buysellhold july.23



Singapore Post (SPOST SP)

Becoming More Expensive to Send Letters


Due to a secular decline in postal volumes and increased operating costs, SPOST is set to increase postal rate rates by 64.5% starting Oct 23. We reckon that the DPP segment is set to bottom out in 1HFY24 and recover close to breakeven for FY24. However, we do expect postal volumes to continue falling as more mail users switch to online alternatives. Maintain HOLD with a higher PE-based target price of S$0.515.



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Property - China

Mild But Continuous Sales Recovery In Tier 1 cities; Removing Of HPRs Will Effectively Unleash Demand In Tier 2 Cities


After relaxing the mortgage policy on 1 September, Tier 1 cities continued to see improvement in the property market last week. Besides, overall new-home sales in 50 cities reported mom increase in Sep 23. In the past week, more Tier 2 cities completely removed purchase restrictions, eg Wuhan, Hefei. We expect to see improvements in market sentiment in Tier 2 cities with bold policy actions. Sales around the National Day holiday will be a focus. Maintain MARKET WEIGHT on China’s property sector.



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Centurion Corp (S$0.425, unchanged) is on track to delist from the Main Board of HKEX and focus its existing primary listing on the SGX-ST. Going forward, outlook remains positive with positive rental reversions and a healthy pipeline of dormitory beds. Centurion enjoys top-line visibility and has the pricing power to increase rates, if necessary.

The government has taken steps to support the inflow of workers, such as relaxing the application criteria for building Factory Converted Dormitories. That said, we continue to expect rates to remain elevated for at least the next two years. While several smaller dormitory players have left the market with the expansion of FEDA requirements, exponentially rising rents in private residential housing have also driven other workers (including S-pass holders) living in these units to seek purpose-built dormitory beds.

Capitalized at S$357mln, Centurion is trading at attractive valuations of just 5.5x core FY23F P/E and 0.49x P/B. The recent doubling of interim dividends to 1.0 S cts represents a decent 4.7% annualized yield and could see further upside given its low payout of only 25%. Centurion’s bed rates are “tracking” the average rates of S$420/month provided by MOM, indicating room to grow versus other competitors which are charging upwards of S$500-$600/month. Regulatory demand to shift workers back into dormitory housing will also benefit well-established dormitory players like Centurion. Maintain BUY with an unchanged target price of S$0.58, pegged to 7.5x core FY23F P/E (5-year average).


Singapore Exchange

Trading volumes relatively subdued


■ Aug 2023’s SDAV of S$1.07bn and DDAV of 1.04m contracts were higher mom, but 8M23 volumes down yoy as volatility (and hedging needs) ease.

■ China A50 fueled the equity index futures volumes, buoyed by China’s stamp duty reduction. Most Nifty contracts still originate from SGX – a key positive.

■ Reiterate Hold with TP unchanged. We think share price may hover at current levels as elevated interest rates continue to weigh on investment sentiment.



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Genting Malaysia

Weekend visit to casino reaffirms our thesis


■ Reiterate Add post our visit to Genting Malaysia’s main casino. Improving visitor arrivals set to drive earnings recovery in coming quarters, in our view.

■ Improvements in floor capacity and staffing suggest casino is well-positioned to benefit from the seasonally stronger tourist arrivals in 4Q23F, we think.

■ GENM is our top pick for exposure to a rebound in tourism. We believe valuation is undemanding at 13x CY24F P/E with c.6-7% dividend yield. 



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Higher rental for the AC Hotels


Maintain BUY and top pick for the sector We are positive on the 11% incremental rental revision for YTLREIT’s AC Hotels, namely for AC Hotel KL Titiwangsa, AC Hotel Penang Bukit Jambul and AC Hotel Kuantan City Centre. We raise FY25-26E net profit by 1% p.a. and DDM-TP by 2sen to MYR1.08 (Ke: 8.9%). YTLREIT remains our top MREIT BUY, due to its resilient earnings, strong pipeline of assets and favourable net DPU yield of 8+% (sector: 6.6%). 



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