LIM & TAN SECURITIES 30 APRIL 2025

Market Overview: Key Indices and Performance

Here’s a snapshot of major market indices as of 8:00 am SG time:

Singapore Market Summary

• Daily Market Value: S\$1,317.2 million
• Daily Market Volume: 968.6 million
• 52-week STI High: 4,005.2
• 52-week STI Low: 3,198.4

Key Interest Rates

US Futures Performance

Commodities Watch

Wall Street Rises Amid Earnings and Tariff Relief

US stocks saw gains on April 29, buoyed by mixed corporate earnings and a positive reaction to President Donald Trump’s move to ease tariffs on automakers. The policy adjustment limits the impact of multiple tariffs and allows carmakers to offset a portion of the levy for two years. This led to a 0.6%-0.8% rise in US stocks overnight. Notably, both the DJIA and S&P 500 recorded their sixth consecutive positive day, marking the longest winning streak since July for the Dow and since November for the S&P 500.

Idea of the Day: Keppel Ltd AGM Highlights

Keppel Ltd (\$6.50, up 0.03) recently held its Annual General Meeting (AGM). Key takeaways from the CEO’s Q&A session include:

1. Stronger Financial Results

Despite a challenging environment, Keppel reported robust results for FY24.

• Net profit from continuing operations reached \$1.06 billion, a ~5% increase from \$1.02 billion in FY23 (excluding legacy offshore and marine (O&M) assets).
• Including legacy O&M assets and discontinued operations, the total net profit for FY24 was \$940 million.
• All segments demonstrated profitability. Infrastructure delivered strong results, while Connectivity saw a significant 45% year-on-year earnings growth.

2. Progress on Transformation

Keppel’s transformation is gaining traction.

• The CEO noted that most analysts no longer apply a conglomerate discount to Keppel.
• Earnings quality has improved significantly, with recurring income hitting \$766 million in 2024. This represents 72% of net profit from continuing operations (excluding legacy O&M), up substantially from 56% in FY22 and 21% in FY21.
• The CEO expressed confidence that the market will eventually assign an appropriate growth multiple to Keppel’s growing recurring income stream.
• Driven by its asset-light strategy, Keppel’s Return on Equity (ROE) on continuing operations (excluding legacy O&M) improved to 10.1% from 7.9% in FY22.
• Asset monetization is progressing well, reaching nearly \$7 billion by the end of 2024, towards the interim target of \$10-\$12 billion by 2026.
• The company achieved its \$70 million recurring annual run-rate cost savings target two years early and aims for an additional \$50 million in savings per annum by the end of 2026.

3. Rewarding Shareholders

Keppel remains committed to shareholder returns.

• The Board proposed a final cash dividend of 19.0 cents per share for FY24, comparable to the previous year, payable on May 9, 2025.
• Including the interim dividend of 15.0 cents paid in August 2024, the total cash dividend for FY24 is 34.0 cents per share.
• The CEO highlighted Keppel’s annualized Total Shareholder Return (TSR) of 34.8% over the past three years, significantly outperforming the STI’s 11.9%.

4. Impact of Recent US Tariffs

The CEO addressed concerns regarding US tariffs.

• The direct impact on Keppel is expected to be limited as it doesn’t operate in manufacturing or export sectors heavily targeted by tariffs.
• Keppel focuses on generating stable recurring income from essential services and alternative real assets, supported by megatrends like climate change, energy transition, digitalization, and AI.
• However, the CEO acknowledged that a broader trade war could be detrimental to the global economy and business environment. Potential indirect impacts include rising supply chain costs, dampened market confidence, exchange rate volatility, and a slower pace of asset monetization.
• Keppel is closely monitoring the volatile situation and remains disciplined and agile, leveraging its integrated ecosystem and diverse capital pools to deliver value.

