Lim & Tan Securities
07 May 2025

Singapore Market Outlook: UOB Downgraded, AIMS APAC REIT Shines, and Sector Movers Amid Global Volatility

Market Overview: Mixed Performance Across Global Indices

The Singapore market, represented by the FSSTI Index, closed at 3,805.2, marking a -0.2% decline for the day and a -4.2% drop month-to-date, though it managed a marginal 0.5% increase year-to-date. In comparison, major indices like the Dow Jones, S&P 500, and NASDAQ have seen mixed results, reflecting ongoing global uncertainty. Notably, the Hang Seng Index (HSI) stood out with a strong 9.7% year-to-date gain, while the VIX Index soared 39.3%, underscoring heightened market volatility.

Commodities remained volatile, with gold surging 26.5% year-to-date, crude oil down 15.8%, and the Baltic Dry Index up 40.7%.

UOB Group: Downgraded on Cautious Guidance Despite Solid Fundamentals

United Overseas Bank (UOB) (\$34.98, unchanged) reported a net profit of S\$1.5 billion for 1Q25, which was stable year-on-year but slightly below consensus expectations of S\$1.54 billion. The results reflected broad-based income growth, underpinned by record fee income and robust loan growth.

• Net Fee Income: Rose 20% to a record S\$694 million, propelled by gains in loan-related and wealth management activities.
• Net Interest Income: Increased 2% year-on-year, supported by a robust 6% loan growth. However, it eased 2% quarter-on-quarter due to a shorter quarter.
• Non-Interest Income: Down 5% year-on-year on lower trading and investment income, but up 25% from the previous quarter thanks to strong customer treasury income.
• Credit Costs: Rose to 35 basis points, reflecting higher pre-emptive allowances amid macroeconomic uncertainties.
• Asset Quality: Remained resilient with a non-performing loan (NPL) ratio of 1.6% and ample provision coverage.
• Capital and Liquidity: CET1 ratio at 15.5%, liquidity coverage ratio at 143%, and net stable funding ratio at 116%.
• Efficiency: Cost-to-income ratio improved from 45.6% to 42.6% due to disciplined spending.

Management flagged rising macroeconomic risks from US tariffs and global trade disruptions. The outlook is cautious, with a focus on ASEAN’s resilience and the bank’s readiness to support clients through uncertainty.

Given the slightly weaker results and more guarded outlook, UOB has been downgraded to “HOLD”. However, its attractive valuations (9-10x PE, 5-6% yield, 1.2x book) and consensus target price of \$38.80 could provide share price support.

AIMS APAC REIT: Steady Growth, Portfolio Revitalization, and Attractive Yields

AIMS APAC REIT (AAREIT) (\$1.27, up 1 cent) posted a 5.2% year-on-year increase in distributions to unitholders and a 2.6% rise in distribution per unit to 9.600 cents for the year ended 31 March 2025.

• Gross Revenue: Up 5.3% to S\$186.6 million; Net Property Income rose 2.1% to S\$133.7 million.
• Leasing Activity: 25 new and 50 renewal leases signed, totaling over 159,800 sqm, with positive rental reversion of 20.0%.
• Portfolio Occupancy: 93.6% overall; 95.8% on a committed basis, supported by 200 tenants across multiple sectors.
• Geographic Exposure: 75.5% of gross rental income from Singapore, 24.5% from high-quality Australian assets.
• Asset Enhancement Initiatives (AEIs): Progress at 7 Clementi Loop and 15 Tai Seng Drive expected to unlock long-term value.
• Divestments: Proposed sale of 3 Toh Tuck Link at a 32.5% premium to book value.
• Financial Metrics: Aggregate leverage at 28.9%, interest coverage ratio of 2.4x, and 85% of debt on fixed rates. Weighted average debt maturity stands at 3 years, and the REIT has S\$289.5 million in financial flexibility.
• Hedging: 74% of expected Australian dollar distributable income hedged into SGD to minimize FX risk.
• Perpetual Securities: Issued S\$125 million at 4.70%, refinancing existing securities at a lower rate.

AAREIT’s portfolio is valued at S\$2.13 billion and remains diversified, resilient, and well-positioned for future growth. The REIT currently trades at 1x book value with a 7.6% yield. The consensus target price of S\$1.43 suggests a 12.6% upside, supporting an “Accumulate” rating.

Key Dividend Announcements and Calendar Highlights

Sector Leaders: Highest Yields and Value Picks

• Highest Consensus Forward Dividend Yield: DBS Bank (7.16%), Frasers Logistics Trust (7.08%), Mapletree Industrial Trust (6.80%), Mapletree Pan Asia Comm Trust (6.72%), Mapletree Logistics Trust (6.70%).
• Lowest Consensus Forward P/E: Yangzijiang Shipbuilding (6.63x), Jardine Cycle & Carriage (7.42x), Jardine Matheson (8.17x), Singapore Airlines (8.73x), UOB (9.27x).
• Lowest Trailing P/B: Hongkong Land (0.35x), UOL Group (0.42x), Jardine Matheson (0.47x), City Developments (0.50x), Mapletree Pan Asia Comm Trust (0.69x).
• Lowest Trailing EV/EBITDA: Yangzijiang Shipbuilding (3.33x), Genting Singapore (5.65x), Jardine Cycle & Carriage (5.98x), DFI Retail Group (6.35x), SATS (8.18x).

Macro Market Trends: US, Hong Kong, and China

China: Leading tech companies like Huawei are increasing onshore borrowings, raising a record 20 billion yuan through ultra-short-term commercial paper to capitalize on low local rates and hedge against US-China trade tensions. The trend aligns with Beijing’s push to boost financial support for tech innovation. ZTE is similarly active in short-term debt markets, with most issuances under 270 days.

US: Weak housing data and subdued homebuilder sentiment point to underpriced recession risks. Elevated mortgage rates, tariffs on construction materials, and tighter immigration policies are raising costs and slowing sector growth. Recent Fed manufacturing surveys indicate stagflationary risks—growth is slowing while cost pressures linger, prompting a defensive stance in asset allocation, particularly favoring gold over industrial metals.

Share Transactions & Fund Flow Highlights

Share buybacks were also active, with significant repurchases by HK Land (500,000 shares at US\$4.96), APAC Realty, Global Investment Limited, Olam, and 17 Live.

SGX Watch-List: Companies Under Close Surveillance

32 companies are currently under the SGX Watch-List, including recent additions such as Addvalue Technologies, Renaissance United, Telechoice, Tiong Seng Holdings, Global Invacom Group, Green Build Technology, Keong Hong, and Camsing Healthcare. These names will be closely monitored for compliance and performance.

Looking Ahead: Key Results and Corporate Actions

The coming weeks feature major earnings releases and corporate actions from UOB, AIMS APAC REIT, Acrophyte, DBS, OCBC, Daiwa House, SIA Engineering, Starhub, Thai Beverage, Prime US REIT, Asian Pay TV, United Hampshire, GEO, CSE, Sasseur REIT, Singpost, SIA, Netlink Trust, Singtel, SATS, and others.

Conclusion

Singapore’s financial markets continue to navigate global volatility, with sector leaders offering attractive yields and defensive value. UOB’s downgrade reflects the uncertain macroeconomic landscape, while AIMS APAC REIT stands out for its portfolio management and resilient distributions. Investors should remain vigilant as global policy shifts, trade tensions, and local corporate actions shape market opportunities and risks.