Singapore Market Daily Review: DBS, FLCT Results, Macro Outlook & Stock Picks

Lim & Tan Securities 08 May 2025
Singapore Markets: DBS Shines, FLCT Reports, and Macro Headwinds Persist

Market Snapshot

The Singapore Straits Times Index (FSSTI) closed at 3,865.4, posting a marginal 0.1% gain for the day. Month-to-date, the index is up 0.9%, contributing to a year-to-date gain of 2.1%. Major global indices showed mixed performance, with US markets like the INDU, SPX, and CCMP posting gains of 0.3% to 0.7%, influenced by news of upcoming US-China trade talks. European markets like the UKX saw a slight dip (-0.4%), while Asian indices like the NKY (-0.1%) and HSI (+0.1%) were relatively flat or saw minor movements. The SHCOMP index rose 0.8%. The VIX volatility index declined by 4.9% for the day.

Daily market value on the Singapore Exchange was S\$1,723.1 million, with a volume of 1,249.7 million shares traded. The 52-week high for the STI stands at 4,005.2, and the 52-week low is 3,198.4.

Key interest rates saw minor fluctuations. The 3 Month SGD SORA was at 2.3%, down 0.1% for the day. The SG 10 YR Bond Yield dropped 3.0% to 2.4%, while the US 10 YR Bond Yield saw a slight increase of 0.1% to 4.3%.

Commodity prices presented a varied picture. Gold was up 0.3% to 3,376.1. Crude Oil fell 1.7% to 58.1. The Baltic Dry index declined 1.1% to 1,406.0, while Crude Palm Oil was down 0.3% to 3,718.0.

Featured Stock: DBS Group (IDEA OF THE DAY)

DBS Group (\$42.76, down 0.23) reported a strong first quarter for 2025, achieving a record profit before tax of SGD 3.44 billion. Total income reached a new high of SGD 5.91 billion, representing a 6% increase year-on-year, driven by robust business growth.

Net profit for the quarter stood at SGD 2.90 billion, resulting in a Return on Equity (ROE) of 17.3%. Compared to the previous quarter, net profit was 10% higher. However, net profit was 2% lower year-on-year, primarily due to higher tax expenses stemming from the implementation of the 15% global minimum tax, which was in line with expectations.

Total income growth was attributed to balance sheet expansion, record fee income, and treasury customer sales led by wealth management. The bank also saw its strongest markets trading income in 12 quarters. The cost-income ratio remained stable at 37%.

Asset quality remained resilient, with the Non-Performing Loan (NPL) ratio stable at 1.1%. Specific allowances were recorded at 10 basis points of loans (SGD 120 million). As a prudent measure to address macroeconomic and geopolitical uncertainty, general allowances of SGD 205 million were taken, strengthening GP reserves to SGD 4.16 billion. Allowance coverage stood at 137%, increasing to 230% after considering collateral.

Group net interest income rose 1% on a day-adjusted basis, supported by balance sheet growth. Non-interest income saw significant growth of 25%, driven by higher fees, treasury customer sales, and markets trading. Expenses fell 8%, partly due to nonrecurring items in the previous quarter, while specific allowances halved.

Profit before allowances increased by 19% to SGD 3.69 billion. Commercial book net interest income grew 2%, with balance sheet growth offsetting a nine-basis-point decline in net interest margin. Loans grew 3% in constant-currency terms, led by non-trade corporate loans, and deposits were 6% higher.

Net fee income surged 22%. Wealth management fees were particularly strong, growing 35% on the back of positive market sentiment and higher assets under management. Loan-related fees also increased by 23% due to increased activity. Commercial book other non-interest income was 12% lower, driven by nonrecurring items, although treasury customer sales grew 11% to a record high. Markets trading income saw a substantial 48% increase, partly benefiting from lower funding costs. Expenses for the commercial book rose 6% due to higher staff costs.

Liquidity positions remained healthy, with a liquidity coverage ratio of 145% and a net stable funding ratio of 115%, both well above regulatory requirements. The reported Common Equity Tier-1 (CET1) ratio was 17.4% based on transitional arrangements, with a pro-forma ratio of 15.2% on a fully phased-in basis.

