CGS International

May 28, 2025

Singapore Strategy: Navigating Market Liquidity and Sustainable Growth in 2025

Executive Summary

Despite global challenges, market liquidity enhancement through the EMDP and sustained earnings growth could provide tailwinds for the Singapore market [[1]].
Investors are likely to focus on companies with robust earnings growth and strong capital management [[1]].
Highlighted are 13 names to capitalize on EMDP and sustainable growth themes [[1]].

Table of Contents Overview

This report includes:

Liquidity injection analysis
Sector allocation and top picks
1Q25 results season review
Earnings forecast changes
Equity Market Review (EMR) insights
Economic and Technical Outlook
Sector-specific analysis (Banks, Capital Goods, Commodities, etc.)
Company Briefs / Top Picks

Liquidity Injection and Market Sustenance

The Monetary Authority of Singapore (MAS) S\$5bn Equity Market Development Programme (EMDP) aims to shortlist fund managers by 3Q25 [[3]].
MAS will channel funds to asset managers with strong investment records focused on Singapore equities [[3]].
Strategies including thematic or regional focus investments will qualify [[3]].
Highlighted are 8 stocks with market caps ranging from c.US\$120m to c.US\$670m that could attract liquidity inflow [[3]].
Dividend plays: BRC, CSE, PROP
Growth stocks: FEH, FRKN, PAN, QNM
Value plays: MPM

Selective Stock Picks Amid Macro Challenges

Investors are expected to remain selective on big-cap stock picks due to a challenging macro environment [[3]].
Companies offering sustainable earnings growth, i.e., projected double-digit earnings growth in FY25F and FY26F, could outperform [[3]].
Companies with value unlocking prospects and cost efficiencies are also attractive [[3]].
Companies fitting these criteria include SATS, SIE, SCI, KEP, and UOL [[3]].

Market Valuation and Outlook

The Singapore market is trading at 13.9x CY25F P/E, with a 4.4% yield [[3]].
The 2025F SIMSCI target is maintained at 411.7 [[3]].
Key downside risks include increased geopolitical tensions and slower interest rate cuts [[3]].

Alpha Picks for 2025F

Highlighted are stock picks split into:

Dividend plays (BRC, CSE, PROP) yielding 6.4-7.7% [[3]].
Growth stocks (FEH, FRKN, PAN, QNM), with projected three-year EPS CAGR of 8.2-12.8% [[3]].
Value play (MPM) trading at CY25F P/BV of 0.73x [[3]].

Alpha Picks for 2025F – Large Cap

Keppel Ltd (KEP SP): Add, Target Price S\$9.28, Total Return 42.7% [[4]].
SATS Ltd (SATS SP): Add, Target Price S\$3.60, Total Return 19.7% [[4]].
Sembcorp Industries (SCI SP): Add, Target Price S\$8.14, Total Return 26.6% [[4]].
SIA Engineering (SIE SP): Add, Target Price S\$3.10, Total Return 24.1% [[4]].
UOL Group (UOL SP): Add, Target Price S\$8.20, Total Return 45.7% [[4]].

Alpha Picks for 2025F – Small Cap

BRC Asia Ltd (BRC SP): Add, Target Price S\$3.40, Total Return 15.4% [[4]].
CSE Global (CSE SP): Add, Target Price S\$0.68, Total Return 66.5% [[4]].
Food Empire Holdings Ltd (FEH SP): Add, Target Price S\$1.95, Total Return 14.5% [[4]].
Frencken Group Ltd (FRKN SP): Add, Target Price S\$1.27, Total Return 15.8% [[4]].
Marco Polo Marine (MPM SP): Add, Target Price S\$0.06, Total Return 45.5% [[4]].
Pan-United Corp Ltd (PAN SP): Add, Target Price S\$0.82, Total Return 21.3% [[4]].
Propnex Ltd (PROP SP): Add, Target Price S\$1.25, Total Return 26.7% [[4]].
Q&M Dental Group (QNM SP): Add, Target Price S\$0.43, Total Return 23.3% [[4]].