Analyst Recommendation on Keppel

We maintain an “Accumulate” rating on Keppel Ltd. The company offers an attractive normalized yield exceeding 5% and holds potential for special dividends upon the monetization of legacy assets. With a capitalization of \$11.8 billion, Keppel’s ongoing transformation into a global asset manager and operator, where its platforms and divisions create synergistic value, remains a key positive factor for shareholders.

Other Highlights: Sheng Siong Group 1Q FY2025 Results

Sheng Siong Group (\$1.74, down 1 cent), a major Singapore supermarket chain, reported its financial results for the first quarter ended March 31, 2025 (1Q FY2025).

Financial Performance

• Net Profit: Increased by 6.1% year-on-year (yoy) to S\$38.5 million.
• Revenue: Grew by 7.1% yoy to S\$403.0 million (from S\$376.2 million in 1Q FY2024). This growth was primarily driven by contributions from 8 new stores opened in 1Q FY2025 and FY2024, and higher festive sales during Hari Raya in March.
• Gross Profit: Rose by 10.2% yoy to S\$122.0 million.
• Gross Profit Margin: Improved by 0.9 percentage points yoy to 30.3%, aided by enhancements in the sales mix which helped offset higher operating costs.
• Other Income: Increased by 18.1% yoy to S\$4.7 million, mainly due to higher rental income from expanded leased space and government grants under the Progressive Wage Credit Scheme (PWCS).
• Operating Costs: Increased, with administrative expenses up 8.8% yoy to S\$15.8 million and selling/distribution expenses up 13.3% to S\$65.8 million. This was largely due to higher staff costs associated with variable bonuses (linked to better financial performance), enhanced benefits, and hiring for new stores.
• Cash Flow: Cash flow from operating activities declined by S\$10.1 million compared to 1Q FY2024. This was mainly due to a higher amount due from banks related to non-cash/digital payments in March and higher payments to vendors.
• Cash Position: The Group’s cash and cash equivalents balance stood at S\$366.9 million at the end of March, up 3.8% yoy.

Market Outlook and Strategy

• Economic Environment: Singapore’s 2025 economic outlook is more cautious due to external headwinds. The Ministry of Trade and Industry (MTI) revised the GDP growth forecast to 0.0%–2.0%. The Monetary Authority of Singapore (MAS) expects core inflation to ease to 0.5%–1.5% and recently reduced the pace of the Singapore dollar’s appreciation in response to moderating inflation and risks from US tariffs.
• Geopolitical Risks: Tensions, especially recent US tariff policy changes, weigh on global sentiment, potentially disrupting trade flows, supply chains, increasing port congestion, and causing freight cost volatility.
• Consumer Behavior: These global economic risks may make consumers more cautious, potentially leading them to favor value-driven supermarkets and focus on essential items offering better value. Government support measures like CDC vouchers aim to alleviate cost-of-living pressures.
• Sheng Siong’s Positioning: The company believes its strong value-for-money proposition, competitive pricing, and house brand offerings position it well to meet evolving consumer needs, particularly the demand for quality essentials at affordable prices.
• Strategic Focus: Sheng Siong is actively refining its sales mix, building core competencies, diversifying its supplier base for resilience, and investing in automation and AI to improve efficiency and mitigate rising labor costs.

Analyst Recommendation on Sheng Siong

Sheng Siong Group (SSG) has a market capitalization of \$2.6 billion. It currently trades at 17.8x forward Price-to-Earnings (PE) and 4.6x Price-to-Book (PB), offering a dividend yield of 3.7%. The consensus target price is S\$1.89, suggesting an 8.6% upside potential. Given potential rising inflation from trade tariffs and the risk of a global recession, we recommend Sheng Siong as a defensive stock to **HOLD**.

