Maybank Research Pte Ltd 13 May 2025 Singapore Post’s Special Dividends, Grab-GoTo Merger Synergies, and Key ASEAN Data Center Insights Idea of the Week: Singapore Post – Special Dividends Incoming SingPost is set to announce its FY25E results on May 15, and expectations are high for special dividends. This move aims to reward shareholders and return cash following the sale of its Australian business and the unwinding of QSI minority cross-shareholdings, which is expected to bring in SGD55.9m. [[1]] Anticipated special dividends are projected to be at least SGD0.10 per share. [[1]] Further asset sales are expected now that the election is over, including post offices and SingPost Centre, alongside the ongoing sale of its freight-forwarding business. [[1]] Global Equity Markets: Calm After the Storm? The announcement of the first trade deal between the US and the UK, coupled with major tariff reductions with China for 90 days, suggests a de-escalation in trade tensions. [[1]] This development is viewed as a significant positive for global equity markets. [[1]] Banks: Thilan’s Perspective on DBS and UOB Thilan maintains a HOLD rating on both DBS and UOB, remaining cautious due to unpredictable US policy. [[1]] Limited potential for sizable earnings upgrades amidst poor macro visibility justifies a Neutral call, supported by strong balance sheets and attractive dividend yields. [[1]] Grab-GoTo Merger Talks: Key Questions Answered by Hussaini Hussaini addresses critical questions regarding the Grab-GoTo merger talks, amid reports that Grab may raise USD2b to acquire GoTo. [[1]] Synergy NPV is estimated at USD2.4-3.0b under various M&A scenarios. [[1]] A full cash acquisition of GoTo by Grab could strain its balance sheet, while an all-share deal could alleviate this pressure. [[1]] GoTo minorities may benefit via dividends or MTO post-asset sale. [[1]] CSE Global: Bullish Outlook Despite Tariffs Expectations remain bullish for CSE Global, with minimal tariff impact anticipated. [[1]] The company is expected to continue gaining traction in the US data-center space. [[1]] ASEAN Internet: Grab-GoTo M&A Scenarios Grab-GoTo merger talks are ongoing, with Grab potentially raising USD2b to acquire GoTo. [[2]] Synergy NPV is projected at USD2.4-3.0b under various M&A scenarios. [[2]] A full cash acquisition by Grab could pressure its balance sheet, whereas an all-share deal could ease the strain. [[2]] GoTo minorities may gain via dividends or MTO post-asset sale. [[2]] Regulatory risks are present but not considered a major hurdle. [[2]] ST Engineering: Growth Intact, Monitor Tariffs STE’s 1Q25 revenue increased by 8% YoY to SGD2.9b, driven by defence and public security sectors. [[2]] The quarter saw strong contract wins across all three business segments. [[2]] Risks to demand posed by tariffs need monitoring; commercial aerospace may be impacted, though mitigating plans are in place. [[2]] Forecasts have been adjusted, but a BUY rating is maintained due to buoyant defence demand and visible earnings growth. [[2]] DBS Group: Resilient Platform DBS 1Q25 core-earnings were in line with Street expectations. [[2]] Its robust platform demonstrates resilience despite volatile operating conditions. [[2]] Management maintains similar guidance as pre-Liberation Day, but a more cautious approach is advised. [[2]] DBS’ commitment to capital returns and its ‘safe haven’ status cushions downside balance sheet risks. [[2]] Limited potential for sizable earnings upgrades amidst poor macro visibility. [[2]] Target Price raised to SGD45.26; HOLD rating maintained. [[2]] CSE Global: Still a Top Pick Despite Tariffs CSE’s production facilities in the US mitigate the impact from tariffs. [[2]] The acquisition of Chicago Communications for USD8.5m will be accretive to EPS, vital for expanding its critical communications business in the US, especially with data-center clients. [[2]] FY25/26 PATMI forecasts lowered by 14.7% and 18.8%, assuming tariffs remain in place and the US economy slows down. [[2]] BUY rating maintained with a lower Target Price of SGD0.58, based on 11.5x FY25 P/E. [[2]] Major News: Singapore Banks’ Extra Allowances Singaporean banks have set aside extra allowances to account for heightened uncertainty in the macroeconomic environment. [[2]] DBS, OCBC, and UOB have each taken pre-emptive steps to bolster their reserves amid US tariffs and a potential economic slowdown, despite stable asset quality. [[2]] Shopee Parent Sea’s New Financial Services HQ Sea opened its global headquarters for its digital financial services business in Singapore on May 8. [[2]] The company will use the HQ as a base to build a fintech ecosystem in the region and has rebranded SeaMoney as Monee. [[2]] Monee is leasing 10 floors across 200,000 sq ft at Rochester Commons. [[2]] China’s Top