DBS CEO Tan Su Shan commented on the strong start to the year, highlighting broad-based business growth led by wealth management and an ROE exceeding 17% despite the impact of the global minimum tax. She noted the heightening macroeconomic risks and market volatility from recent trade tensions and emphasized the bank’s commitment to staying nimble, capturing opportunities, and prudently managing risks. She also pointed to the strengthened general allowance reserves and strong capital/liquidity positions as a solid foundation for supporting customers.

Analysts view DBS’s performance as in line with expectations. They anticipate a normalized dividend of \$2.40 per share plus a capital return of 60 cents per share, totaling \$3 in returns for FY2025, which represents an attractive yield of 7%. The forward PE ratio is currently 11x, while the consensus target price stands at \$45. Lim & Tan Securities maintains an “Accumulate” rating on DBS.

Other Company Highlights

Several companies within the FSSTI Universe stand out based on consensus forward estimates and trailing ratios:

Frasers Logistics and Commercial Trust (FLCT) (\$0.865) announced its results for the six-month period ended 31 March 2025 (1HFY25). The trust reported revenue of S\$232.3 million and Adjusted Net Property Income (NPI) of S\$161.3 million for 1HFY25. These figures represent increases of 7.5% and 1.6% respectively compared to S\$216.0 million and S\$158.7 million in the first half of FY2024 (1HFY24).

The year-on-year increases were primarily driven by full contributions from Ellesmere Port (completed December 2023), the acquisition of four German logistics properties (March 2024), contributions from the Maastricht Property in the Netherlands (completed October 2024), and the acquisition of 2 Tuas South Link 1 (November 2024). These gains were partially offset by higher vacancies in Alexandra Technopark and 357 Collins Street, increased non-recoverable land taxes in Australia, and the impact of lower average AUD and EUR exchange rates against the SGD in 1HFY25 compared to 1HFY24.

Finance costs were higher mainly due to rising interest rates and additional borrowings taken for fund-through developments and acquisitions. Consequently, distributable income for 1HFY25 was lower at S\$113.0 million, down from S\$130.7 million in 1HFY24, after accounting for higher finance costs, increased tax expense, and 56.9% of 1HFY25 management fees paid in cash.

The distribution per unit (DPU) for 1HFY25 was 3.00 Singapore cents, translating to an annualised distribution yield of 6.5%. This DPU is scheduled to be paid on 18 June 2025.

For the three months from January to March 2025 (2QFY25), FLCT achieved positive portfolio average rental reversion of +2.5% on an incoming rent vs. outgoing rent basis and a strong +19.2% when comparing the average rent of new/renewal leases to the preceding leases’ average rent. This performance was supported by healthy demand and active leasing, with 24 transactions covering approximately 144,000 square metres executed during the quarter. Seven of these were L&I lease transactions, which saw positive rental reversions of +8.7% (incoming vs outgoing) and +33.0% (average vs average), with the remaining transactions from the commercial portfolio.

For the full 1HFY25 period, the portfolio recorded positive rental reversion of +2.0% (incoming vs outgoing) and a robust +29.0% (average vs average). This was driven by total leasing activity covering approximately 319,000 sq m, representing about 11.2% of the total portfolio lettable area.

FLCT maintained a healthy overall portfolio occupancy of 93.9% as at 31 March 2025. The L&I portfolio, which constitutes about 72.4% of the portfolio value and consists of high-quality assets in prime locations, continued to see near full occupancy at 99.6%. The commercial portfolio occupancy was 84.1% as at the same date. The weighted average lease expiry (WALE) for the L&I portfolio was 4.6 years, 4.7 years for the commercial portfolio, resulting in an overall portfolio WALE of 4.6 years as at 31 March 2025.

As at 31 March 2025, FLCT’s aggregate leverage remained healthy at 36.1%. The weighted average debt maturity stood at 2.3 years, and the interest coverage ratio was strong at 4.5 times. With 69.7% of borrowings at fixed rates, the cost of borrowings was 3.0% per annum on a trailing 12-month basis. FLCT plans to maintain a prudent capital management approach amidst ongoing volatility.

Analysts note FLCT’s market capitalization is S\$3.3 billion, and it currently trades at 0.8x PB and offers a 6.5% annualised yield. The consensus target price is S\$1.06, implying a 22.5% upside from the current share price. Lim & Tan Securities maintains an “Accumulate” rating on FLCT, citing its attractive stable dividend yields, healthy gearing, and potential benefit from future interest rate cuts in FY25.