Sector Allocation and Top Picks Strategy

Downgraded commodities sector due to uncertain outlook [[5]].
Downgraded Internet sector [[5]].
Upgraded consumer sector due to defensive outlook [[5]].
Ratings lowered on ST, SE, and WIL from Add to Hold [[5]].
CLAR, KDCREIT, YZJSGD removed; SIE and SATS added to big cap list [[5]].
BRC, FRKN, CSE, and PROP added; HLA removed from small-mid cap list [[5]].
High conviction big-cap picks: KEP, SATS, SCI, SIE, and UOL [[5]].
Small-mid cap list: BRC, CSE, FEH, FRNKN, MPM, PAN, PROP, and QNM [[5]].

Sector Ratings and YTD Performance

Overweight: Capital Goods, Consumer, Construction, Gaming, Healthcare, REITS [[5]].
Neutral: Banks, Commodities, Internet services, Property, Technology, Telco, Transport [[5]].
YTD average price performance varies across sectors, with Gaming and Manufacturing showing significant gains [[5]].

1Q25 Results Season Wrap-Up

Hits equaled misses in 1QCY25 [[6]].
Misses were mainly due to one-offs like higher tax expenses (SE, UOB, CD) [[6]].
Hospitality REITS saw weaker performance due to a high base and increased competition [[6]].
Key recommendation changes: Downgrades of ST, SE, WIL from Add to Hold; upgrade of DBS from Hold to Add [[6]].
Most companies maintained 2025F outlook guidance but cautioned about clarity towards 2H25F [[6]].

Positive and Negative Surprises for 1Q25

Positive surprises: Sheng Siong Group, BRC Asia, Food Empire Holdings, SATS, Singapore Airlines [[6]].
Negative surprises: SIA Engineering, United Overseas Bank, CDL Hospitality Trust, Far East Hospitality Trust, Genting Singapore, ComfortDelGro [[6]].

Earnings Forecast Changes by Sector

CY25F/CY26F core net profit projections trimmed by 1.2%/0.2% [[7]].
Lowered projections for banks, tech manufacturing, transport, commodities, and REITs [[7]].
Lifted Internet services and capital goods sector projections [[7]].
Core net profit growth for CY25F/CY26F stands at +6.2%/+8.5% [[7]].
The Singapore stock market is trading at 13.9x 12M forward PE and offers a 4.4% dividend yield [[7]].
SIMSCI target of 411.7pts unchanged for 2025F [[7]].
SIA outperformed on higher-than-expected 4QFY3/25 EBIT [[7]].
STE is the best performing stock YTD on strong orderbook and improved growth prospects [[7]].

Sector-Specific Earnings Forecast Changes

Financials: ▼ [[7]]
Property: ▲ [[7]]
REITS: ▲ [[7]]
Telcos: ▲ [[7]]
Transport: ▼ [[7]]
Capital Goods: ▲ [[7]]
Commodities: ▲ [[7]]
Gaming: ▼ [[7]]
Consumer: ▲ [[7]]
Tech/Manufacturing: ▼ [[7]]
Healthcare: ▲ [[7]]
Internet Service: ▲ [[7]]
Gloves/Others: ▼ [[7]]

MSCI Valuations and Market Summary

MSCI’s 12M forward core P/E (x) vs. fwd EPS growth [[8]].

MSCI Sin Summary

Core P/E (x): 15.0x (2025F), 13.9x (2026F), 13.1x (2027F) [[8]].
Core EPS growth (%): 3.5% (2025F), 8.1% (2026F), 5.0% (2027F) [[8]].
Dividend yield (%): 4.4% (2025F), 4.5% (2026F), 4.6% (2027F) [[8]].
ROE (%, recurring): 12.6% (2025F), 12.7% (2026F), 12.6% (2027F) [[8]].

EMDP Framework and Stock Picks

Framework for EMDP picks focuses on broadening liquidity beyond STI component stocks [[9]].
Targets smaller counters with market caps between \$500m and \$3bn (S\$ terms) [[9]].
Criteria include three-month average daily traded value of at least US\$0.10m [[9]].
8 stock picks: dividend plays (BRC, CSE, PROP), growth stocks (FEH, FRKN, PAN, QNM), and value play (MPM) [[9]].

