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Singapore Equity Picks
UOL: Raise exposure by 1,200 shares @ SGD5.75
Marina Square’s value unlocking potential stays on our radar that greatly benefits both UOL and Singapore Land. Stock should be supported ahead of URA Draft Master Plan 2025 likely to be released next month. Besides its value unlocking potential, UOL earnings for this year is expected to rise 41%. Stock trades at 0.43X P/B. Our fundamental fair value for UOL is SGD8.40, consensus SGD7.54. We see technical support around SGD5.70. We deploy a small portion of our available cash currently sitting in equity picks to the stock. With the addition, there are now 5,000 UOL shares in equity picks.
Trending Sector
Singapore stocks
2 stocks well positioned beyond the COVID bump
- Covid wave in Singapore and Hong Kong is regaining momentum
- Estimated number of Covid cases in Singapore jumped 28% w/w to 14,200 (surpassing the prior peak in 2023), with average daily hospitalisations up 30% w/w from 102 to 133, prompting its first infection update in almost a year
- The share of respiratory samples in Hong Kong testing positive for Covid has also climbed to its highest level in the past year
- We expect health retail and clinics to see increased traffic and spending
- DFI (c.30% exposure to health and beauty via Guardian in Singapore and Mannings stores in Hongkong) should be a likely beneficiary of increased demand for over-the-counter medicines, test kits, masks, and wellness products amid rising Covid cases
- Raffles Medical could see a modest uplift from higher clinic volumes, though the impact may be limited as primary care typically has lower bill sizes
- Both names offer longer term growth beyond the Covid bump
- Potential catalysts for DFI include a special dividend (which could add up to 6% yield), supported by its net cash position and potential distribution of proceeds from the sale of its Singapore food business. Continued margin expansion is also expected to support earnings growth.
- Raffles Medical is supported by its refreshed capital management strategy aimed at returning more value to shareholders, improving profitability at its China hospitals, and better operating leverage in its insurance segment
Stocks to Watch
DFI
On track to deliver on our above consensus target
- Underlying core profit ex divestments up 28% y/y with sales stable on like-for-like (LFL) basis
- Strong profit growth for Health & Beauty, Food, Home Furnishing and Maxim’s
- Pare down USD617mn in debt, implying ~USD23mn total interest savings in next 3 quarters
- Maintained FY24 underlying core profit guidance of USD230mn to USD270mn; Maintain BUY and TP of USD3.00
ComfortDelGro Group
Monopolising SG public bus ad space, but net benefit likely minimal
- ComfortDelGro’s advertising arm, Moove Media, awarded seven-year contract to manage advertising on all public buses and at bus interchanges, with a possible two-year extension from 1 Nov 25
- Ad operations for public bus sector consolidated under single operator to give advertisers wider reach and ad operator economics of scale
- Moove Media to pay Land Transport Authority (LTA) SGD150mn in fees over seven years, while previously bus operators retain all non-fare revenue
- Limited profit upside but removes overhang of complete loss of bus ad profits; Maintain BUY with TP of SGD1.80
Singtel
Rationale and usage of Bharti's stake sale
- We see room for Singtel to cut its Bharti Airtel stake by another 5% over the next 3-5 years, with most proceeds reinvested into its core business or paid out as dividends
- HoldCo discount is likely to narrow to below 15% - similar to levels before FY18 - as Singtel monetises its associate stakes
- Maintain BUY with a higher TP of SGD4.27, based on a revised 15% HoldCo discount (prev 20%)
Legend
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Earnings | Positive earnings revision | Negative earnings revision |
Recommendation | Upgrade | Downgrade |
TP | Increase | Decrease |
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