Macroeconomic Trends Affecting US, Hong Kong, and China Markets

Recent economic data from the US suggests a potential slowdown extending beyond the manufacturing sector. Weak Empire and Philly Fed manufacturing prints have been followed by a Philly Fed services survey indicating the slowdown is spreading. The Richmond Fed manufacturing index also missed estimates, falling further into contraction at -13 from -4, with new orders declining across regional Fed surveys.

The Richmond Fed report also highlighted rising price pressures, where input costs are outpacing output prices, leading to squeezed margins for businesses. While the recent equity selloff has largely reflected multiple compression, the trade shock is expected to impact earnings and profitability directly. Regional employment has also contracted, suggesting deterioration in the labor market beyond just reduced hours.

US capital expenditure and hiring plans are reportedly plunging, which could negatively impact consumer spending – a key growth driver post-COVID. Weakening business and consumer confidence, alongside a soft housing market, point towards growth potentially slipping below potential and a rise in unemployment. Analysts remain underweight risk assets and overweight government bonds in this environment.

In China and Hong Kong, major banks are reporting narrower margins and some a drop in profits, attributed to a protracted economic slowdown exacerbated by rising tariffs. The ongoing debt crisis in China’s property sector is also weighing on the earnings of large state-owned banks. China Construction Bank Corp reported a 4% fall in net profit year-on-year in Q1 2025, noting that the global economy lacked strong growth momentum and faced challenges like rising tariffs affecting trade growth prospects.

Industrial and Commercial Bank of China (ICBC), the world’s largest lender, and Bank of China also posted first-quarter profit drops. While China’s Bank of Communications (BoCom) and Agricultural Bank of China (AgBank) saw slight net profit rises (1.5% and 2.2% respectively), they also experienced falling margins. Non-performing loan ratios across banks either remained steady or fell slightly in Q1.

However, analysts predict that NPLs are likely to rise in the coming months. Risks are seen as high due to the “unseasoned risks” associated with financing China’s transition towards high-end manufacturing, technology, and clean energy industries.

Chinese banks’ profitability is expected to face further pressure from potential cuts to key interest rates this year. While Beijing has kept lending rates steady for six months, markets anticipate further stimulus amidst the intensifying Sino-US trade war. Analysts suggest that lower rates, while reducing borrower debt servicing costs, would compress banks’ net interest margins, further decreasing profitability. In March, four major state-owned banks announced plans to raise a combined 520 billion yuan (S\$93.7 billion) via private placements to support the economy.

Asia-focused HSBC has warned that loan demand and credit quality could suffer from the broader fallout of the US-China trade war. The bank’s CEO noted a “significant drop in volumes along the US-China corridor in the sectors that have not been given a waiver or the reduction of tariffs.”

Share Transaction Activity (1 May’25 – 7 May’25)

Activity in share transactions included acquisitions, disposals, and share buybacks during the period.

Acquisitions

Disposals

Share Buyback

Fund Flow Data

The report includes charts and tables detailing recent fund flow movements, providing insights into investor positioning across different market segments.

Upcoming Events

Investors should note the following upcoming dividend payments and other key dates:

Dividends / Special Distributions

The following table lists announced dividends and distributions with their key dates (list is not exhaustive):

What’s Ahead (May 2025 Calendar)

Key corporate events scheduled for May 2025 include:

• 7 May: UOB (B4), AIMS APAC (B4), Acrophyte (B4)
• 8 May: DBS (B4)
• 9 May: OCBC (B4), Daiwa House (B4), SIA Engineering (After), Starhub (After), Thai Beverage (After)
• 13 May: Prime US REIT (After)
• 14 May: Asian Pay TV (B4), United Hampshire (B4), GEO (After), CSE (After), Telechoice (After)
• 15 May: Sasseur REIT (B4), Singpost (B4), SIA (After), Netlink Trust (After)
• 22 May: Singtel (B4)
• 23 May: SATS (After)

(B4 = Before Market Open, After = After Market Close)

SGX Watch-List

As of the report date, 32 companies are currently under the SGX Watch-List. The list includes additions made since 2H2023.