Market Overview
The report opens with a global market commentary highlighting a mixed environment with significant geopolitical and tariff-related concerns. In the United States, investors shrugged off heightened geopolitical risks – following a contentious meeting between President Donald Trump and Ukrainian leader Volodymyr Zelenskiy – as major indices rallied. The S&P 500 advanced by 1.59%, the Dow Jones Industrial Average soared by over 600 points (1.39%), and the Nasdaq Composite climbed 1.63%. Meanwhile, tariffs on Chinese goods and declining Chinese equities triggered broader caution.
In Europe, the Stoxx Europe 600 Index edged lower amid lingering tariff fears, while the Asian markets suffered steeper declines. Specifically, the MSCI Asia Pacific Index dropped by 2.5% with heavyweights like Alibaba, Tencent, and Meituan weighing on performance. The report also cites concerns such as subdued tech stock momentum and inflation data that hinted at a minimal annual increase, as well as a looming potential dip in US GDP based on the Federal Reserve Bank of Atlanta’s revised GDPNow forecast.
Deep Dive Company Analysis
China Construction Bank (939 HK / 601939 CH) – The Preferred Play
China Construction Bank (CCB) is positioned as a preferred play with a combination of resilient fundamentals and attractive valuation. The research details persistent net interest margin (NIM) pressures, projecting a continued contraction – albeit at a smaller magnitude compared to the previous year. Although retail and mortgage segments continue to weigh on growth, improvements in corporate loan demand from sectors like green finance, advanced technology, and infrastructure are expected to stabilize new loan volume growth.
Asset quality remains stable with a non-performing loan (NPL) ratio steady at 1.35% in Q3 2024. Notably, real estate loans represent a modest 3.6% of the loan book, with real estate NPL ratios showing signs of improvement. CCB’s robust NPL coverage at 237% and the top-tier Common Equity Tier-1 (CET1) ratio of 14% – the highest among its SOE peers – indicate lower future recapitalisation needs.
Valuation for CCB is appealing with trading multiples at 0.4x forward P/B (939 HK) and 0.58x (601939 CH), coupled with dividend yields of 6.5% and 4.8% respectively for 2025. The fair value estimates have been raised to HKD8.00 (939 HK) and CNY9.90 (601939 CH). Overall, the research team recommends a BUY.
CapitaLand Investment Ltd (CLI SP) – On the Hunt for Growth
CapitaLand Investment Ltd showcased contrasting performance in FY24. On one hand, headline profit after tax and minority interests (PATMI) surged by an impressive 165% YoY to SGD479 million. However, when adjusting for gains/losses from divestments, the underlying operating PATMI fell by 10% to SGD510 million – missing the consensus forecast.
The company declared an unchanged core cash dividend of 12 Singapore cents per share with an additional special dividend-in-specie of approximately 6 Singapore cents. Furthermore, CLI’s Fund Under Management (FUM) grew significantly by 18% to SGD117 billion, driven by both organic growth and strategic mergers and acquisitions, including sizeable deals with SC Capital Partners and Wingate Group. With an ambitious target to reach SGD200 billion in FUM by FY28, and a strategic focus on sectors such as data centres, credit, self-storage, lodging, logistics, and wellness – particularly in India – the firm is poised for growth.
In addition, the company’s fee-income related business is a standout, representing 62% of operating PATMI despite contributing only 39% to revenue, highlighting higher margins. Following a significant balance sheet deleveraging, CLI now enjoys improved financial flexibility. Based on these factors, the research team maintains a BUY rating with a fair value estimate of SGD3.71.
ST Engineering Ltd (STE SP) – Making Headway with Earnings Growth
ST Engineering Ltd continues to show strong performance following total returns of 21% in 2023 and 24% in 2024. The company’s FY24 performance underlines a healthy revenue growth within expectations, with revenue reaching SGD11.3 billion and net profit expanding by 20% to SGD702.3 million – slightly outperforming earlier estimates.
