Singapore

• Following 2Q24 , our operating profit of S$2.9bn and a net profit of S$2.6bn, stand considerably higher than consensus of S$2.5bn and S$2.3bn respectively. 
• SIA’s continue to suffer more inflation than most peers (ex-Qantas). However, 1H24 illustrated that continued restoration of capacity is diluting pressure and narrowing the gap to peers.
• The true test for SIA will be management of normalizing profitability beyond FY24. We model operating profit of S$1.8bn/net profit of S$1.5bn in FY25, versus consensus of S$1.5bn/S$1.2bn.

• Sea Ltd (SE US) saw its 3Q2023 result swing back to a loss after turning on investment at Shopee during 3Q2023 in the face of competition.
• The company was open about its renewed investment in growth during the previous quarter in the face of threats from TikTok Shop, which may have lessened post its Indonesia expulsion. 
• Sea Ltd may not have engendered itself with investors impressed with its ability to pivot like no other to actual profitability, now introducing an element of uncertainty. Valuations reflect this.

• Amara Holdings (AMA SP) has disclosed a voluntary unconditional offer from Dymon Asia and the Albert Teo Family at S$0.60 per share, a 30.4% premium to the last close price. 
• On 17 June, Amara received a written notification from Mr Albert Teo Hock Chuan (CEO) and Ms Susan Teo Geok Tin (Company Secretary) that they are mulling an offer. 
• The offer price is final. The offer is attractive and marginally below the ten-year high. Hitting the 90% compulsory acquisition threshold implies a minority acceptance rate of 79.3%.

• Looks like Sea (SE US) decided to take a detour back to the land of losses this quarter.
• But it’s not a massive issue. They’ve maintained close to 7% QoQ revenue growth, so things should be okay.
• Investors likely won’t delve into the details further to uncover the substantial costs hidden behind that apparent growth.

• Dearth of international flights from Chinese and Russian carriers — 2nd & 3rd biggest global aviation market, will distort supply, underpins strong yields and profitability.  
• SIA’s cost management is superior thanks to high asset utilisation, stable SGD vs. the USD, and access to attractive financing.  SIA’s competitors severely lack these attributes. 
• We forecast FY24 net profit of SGD2.4b (+13.1% YoY) and peg it to 10x PE to derive a TP of SGD8.07, +30% UPSIDE potential.  

• Grab‘s 3Q2023 results demonstrate a high degree of success in achieving a delicate balance between growth and profitability, with significant progress across all verticals, and a  broadening of product offerings.
• The company turned adjusted EBITDA breakeven for the first time in 3Q2023, through lower incentives, cost efficiencies, and lower regional corporate costs, with further progress towards FCF breakeven in 4Q2023.
• Grab remains confident about the outlook with guidance revised upwards, with the company looking at some potentially interesting M&A, which should be earnings accretive and beneficial to the ecosystem. 

• Back in mid-June, hotel and investment property play Amara Holdings (AMA SP) gained 38% over three consecutive days on news of a possible Offer from its controlling shareholders.
• The Teo family controls ~51% of shares out. No price was mentioned. This development was discussed in Amara Holdings Gains On Possible Offer.
• After shares were halted on the 10th November, Amara has now announced a best-and-final unconditional cash Offer at S$0.60/share, a chunky 53.8% to undisturbed and a lifetime high.

• We suspect that the recent strength in Sea (SE US)‘s price performance is likely due to short covering, with shorts incentivized to cover after a nearly 38% gain.
• As earnings approach, short positions have been increasing since late October, likely anticipating another earnings disappointment from Sea Ltd’s Q3 report on November 14, 2023.
• Consensus estimates for Sea Ltd are at their lowest since its inception. A modest outperformance could lead to a squeeze in short interest.

• Sheng Siong (SSG SP) continues to maintain steady, low, single-digit growth in revenue and flat profitability despite a challenging environment. 
• Inflation trends reversing due to lower power costs in 2024, and an improvement in its product mix could lead to increased low double-digit profitability (10-11% YoY). 
• Trading at 18.5x/17.6x FY23e/24e PE and 3.9% dividend yield, the stock remains on our watchlist if a correction leads to a favorable entry point.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Softbank Group
2. Sunny Optical Technology Group
3. Seazen (Formerly Future Land)
4. Melco Resorts & Entertainment
5. Yanlord Land

and more…

With weaker end demand than originally expected in Q323, XP Power’s trading update confirmed a lower outlook for FY23 operating profit and a consequent rise in net debt. To mitigate the risk of hitting debt covenants, the company has initiated a series of cost and cash saving measures, renegotiated its debt covenants and undertaken a fundraise. With revised debt covenants in place and reduced gearing, we believe XP is now well positioned for growth as end market conditions improve.

For our next Corporate Webinar, we are glad to welcome OUE Commercial REIT’s CEO and Executive Director, Han Khim Siew, and CFO, Lionel Chua.

In the upcoming webinar, Khim Siew and Lionel will share a short company presentation after which, they will engage in a fireside chat with Smartkarma Insight Provider, Angus Mackintosh. Angus will also provide an industry overview, featuring landscape commentary and returns analysis. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 28 November 2023, 19:00 SGT.

About OUE Commercial REIT

OUE Commercial Real Estate Investment Trust (“OUE C-REIT”) is one of the largest diversified Singapore REITs with total assets of S$6.0 billion as at 30 June 2023. With six assets in Singapore and one in Shanghai, the property portfolio comprises 1,643 upper upscale hotel rooms, as well as approximately 2.2 million square feet of prime office and retail space.

In Singapore, OUE C-REIT’s office assets – OUE Bayfront, One Raffles Place and OUE Downtown Office, are situated within the CBD where medium-term supply is limited. OUE C-REIT also owns two hotels, Hilton Singapore Orchard and Crowne Plaza Changi Airport, which are well-positioned to capture the continued rebound in tourism and MICE demand. Complementing Hilton Singapore Orchard is Mandarin Gallery, a choice location for international brands in the heart of Orchard Road.

On 30 October 2023, OUE C-REIT obtained a “BBB-” credit rating with a stable outlook from S&P Global Ratings.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Meituan
• Melco Resorts & Entertainment
• NagaCorp Ltd
• Yanlord Land
• Yuexiu Property

• In past 2 quarters OCBC (OCBC SP) saw its credit costs rise 150% YoY and then 250% YoY. For almost all of the preceding 8 quarters YoY growth was negative.
• It holds 3.8% of total loans in Greater China CRE, a sector that has seen visible deterioration in some banks, like Standard Chartered (STAN LN) and HSBC Holdings (HSBA LN).
• Great Eastern Holdings (GE SP) is seeing weakness in main revenue lines, with worsening policy claims. Its profit delta this year is distorted from the base effect.

• DBS is now guiding for no profit growth during FY24. This may end up missing with negative growth more statistically likely, in a worsening world.
• Credit metrics are not particularly positive in today’s release with SGD215m of credit costs compared with SGD72m in the preceding quarter.
• If rate rises are done or nearly done, than the main positive delta of DBS earnings are also done or nearly done. Management guidance suggests as much too.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Lippo Malls Indonesia Retail Trust’s ESG as “Adequate”, in line with its Environmental and Social scores. We deem Governance as “Weak”, despite the “Adequate” score in quantitative terms. Controversies are “Immaterial” and Disclosure is “Adequate”.