FSSTI Stock Selection Metrics

Based on Bloomberg Estimates for the FSSTI Universe:

Highest Consensus Forward Dividend Yield (%)

1. DBS BANK: 7.16
2. FRASERS LOGISTICS TRUST: 7.08
3. MAPLETREE PAN ASIA COMM TRUST: 6.80
4. MAPLETREE INDUSTRIAL TRUST: 6.72
5. MAPLETREE LOGISTICS TRUST: 6.70

Lowest Consensus Forward P/E (X)

1. YANGZIJIANG SHIPBUILDING: 6.63
2. JARDINE CYCLE & CARRIAGE: 7.42
3. JARDINE MATHESON: 8.17
4. SINGAPORE AIRLINES: 8.73
5. UOB BANK: 9.27

Lowest Trailing P/B (X)

1. HONGKONG LAND: 0.35
2. UOL GROUP: 0.42
3. JARDINE MATHESON: 0.47
4. CITY DEVELOPMENTS: 0.50
5. MAPLETREE PAN ASIA COMM TRUST: 0.69

Lowest Trailing EV/EBITDA (X)

1. YANGZIJIANG SHIPBUILDING: 3.33
2. GENTING SINGAPORE: 5.65
3. JARDINE CYCLE & CARRIAGE: 5.98
4. DFI RETAIL GROUP: 6.35
5. SATS: 8.18

Macro Market News: US, Hong Kong, and China

US Dollar Dynamics

BCA Research notes a shift in traditional currency dynamics. Typically, in risk-off scenarios, capital flows boost a currency. While the US has historically been an exception (running a positive income balance despite a negative net investment position due to perceived safety, especially in Treasuries), this is changing. Aggressive US fiscal policy has pushed rates higher, raising debt sustainability concerns. For the first time in decades, the US is projected to run a negative investment income balance. With the dollar still seen as significantly overvalued, BCA Research’s GAA colleagues have moved to an underweight USD position in their latest quarterly report.

China/HK: Cooling Luxury Market

China’s once-booming luxury market is experiencing a slowdown.

• Shifting Consumer Behavior: Premium goods consumers (urban professionals, younger generations in rising cities) are tightening their belts. While not necessarily poorer, middle-class families are becoming more risk-averse due to job insecurity and asset value concerns, choosing to save rather than spend. Chinese central bank data showed a record 17.99 trillion yuan in new deposits in 2024, with households accounting for nearly 80%.
• Market Contraction: Bain & Co projected the mainland Chinese luxury market shrank by up to 20% in 2024, ending a brief post-pandemic recovery. While Chinese spending abroad (e.g., in Japan, Asia) exceeded 2019 levels, their total global luxury spending was still down ~7% year-on-year and 16% below pre-pandemic levels.
• Brand Strategies: Luxury brands are adapting. Private “Very Important Client” (VIC) events, once reserved for top spenders (e.g., 500,000 yuan/year), are now more frequent with lower entry barriers (e.g., 100,000 yuan/year), as brands chase waning demand. These events are widely shared on social platforms like Douyin and Xiaohongshu.
• Segment Impact: No segment is immune. Watches and jewellery, often seen as investments, are hit hardest. Bain estimated watch sales in China fell up to 33% in 2024, and jewellery by up to 30%. Compagnie Financiere Richemont (Cartier, Van Cleef & Arpels) reported an 18% sales drop in Greater China in Q4 2024. LVMH’s watch/jewellery division saw a 17% decline in Asia (ex-Japan). Even core fashion and leather goods are sliding.
• Investor Sentiment: Falling secondary market prices for high-end watches undermine confidence in their value retention. Diamond demand has also dried up, lacking a reliable resale benchmark like gold. Even resilient VICs are becoming more conservative in luxury spending, diversifying wealth amid the downturn.

Share Transactions (1 Apr’25 – 29 Apr’25)

Acquisitions

Disposals

Share Buybacks

*Note on DBS Buyback: 5.2% of current buyback maximum mandate (85,328,308 shares) or 15.3% of DBS’ \$3 billion target absolute \$ mandate.

