First REIT: Strategic Review in Progress

First REIT has announced a significant development with the receipt of a preliminary non-binding Letter of Intent (LOI) from PT Siloam International Hospitals Tbk to acquire its portfolio of hospital assets in Indonesia. Notably, Siloam is the existing tenant and operator of these hospital assets and is majority-owned by a fund managed by CVC Capital Partners.

The Board of First REIT has initiated a strategic review to evaluate the LOI and consider options like joint ventures, partnerships, asset acquisitions, and divestments. The goal is to deliver sustainable, long-term value to unitholders. Citigroup Global Markets Singapore Private Limited has been appointed to assist in this process.

However, it is emphasized that there is no certainty of a transaction materializing from the LOI or strategic review. Any transaction will require regulatory approvals and compliance. Investors are advised to exercise caution and seek professional advice when dealing with First REIT’s units.

Despite a recent drop in Distribution Per Unit (DPU) due to currency translation impacts from a weaker Japanese Yen and Indonesian Rupiah, First REIT continues to show steady operations with higher rental income in local currencies. With Indonesia’s growing demand for quality healthcare, First REIT remains well-positioned to capture this opportunity.

The stock trades at 0.9x Price-to-Book (PB) with an annualized dividend yield of 9%. The market capitalization is S\$534 million. The recommendation remains “Accumulate on Weakness,” with Bloomberg’s consensus one-year target price at 29 cents, implying a 12% potential return.

Civmec Limited: Positive Trajectory Amid Ownership Transition

Civmec Limited is actively pursuing the acquisition of Luerssen Australia Pty Ltd, a company responsible for building six Arafura Class Offshore Patrol Vessels under the SEA 1180 contract for the Royal Australian Navy. The non-binding Heads of Agreement involves transferring all assets, employees, and licenses from NVL B.V. & Co. KG to Civmec. The revised effective date for ownership transfer is set for July 1, 2025, subject to necessary regulatory approvals and due diligence.

In the interim, Civmec and Luerssen Australia have entered into a Service Level Agreement aimed at enhancing program efficiencies and cost reductions. Under this framework, Civmec provides shipbuilding services on a do-and-charge basis, ensuring flexibility and responsiveness.

Management remains optimistic about the progress of this acquisition. Civmec’s Executive Chairman, Jim Fitzgerald, highlighted the seamless transition that the new agreement aims to ensure. Similarly, Luerssen Australia’s Chairman, Tim Wagner, expressed satisfaction with the collaboration and its benefits for the SEA 1180 project.

Civmec is currently capitalized at S\$528 million, trading at 9.6x forward P/E and 1.2x PB with a dividend yield of 5.0%. While the company is poised to benefit from increased infrastructure spending and naval vessel sustainment, management has noted potential delays in project awards during 2H FY25, which may lead to reduced activity levels. The recommendation is “Accumulate on Weakness” as investors await order book replenishments.

Market Fund Flows: Institutional and Retail Trends

For the week of January 6, 2025, institutional investors recorded a net buy of S\$21.2 million, reversing a net sell of S\$130.9 million from the previous week. Retail investors, on the other hand, showed a net buy of S\$55.3 million compared to a net sell of S\$49.8 million in the prior week.

Top institutional net buys included OCBC Bank (S\$60.6M), UOB (S\$55.1M), and DBS (S\$51.0M). On the flip side, CapitaLand Investment (-S\$57.4M) and Yangzijiang Shipbuilding (-S\$43.7M) saw the largest net sells.

Among retail investors, CapitaLand Investment led the net buys at S\$49.6 million, followed by SGX (S\$25.3M) and Singtel (S\$13.4M). The largest net sells included UOB (-S\$60.9M) and OCBC (-S\$44.5M).

Dividends and Special Distributions

Several companies have announced upcoming dividends and special distributions. Notable payouts include:

• Frasers Property Ltd: 4.5c final dividend, payable February 14, 2025.
• PNE Industries Ltd: 2c final dividend, payable February 14, 2025.
• BRC Asia: 8c final and 6c special dividend, payable May 15, 2025.

SGX Watch-List Updates

The SGX Watch-List currently includes 32 companies, with recent additions such as Addvalue Technologies and Renaissance United as of December 2023. These companies are under monitoring due to financial criteria such as market capitalization and profitability thresholds.