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CGS CIMB |
CGS CIMB |
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Strategy Start of the easing cycle
Anecdotal evidence of stock performance in previous rate cut cycles shows that the Singapore stock market benefited at the start of the easing of the interest rate cycles during the 2007 and 2019 rate cuts. While the current quantum is still uncertain, the direction points towards a downward revision. We think investors should increase their exposure in SREITs, which will likely benefit from the continued widening of yield spreads vs. the 10-year government bond yield, with potential earnings upside risk in the medium term as funding cost trajectory reverses and inorganic growth opportunities pick up pace. In order to ride the momentum of strengthening ASEAN currencies, we believe that producers such as JAP and WIL as well as Internet players SE and GRAB, are potential beneficiaries.
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Genting Bhd Low valuations signal Add opportunity
■ 2Q24 results were within expectations; interim dividend of 6 sen declared. ■ While RWLV AML is an overhang, the stock is trading at just 10x FY25F P/E. ■ Reiterate Add but cutting FY24F-25F EPS and TP to RM6.65.
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PHILLIP SECURITIES |
UOB KAYHIAN |
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Singapore Telecommunications Ltd Eyeballing cost and AI opportunity
▪ 2024 Investor Day: The effects of higher mobile prices in Australia, India, and Thailand will flow into upcoming quarters via higher margins. The S$200mn cost out p.a. in Optus and Singapore are on track together with an additional 20% cut in S$150mn corporate cost. Capital expenditure has peaked and will gradually decline. ▪ The most exciting division is Digital Infrastructure, which has three major growth drivers. Firstly, data centre (attributable) capacity will almost triple from 62MW currently to 166MW by 2026. Besides capacity, a new GPU-as-a-service revenue streaming service utilising Nvidia AI chips will be rolled out. Finally, revenue from its patented Paragon platform is beginning to surge as deployment is underway in multiple countries.
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REITs – Singapore S-REITs Monthly Update (Aug 24)
The Fed has switched emphasis to supporting the labour market as “confidence has grown that inflation is on a sustainable path back to 2%”. The new chapter on rate cuts has commenced. Maintain OVERWEIGHT. We focus on blue-chip S-REITs with attractive distribution yields: BUY CLAS (Target: S$1.30), FLT (Target: S$1.40), KREIT (Target: S$1.15), MINT (Target: S$2.78) and MPACT (Target: S$1.68).
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| UOB KAYHIAN | MAYBANK KIM ENG |
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CIMB Group (CIMB MK) 2Q24: Solid ROE Trajectory Priced In; Downgrade To HOLD
2Q24 earnings were broadly in line with expectations. 2Q24 earnings growth was underpinned by lower provisions and non-interest income growth. However, given the stock’s impressive ytd share price performance, outperforming both the KLCI and KLFIN index by 24% and 21% respectively, we downgrade CIMB to HOLD, maintaining our target price at RM8.12 (1.14x 2025 P/B, 11.5% ROE).
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Singapore Airlines (SIA SP) Clearing the final hurdle
Gets FDI approval for proposed merger; keep HOLD SIA said it has received approval from the Indian government for foreign direct investment (FDI), as part of a merger in which Vistara, its 49%- owned JV with Tata, will be absorbed into Air India. While this will help SIA to continue participating directly in the burgeoning aviation market, we think more investment may be needed to turn around the Indian carrier. Maintain HOLD and TP at SGD6.55, based on 1.25x FY25E P/B. Downside risks include more intense competition, weak cargo volume, a sharp rise in jet fuel prices and/or a non-fuel expenditure. Re-rating catalysts include higher-than-expected yields, a steep drop in jet fuel prices or less intense competition than anticipated.
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