Lim & Tan Securities’ Comprehensive Market Analysis: Navigating the Evolving Landscape

Date of Report: 27 March 2025

Paragon REIT Privatization Offer: An Attractive Opportunity for Unitholders

Paragon REIT (\$0.97, up 0.5 cent) has announced a scheme document for its proposed privatization, and Lim & Tan Securities highlights the key details:

• The Scheme consideration is S\$0.98 in cash per unit, which values Paragon REIT at 1.07x price/adjusted NAV.
• This price represents a 34.2% premium over S-REIT retail peers and 8.4% above the average of precedent privatizations.
• The rationale for the scheme includes Paragon REIT’s low free float, trading liquidity, and analyst coverage, as well as the need for a major asset enhancement initiative (AEI) at the aging Paragon mall.
• The Independent Financial Advisor has deemed the scheme to be fair and reasonable, and Lim & Tan Securities recommends that minority unitholders vote in favor of the scheme.

OCBC’s Strong Performance and Capital Return Plans

Lim & Tan Securities highlights key points from OCBC’s (\$17.25, up 0.06) Annual Report 2024:

• OCBC reported record net profit of \$7.59 billion in 2024, up 8% from 2023, with a return on equity of 13.7%.
• The bank maintained strong asset quality, with a non-performing loan ratio of 0.9%, and a robust capital position with a CET1 ratio of 17.1%.
• OCBC plans to return \$2.5 billion of capital over two years through special dividends and share buybacks, in addition to its target ordinary dividend payout ratio of 50%.
• For 2024, OCBC will pay a total dividend of \$1.01 per share, representing a payout ratio of 60% and a yield of 7.0% based on the 2024 average share price.

Challenges Facing Chinese Developers in Debt Restructuring

Lim & Tan Securities also discusses the ongoing struggles of Chinese developers in their debt restructuring efforts:

• Even after obtaining court approval for their debt plans, some developers are finding it increasingly difficult to honor their promises due to liquidity problems and the prolonged property market crisis.
• Companies like Powerlong Real Estate Holdings and Yuzhou Group Holdings have had to go back to creditors, seeking more time or revising their debt plans.
• The troubles faced by these developers highlight the continued risks in the Chinese property market, as some larger players also struggle to complete their restructuring deals.

Macro Market Insights

Lim & Tan Securities also provides an overview of the latest macro market news affecting the US, Hong Kong, and China markets:

• In the US, BCA Research notes that oil prices remain caught between conflicting supply and demand risks, with softening demand and plentiful supply seen as a net negative for oil prices over the next 18 months.
• The US labor market is also showing signs of fraying at the edges, with a jump in the U6 underemployment rate and a declining employment-to-population ratio.
• In China and Hong Kong, creditors owed around US\$150 billion by defaulted Chinese developers are finding it increasingly difficult to recover their money, even after a debt plan is agreed upon.

FSSTI Stock Selection and Fund Flow Data

The report also includes FSSTI stock selection, share transactions, and fund flow data for the Singapore market.