the NPC session?
• Starhill Global REIT (SGREIT SP): A stable set of results

STI Stocks Sorted by Market Capitalisation (US\$m)

Here is a detailed analysis of the top STI stocks sorted by market capitalization:

• DBS Group Holdings Ltd (DBS SP): Price: SGD42.40, Market Cap: USD90,863m, Div Yield: 5.0%, P/E Ratio: Hist: 11x, F1: 11x
• Oversea-Chinese Banking Corp Ltd (OCBC SP): Price: SGD16.06, Market Cap: USD54,437m, Div Yield: 5.4%, P/E Ratio: Hist: 10x, F1: 10x
• United Overseas Bank Ltd (UOB SP): Price: SGD35.69, Market Cap: USD44,957m, Div Yield: 4.8%, P/E Ratio: Hist: 12x, F1: 10x
• Singapore Telecommunications Ltd (ST SP): Price: SGD3.25, Market Cap: USD40,437m, Div Yield: 4.0%, P/E Ratio: Hist: 68x, F1: 21x
• Wilmar International Ltd (WIL SP): Price: SGD3.14, Market Cap: USD14,770m, Div Yield: 5.4%, P/E Ratio: Hist: 10x, F1: 11x
• Singapore Airlines Ltd (SIA SP): Price: SGD6.45, Market Cap: USD14,450m, Div Yield: 7.4%, P/E Ratio: Hist: 12x, F1: 10x
• Jardine Matheson Holdings Ltd (JM SP): Price: USD40.81, Market Cap: USD11,914m, Div Yield: 5.5%, P/E Ratio: Hist: 149x, F1: 8x
• Singapore Technologies Engineering Ltd (STE SP): Price: SGD4.68, Market Cap: USD10,988m, Div Yield: 3.4%, P/E Ratio: Hist: 23x, F1: 21x
• CapitaLand Integrated Commercial Trust (CICT SP): Price: SGD1.97, Market Cap: USD10,816m, Div Yield: 5.4%, P/E Ratio: Hist: 16x, F1: 18x
• CapitaLand Investment Ltd/Singapore (CLI SP): Price: SGD2.79, Market Cap: USD10,486m, Div Yield: 4.3%, P/E Ratio: Hist: 87x, F1: 20x
• Hongkong Land Holdings Ltd (HKL SP): Price: USD4.63, Market Cap: USD10,217m, Div Yield: 4.8%, P/E Ratio: Hist: -, F1: 20x
• Thai Beverage PCL (THBEV SP): Price: SGD0.52, Market Cap: USD9,750m, Div Yield: 4.4%, P/E Ratio: Hist: 13x, F1: 12x
• Singapore Exchange Ltd (SGX SP): Price: SGD11.45, Market Cap: USD9,238m, Div Yield: 3.1%, P/E Ratio: Hist: 20x, F1: 21x
• Keppel Ltd (KEP SP): Price: SGD6.41, Market Cap: USD8,723m, Div Yield: 5.3%, P/E Ratio: Hist: 16x, F1: 14x
• CapitaLand Ascendas REIT (CLAR SP): Price: SGD2.61, Market Cap: USD8,647m, Div Yield: 5.7%, P/E Ratio: Hist: 79x, F1: 18x
• Jardine Cycle & Carriage Ltd (JCNC SP): Price: SGD27.63, Market Cap: USD8,228m, Div Yield: 5.7%, P/E Ratio: Hist: 8x, F1: 8x
• Yangzijiang Shipbuilding Holdings Ltd (YZJSGD SP): Price: SGD2.68, Market Cap: USD7,977m, Div Yield: 2.4%, P/E Ratio: Hist: 11x, F1: 9x
• Genting Singapore Ltd (GENS SP): Price: SGD0.79, Market Cap: USD7,186m, Div Yield: 5.1%, P/E Ratio: Hist: 14x, F1: 15x
• Sembcorp Industries Ltd (SCI SP): Price: SGD5.01, Market Cap: USD6,740m, Div Yield: 2.8%, P/E Ratio: Hist: 9x, F1: 9x
• Seatrium Ltd (STM SP): Price: SGD2.00, Market Cap: USD5,115m, Div Yield: -, P/E Ratio: Hist: -, F1: 43x
• Mapletree Pan Asia Commercial Trust (MPACT SP): Price: SGD1.24, Market Cap: USD4,918m, Div Yield: 6.4%, P/E Ratio: Hist: 14x, F1: 15x
• Mapletree Logistics Trust (MLT SP): Price: SGD1.28, Market Cap: USD4,867m, Div Yield: 6.3%, P/E Ratio: Hist: 25x, F1: 19x
• Mapletree Industrial Trust (MINT SP): Price: SGD2.27, Market Cap: USD4,865m, Div Yield: 5.5%, P/E Ratio: Hist: 54x, F1: 17x
• SATS Ltd (SATS SP): Price: SGD3.85, Market Cap: USD4,318m, Div Yield: 0.4%, P/E Ratio: Hist: 29x, F1: 22x
• City Developments Ltd (CIT SP): Price: SGD5.20, Market Cap: USD3,500m, Div Yield: 1.5%, P/E Ratio: Hist: 14x, F1: 17x
• UOL Group Ltd (UOL SP): Price: SGD5.37, Market Cap: USD3,418m, Div Yield: 2.8%, P/E Ratio: Hist: 6x, F1: 16x
• DFI Retail Group Holdings Ltd (DFI SP): Price: USD2.37, Market Cap: USD3,205m, Div Yield: 3.6%, P/E Ratio: Hist: 27x, F1: 16x
• Venture Corp Ltd (VMS SP): Price: SGD13.65, Market Cap: USD2,978m, Div Yield: 5.5%, P/E Ratio: Hist: 16x, F1: 15x
• Frasers Centrepoint Trust (FCT SP): Price: SGD2.11, Market Cap: USD2,890m, Div Yield: 5.7%, P/E Ratio: Hist: 19x, F1: 19x
• Frasers Logistics & Commercial Trust (FLT SP): Price: SGD1.00, Market Cap: USD2,831m, Div Yield: 7.8%, P/E Ratio: Hist: 25x, F1: 17x