ST Engineering’s diverse business segments – including Commercial Aerospace, Defence & Public Security, and Urban Solutions & Satcom – each delivered notable improvements. The Commercial Aerospace segment achieved a 12% revenue increase with a robust 19% EBIT growth. The lucrative order book has now reached SGD28.5 billion, with SGD8.6 billion of new contracts expected to be delivered in 2025.
With announced dividend increases rounding up the strong financial performance and positive prospects from an Aerospace & Defence CAPEX upcycle, the research team reaffirms a BUY recommendation. The fair value estimate for STE SP has been lifted to SGD6.30.
Sun Hung Kai Properties (16 HK) – Strong Earnings Amid Margin Pressure
Sun Hung Kai Properties (SHKP) recorded robust growth in its core profit after tax and minority interests (PATMI), which jumped 17.5% YoY for 1HFY25 to HKD10.5 billion. This growth was propelled by a staggering 45.0% YoY increase in total revenue, which reached HKD39.9 billion – largely driven by its property development segment benefiting from key residential project revenue recognition.
However, operating profit margins in the property development segment compressed significantly from 34.0% in the previous half-year down to 14.7%, driven by a declining home price trend and oversupply concerns in Hong Kong and China. Furthermore, SHKP’s reported PATMI was impacted by net fair value losses from investment properties, though core results remained strong.
SHKP also boasts a sizeable and strategically positioned landbank across Hong Kong and China, ensuring future rental income and investment opportunities. With strong financial metrics – including an improved interest coverage ratio and a declining net gearing ratio – the company is expected to further strengthen its recurring income base. The management maintains a dividend policy of a 40-50% payout on underlying earnings, and the research team concludes with a BUY recommendation, supported by a fair value estimate of HKD93.10.
Stoneweg European REIT (SERT SP) – Clearing the Decks; A Steady Path from Here
Stoneweg European REIT has stabilized after a pause in major divestments, demonstrating modest but steady growth in its revenue streams. In 2H24, the REIT’s gross revenue increased by 0.3% and the net property income (NPI) edged up by 0.2% to EUR106.6 million and EUR65.6 million respectively. The distributable income showed marginal improvement, and the final dividend declaration aligned closely with forecast expectations.
Refinancing efforts have been successfully executed, with the early issuance of a EUR500 million bond at around 4.25%, replacing an earlier 2.1% EUR450 million bond. Such financial restructuring has helped to remove the overhang for investors and stabilizes expected returns for 2025 as the all-in interest rate is projected to rise modestly.
Although short-term pullbacks in forecasted distributions per unit (DPUs) are anticipated – with FY25 and FY26 forecasts revised downward modestly – the overall yield remains attractive at around 7.8-7.9%. With active asset enhancement initiatives and stabilized asset values, the research team supports a BUY rating, with a fair value estimate now set at EUR1.81.
Hong Kong Exchanges & Clearing Limited (388 HK) – A Beta Play
Hong Kong Exchanges & Clearing Limited (HKEX) reported strong core business growth during 4Q24 with earnings 3% above consensus and a remarkable YoY increase of 46%. EBITDA margins improved noticeably to 73.6%, while a combination of revenue streams – including a 93% surge in Stock Connect revenue and a 105% jump in cash trading revenue – reinforced HKEX’s robust performance.
Average Daily Turnover (ADT) rebounded dramatically, reaching HKD213 billion year-to-date, reflecting improved market sentiment and supportive market stimulus measures. HKEX’s forward-looking 2025 initiatives include a phased minimum spread reduction, a possible shorter settlement cycle aligned with US standards, and a review of IPO rules to attract more listings.
Balancing its beta play characteristics with strong growth in key business areas such as derivatives, stock trading, and commodities segments, the research team remains confident in the valuation prospects. With an upgraded fair value estimate of HKD440 and strong corporate governance practices, HKEX is recommended as a BUY.