Fund Flow Data

*(Graphical data presented on Pages 5 and 6 of the original report is not included here as it cannot be replicated in text format.)*

Upcoming Dividends / Distributions

*(List is not exhaustive)*

What’s Ahead: Earnings Calendar

April 2025 Results

• Apr 15: Sabana REIT (After Market), Aztech (After Market)
• Apr 22: Parkway Life (Before Market)
• Apr 23: Digital Core REIT (After Market), Mapletree Log (After Market)
• Apr 24: Capland China Tr (Before Market), Capland India Tr (After Market), OUE REIT (After Market), Suntec REIT (After Market)
• Apr 25: Mapletree P Asia (Before Market), iFast (After Market), Capland Integrated (Before Market)
• Apr 28: CaplandAscoƩ Tr (Before Market), CaplandAscendas (After Market)
• Apr 29: Frasers Centrepoint (Before Market), Wilmar (After Market), First REIT (After Market), Stoneweg REIT (After Market), IREIT (After Market), Starhill Global (After Market), Micro Mechanics (Before Market)
• Apr 30: Far East Trust (Before Market), CDL H Trust (Before Market), Elite UK REIT (After Market), Capland Invest (After Market)

May 2025 Results

• May 7: UOB (Before Market), AIMS APAC (Before Market), Acrophyte (Before Market)
• May 8: DBS (Before Market)
• May 9: OCBC (Before Market), Daiwa House (Before Market), SIA Engineering (After Market), Starhub (After Market)
• May 14: United Hampshire (Before Market), GEO (After Market)
• May 15: Sasseur REIT (Before Market), Singpost (Before Market), SIA (After Market)
• May 22: Singtel (Before Market)
• May 23: SATS (After Market)

SGX Watch-List (As of Dec 2024, List Not Exhaustive)

The following companies are under the SGX Watch-List based on entry dates:

Existing Entries (Pre-2H2023)

• Amos Group (06-Jun-23)
• Ascent Bridge Ltd (04-Dec-19)
• ASTI Holdings (06-Jun-19)
• BriƟsh And Malayan Hldgs (06-Jun-23)
• CH Offshore (06-Jun-23)
• Cosmosteel (05-Jun-18)
• Datapulse Technology (06-Jun-23)
• Debao Property (04-Dec-19)
• Eneco Energy (04-Dec-19)
• Full Apex (Holdings) (05-Jun-17)
• GRP Limited (06-Jun-23)
• Interra Resources (05-Dec-17)
• Intraco Ltd (06-Jun-23)
• IPC Corp (06-Jun-23)
• Jadason Enterprises (06-Jun-23)
• Jasper Investments (Salt Investments) (06-Jun-23)
• Manufacturing IntegraƟon Technology (06-Jun-23)
• MeƟs Energy (05-Dec-18)
• Raffles Infrastructure (06-Jun-19)
• Shanghai Turbo (06-Jun-23)
• SMI Vantage (04-Dec-19)
• Trek 2000 Intl (06-Jun-23)
• United Food Hldgs (06-Jun-19)
• USP Group Limited (04-Dec-19)

Latest Additions (Since 2H2023)

• Addvalue Technologies (05-Dec-23)
• Renaissance United (05-Dec-23)
• Telechoice (05-Dec-23)
• Tiong Seng Hldgs (05-Dec-23)
• Global Invacom Group (05-Jun-24)
• Green Build Technology (05-Jun-24)
• Keong Hong (05-Jun-24)
• Camsing Healthcare (03-Dec-24)

*(Source acknowledged as SGX RegCo website in the original report)*
Disclaimer: This article is based on the Lim & Tan Securities Daily Review report dated April 30, 2025. It is intended for general information purposes only and does not constitute financial advice. Readers should conduct their own research and consult with a financial advisor before making investment decisions. Information and opinions are subject to change. Lim & Tan Securities Pte Ltd, its directors, connected persons, and employees may hold positions in the securities mentioned.