Broader Market Situation

Based on Bloomberg data, 63% of 152 stocks with market caps above US\$200m but below US\$2bn are trading below book value [[10]].
30 stocks outside coverage are trading at less than half their book value [[10]].
Among coverage, 19 stocks trading below CY25F BVPS forecast, with 10 being property/REIT counters [[10]].

Sifting for Strong and Sustainable Growth Stocks

Singapore market supported by liquidity injection tailwinds [[11]].
Positive market earnings growth projected: 6.2% for CY25F and 8.5% for CY26F [[11]].
Investors preferring companies with quality and defensive earnings quality and growth [[11]].
Stock selection criteria: i) double-digit earnings growth in FY25F and FY26F; and ii) potential for unlocking value [[11]].
Highlighted: SATS and SIE offer double-digit earnings growth outlook [[11]].

SATS and SIE Growth Prospects

SATS: FY25F/FY26F core net profit growth of 201%/11%, backed by revenue growth from new contract wins [[11]].
SIE: Heightened air cargo demand could benefit from ongoing trade tensions [[11]].

Technical Outlook – Short Term

SIMSCI successfully defended its 350.00 pts major support, reaching beyond the 400.00 pts level [[15]].
A bullish flag forming signals a potential bullish continuation [[15]].
Short-term target (1-month) at 417.00 pts [[15]].
Key major support at 395.50 pts must be supported to maintain bullish outlook [[15]].

Technical Outlook – Long Term

Bullish move concluded, breaking beyond 400.00 pts [[16]].
SIMSCI broken above the symmetrical triangle, confirming bullish trend [[16]].
Mid-term target (6-12 months) is at 423.70 pts, and the long-term target (12-18 months) is at 442.00 pts [[16]].

Sector: Banks – Neutral

Reiterated Neutral call on the Singapore banking sector [[19]].
FY25F net profit decline expected across banks, with DBS exhibiting the softest yoy decline of 1.3% yoy [[19]].
Uncertain trade talks between US and partners may strain macroeconomic conditions [[19]].
Risk-off sentiments may lead to slower loans and fee income growth [[19]].
Slower economic growth could lead to deterioration in credit quality in 2H25F [[19]].

FY25F Guidance for Banks

DBS and OCBC have stuck to their previous FY25F guidance [[19]].
Income growth offset by higher provisioning and higher effective tax rate [[19]].
Stagnant ROE in FY25F [[19]].

Capital Return Initiatives for Banks

Committed capital return initiatives provide attractive yields [[19]].
Attractive dividend yields of 6.4-7.0% for FY25F [[19]].

DBS, OCBC, and UOB Guidance Updates

DBS: Slight yoy growth in NII, high-single-digit growth in commercial book Non-II [[19]].
OCBC: c.2% NIM, Mid-single-digit loan growth [[19]].
UOB: Growth yoy in total income, Double-digit growth in fee income [[19]].

Banks – Top Picks

DBS (Add; TP: S\$47.90): Top pick with share buybacks and sustainable DPS increments [[20]].
UOB (Add; TP: S\$38.60): Executing a similar capital return initiative [[20]].
OCBC (Hold; TP of S\$17.20): Capital return initiative appears tame in comparison [[20]].

Capital Goods – Top Picks: KEP, SCI

Asset monetisation remains key for KEP [[22]].
KEP is likely to close above S\$1bn of asset monetisation in FY25F [[22]].
SCI could see double-digit earnings growth in FY25F, stretching to FY26F [[22]].
13% yoy growth in FY25F net profit could come from consolidation of Senoko Energy [[22]].

Share Price Movement Before and After 1Q25 Results

STE: Neutral since results, primed for profit taking [[22]].
YZJSB: Management tone pessimistic [[22]].
KEP: Management guided for 500m asset monetisation [[22]].