Chipmaker SMIC Plunges SMIC projects lower sales, with Co-CEO Zhao Haijun stating sales would fall between 4% and 6% in the second quarter. [[2]] The warning follows the discovery of unspecified issues with production lines, affecting process accuracy and product yield. [[2]] The company is sticking with plans to spend US\$7.5b this year to boost and upgrade output. [[2]] US FOMC Meeting (6-7 May 2025) The Fed kept the fed funds rate (FFR) at 4.25%-4.50% for the third consecutive FOMC meeting. [[2]] The FOMC statement flags further increased uncertainty to the economic outlook, especially “stagflation” risk. [[2]] The 2025 FFR outlook has been revised to -75bps cuts to 3.50%-3.75% and -50bps cuts are expected for 2026 (end-2026: 3.00%-3.25%). [[2]] UOB: Operating in Uncertainty UOB’s 1Q25 earnings were ahead of MIBG and in-line with Street expectations. [[3]] Operating metrics were strong, but may not reflect future conditions due to unpredictable US policy. [[3]] The Group has demonstrated strong execution during past downturns, with strong balance sheet liquidity and commitment to announced capital returns. [[3]] Target Price raised to SGD35.21; HOLD rating maintained due to limited growth visibility. [[3]] Lendlease Global Comm REIT: Steady Performance LREIT’s 3Q business update indicates steady operations and new management’s focus on portfolio optimization and regaining financial flexibility. [[3]] Portfolio occupancy remains high, though it fell sequentially due to lower occupancy at 313@somerset. [[3]] Positive reversion continued while tenant sales normalized. [[3]] Gearing is little changed and elevated; debt costs have decreased due to repayments and lower-base rates. [[3]] Management is focused on lowering gearing; Maintain HOLD. [[3]] Wilmar International: 1Q25 In-Line Wilmar’s 4Q24 core NPAT rose 4% YoY, driven by solid associate/JV gains and 3% revenue growth. [[3]] 1Q NPAT tracked at 24% of FY25 estimates. [[3]] Food Products saw +3% YoY volume growth, supported by China demand, while sugar volumes dipped due to 4Q frontloading. [[3]] Minimal tariff impact is expected due to diversified supply chains and resilient edible oil demand. [[3]] BUY rating maintained on Wilmar for its steady fundamentals and macro defensiveness, with the stock at 11x PE and 6-7% yield. [[3]] Aztech Global: Key Customer Orders Tank 1Q25 revenue of SGD42m and NPAT of SGD12.5m fell sharply by 67% and 91% YoY, respectively. [[3]] Tariffs are expected to reduce US consumer demand and orders from its key customer should remain weak. [[3]] Even with the ramp-up of its 5 new customers, it will not be able to replace orders lost from its key customer in the short term. [[3]] FY25/26 PATMI forecasts cut by 43.1/43%, and Target Price lowered to SGD0.45 from SGD0.56. [[3]] Preference given to Frencken due to growth from its semi-con segment. [[3]] Question of the Week: ASEAN Data Center Views Since the start of the year, advanced chip export restrictions by the US, tariffs, and macro concerns have raised questions about the sustainability of the strong data-center (DC) build cycle in ASEAN. [[3]] Nations like Singapore, Malaysia, and Thailand are categorized under Tier 2 in the US’s AI diffusion framework or chip export control, subjecting them to restrictive licensing requirements. [[3]] The allowed quota under the AI diffusion framework (wef 15 May) is seen as sufficient to meet already announced data center investments in ASEAN. [[3]] A shift toward more flexible country-specific arrangements could pave the way for future investment by regional players and hyperscalers. [[3]] ASEAN DC infrastructure remains under-penetrated and can punch above its weight. [[3]] March quarter results for major cloud providers and content companies such as Meta, Google, and Microsoft showed cloud/AI revenues in-line or exceeding street expectations, except for AWS, which missed by 5%. [[3]] Despite macro and tariff uncertainty, all companies maintained elevated AI/data center capex guidance, with Meta increasing data center capex guidance from USD60-65b to USD64-72b and Oracle guiding for capex to double from FY24 to FY25. [[3]] CSPs have no intention of cutting back on data center capex throughout FY25, and cloud revenues for these companies remained strong or even outperformed expectations. [[3]] Positive outlook remains on the ASEAN DC build cycle, with opportunities to accumulate stocks in the ASEAN DC supply chain. [[3]] China’s Exports Rise Despite US Tariffs China’s exports rose more than forecast, even as shipments to the US slumped sharply after President Trump’s tariff hikes. [[3]] Shipments to the US fell 21% after the imposition of duties in early April, while those to the 10 Southeast Asian nations in the Asean group rose 21% and exports to the European Union were up 8%. [[3]]