ComfortDelGro Corporation (CD SP) – Getting Used to Shiny New Wheels
ComfortDelGro Corporation’s FY24 performance met expectations with top-line growth fueled by higher commission rates and increased fares, bolstered further by contributions from new acquisitions. CD’s revenue increased by 15.4% YoY to SGD4.5 billion while net profit grew by 13.6% to SGD255.7 million. Operating profit in 4Q24 rose by 17.3% YoY, with revenue and operating profit figures remaining seasonally consistent.
The Public Transport segment, despite a moderate decline in bus-package revenue, showed resilience with stable operating profit margins and plans for incremental fare adjustments into FY25. Conversely, the Taxi & Private Hire segment experienced rapid revenue gains alongside a compression in margins – in part due to challenges in the Chinese market and intensifying local competition from new entrants. However, the segment is expected to benefit from sustained contributions from key players like Addison Lee.
With a final dividend declaration of 4.25 Singapore cents per share (a 13% increase YoY) and an overall dividend yield of approximately 5.5%, ComfortDelGro demonstrates stability amid ongoing consolidation. In light of its strategic focus on unlocking synergies and streamlined cost management post-acquisitions – despite a shift from a net cash to a net debt position – the research team affirms a BUY recommendation with a maintained fair value estimate of SGD1.67.
Additional OIR Reports – Overview of Latest Listed Companies
The report concludes with a comprehensive table of the latest OCBC Investment Research reports covering additional companies. Key highlights include:
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City Developments Ltd (CIT SP): Reported as having muted results with potential share price overhang. The company is recommended as BUY with a fair value estimate of SGD6.02.
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Sembcorp Industries Ltd (SCI SP): Focused on opportunities in energy transition, artificial intelligence, and industry, with a BUY rating and a fair value estimate of SGD7.20.
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Bumitama Agri Ltd (BAL SP): Presented as having a strong finish to the year, with a BUY recommendation and a fair value of SGD0.965.
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Bank of China (3988 HK / 601988 CH): Emphasized a margin outlook expected to outperform peers. The recommendation is BUY with fair value estimates of HKD5.10 and CNY6.50.
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PropNex Ltd (PROP SP): Noted for its scalable Salesforce initiatives but currently holds a HOLD rating with a fair value estimate of SGD1.20.
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Trip.com (9961 HK / TCOM US): Highlighted for stepping-up its overseas expansion efforts. The company is given a BUY rating with fair value estimates of HKD655.00 and USD84.00.
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Nanofilm Technologies International Ltd (NANO SP): The outlook is described as cautiously optimistic, with a HOLD rating and a fair value estimate of SGD0.735.
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China CITIC Bank (998 HK / 601998 CH): With stable revenue growth projections, this bank is recommended as BUY with fair value estimates of HKD6.80 and CNY8.00.
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Riverstone Holdings Ltd (RSTON SP): Cited as being worn down by foreign exchange factors but still carries a BUY signal with a fair value of SGD1.100.
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Genting Singapore Ltd (GENS SP): Positioned for further growth in 2H25, with a stable recommendation of BUY and a fair value of SGD1.03.
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Singapore Airlines Ltd (SIA SP): After an excellent quarter, the airline carries a HOLD rating with a fair value estimate of SGD6.50.
These additional insights, alongside the deep dive analyses, provide a comprehensive view of the current market landscape and individual company performance as assessed by OCBC Investment Research.
Conclusion
OCBC Investment Research’s Market Pulse report for 3 Mar 2025 delivers an in-depth analysis of global market conditions and detailed performance reviews of major companies. From the resilience of China Construction Bank and the growth pursuits of CapitaLand Investment Ltd, to the steady momentum of ST Engineering Ltd, Sun Hung Kai Properties, Stoneweg European REIT, Hong Kong Exchanges & Clearing Limited, and ComfortDelGro Corporation – each entity showcases distinct strengths and challenges. The additional OIR reports further broaden the perspective on other actively covered stocks, rounding out a comprehensive resource for investors targeting medium-term returns.