Scenario Analysis of Potential M1 Divestment

Details on potential financial impacts of M1 divestment scenarios [[23]].

KEP and SCI Forecasts

KEP’s SOP derivation [[24]].
SCI’s segment profit forecast [[24]].

STE, YZJSB, SCI, and KEP Valuations

P/E valuations for STE and YZJSB [[26]].
P/E valuations for SCI and P/BV (x) valuations for KEP [[26]].

Construction – PANU and ISO Preferred Picks

Positive stance on the building materials sector due to elevated construction activities and project pipeline [[29]].
Peak construction demand likely from FY26F onwards [[29]].
Top picks: PANU and ISO [[29]].
PANU: Large exposure to infrastructure and institutional projects, ESG angle, net cash balance sheet [[29]].
ISO: Higher margins from autonomous washing and painting drones [[29]].
Key re-rating catalysts: Strong improvements in offtake volumes and earnings-accretive M&As [[29]].

Consumer – Overweight

Consumer companies’ 1Q25 results were mixed [[30]].
Better-than-expected results for Sheng Siong Group (SSG) and Food Empire (FEH) [[30]].
FEH’s re-rating will likely continue into 2H25F [[30]].

Healthcare – Overweight

Positioning for overseas expansion [[34]].
Attention turns to share buyback intention announced [[34]].
Top pick: QNM. A series of corporate action paves the way for a stronger 2H25F [[34]].

Property – Neutral, Top Pick UOL

Singapore developers are trading at a 60% discount to RNAV and at 0.5x P/BV [[38]].
Maintain sector Neutral; preferred pick is UOL [[38]].

REITS

Declining cost of debt is a notable green shoot in this earnings reporting season [[40]].
Privatisation offers for FHT and PGNREIT [[40]].
We like SREITs with strong balance sheets and ability to tap acquisition growth opportunities [[40]].

Technology – Hold Venture, Add Frencken

Cautious outlook [[42]].
Re-rating catalysts: Improving net profit guidance and possible valuation tailwinds if the Fed starts to cut interest rates [[42]].
We like Venture (big cap) and Frencken (small cap) [[42]].

Company Briefs / Top Picks

Detailed analysis of individual companies and their investment potential [[48]].

Keppel Ltd – Asset Monetisation Gathering Pace

Keppel reported strong asset monetisation progress in 1Q25, achieving S\$347mn in asset sales [[49]].
Management is in advanced talks to monetise S\$550m more, likely involving I12 Katong or the Mumbai Urbania Township [[49]].
Retain Add, with an SOP-based TP of S\$9.28 [[49]].

BRC Asia Ltd – Acquisition to Boost Downstream Presence

Reiterate Add as we see BRC’s high dividend payout as sustainable in FY25-27F amid healthy industry fundamentals [[54]].
Our TP is raised to S\$3.40 [[54]].

CSE Global – Expect Stronger 2H25F

Reiterate Add with lower TP of S\$0.68, still based on 12x CY26F P/E [[55]].

Frencken Group Ltd – Moderate 1H25F Revenue Growth Possible

We keep our Add call as we stay positive on the outlook for Frencken’s key semicon segment [[57]].

Pan-United Corp Ltd – Capturing Construction Tailwinds

We raise our TP to S\$0.82 on higher FY26F EBITDA [[59]].
Reiterate Add given its strong positioning to capture construction tailwinds [[59]].

Propnex Ltd – Leader in Property Brokerage

We like PROP as a leader in the property brokerage business in Singapore [[60]].
Our TP of S\$1.25 is based on the average of net cash-adjusted FY25F P/E of 10x and 5-year DCF valuation [[60]].

Appendix

Singapore stocks under coverage with projected double-digit EPS growth in FY25F and FY26F [[63]].
Singapore coverage universe [[64]].
Analysts Coverage – latest report link [[67]].

Disclaimer

Detailed disclaimer information regarding the content, distribution, and potential conflicts of interest [[68]].

Singapore Stock Market Strategy: Top Picks for EMDP and Sustainable Growth (2025)