OUE REIT - Proceeds in, gearing to decline
• OUE REIT remains supported by strong performance across its segments. The office segment has observed the flight-to-quality trend, which has contributed to strong rental reversions (3Q25: 9.3%). The retail segment is bolstered by unique F&B offerings and resilient ultra-luxury market. The hospitality segment has an optimistic long-term outlook due to its attractive sponsor pipeline, efforts to secure more MICE business, and active management of room rates.
• Net divestment proceeds of S$318mn from the sale of Lippo Plaza Shanghai have been repatriated to Singapore. Although the use of proceeds has not yet been finalised, priority will be given to debt repayment. OUE REIT has also made progress on its acquisition plan, screening opportunities in Japan and Australia. It has been indicated that Australia remains the preferred market for office assets.
• We maintain our BUY recommendation with an unchanged target price of S$0.40. There are no changes to our forecast. We believe growth opportunities will primarily come from its international acquisitions. The Sydney office segment has proved to be an attractive market with limited supply and strong demand, creating a potentially compelling entry point for OUE REIT.
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Singapore Residential
Act 2: Scaling the peak
• Next phase of re-rating will favour the developers that can demonstrably unlock value
• Robust pre-sales of strong launch pipeline expected to position our preferred developers (UOL, GUOL, and CDL) well
• We lift our TPs for the developers, with 10-15ppt narrower discounts to RNAV
• Deep value mid-cap names like HPL, HOBEE and BS (Bukit Sembawang) are potential EQDP beneficiaries
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Malaysia Strategy
Ready for takeoff
Malaysia’s cumulative exemptions from US reciprocal tariffs are one of the highest in ASEAN, making it less exposed to tariff risks.
■ Further narrowing of the FFR-OPR spread should continue to blow tailwinds for the ringgit and catalyse the Malaysian stock market, in our view.
■ Malaysia offers relative political stability alongside policy reforms that are bearing fruit. We introduce our 2026F KLCI target at 1,810.
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We understand from Innotek’s management that Nvidia will most
likely absorb most of the additional tariffs that the USA government
levies (25% tax) from chips that are sold to China for them to
assemble into the final GPU product to be used in and outside of
China. The above news would be positive for Innotek’s AI GPU
business with both Nvidia as well as Supermicro. At Innotek’s last
traded price of 65 cents, it is capitalized at $151mln with its net
cash position accounting for 40% of its market cap and the company
trading at 15x FY26 earnings and 3.1% dividend yield. Price to
Book is 0.9x. We maintain an “Accumulate” rating on Innotek
given its expected strong turnaround from FY26, thanks to maiden
contributions from Nvidia & Inspur.
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LHN Ltd – Steeper growth ahead
- 2H25 earnings were above expectations. FY25 revenue/PATMI were 100%/109% of our forecasts. Growth was driven by a jump in co-living earnings. Final and special dividend totalling 3 cents was announced (FY24: 2 cents).
- The expansion of rooms for Coliwoo remains robust. There are 714 rooms under renovation, with another estimated 1,500 rooms planned. The pipeline is equivalent to a 75% growth from the current 2,933 rooms. Opportunities are wide-ranging, including hotel licenses, student accommodation, commercial buildings, and management contracts. The target is to expand room count by 800 per year (~27% CAGR).
- We maintain our BUY recommendation. With the listing of Coliwoo, our valuation of LHN is now based on a sum-of-parts basis (prev. 13 P/E ratio). We value Coliwoo on a mark-to-market basis with a 10% discount, property development at book value and the rest of the business at 10x PE. Our target price is lowered from S$1.13 to S$0.85.
Post Coliwoo listing and a stronger balance sheet, we expect LHN to pay a higher dividend yield and to deploy capital into new areas of growth, namely storage space and facilities management businesses. Valuations remain attractive at a dividend yield of almost 6% and an adjusted price-to-book ratio of 0.9x.
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Reflections 2025
Amidst extreme uncertainty, S’pore offered certainty 2025 brought about extreme uncertainty. Singapore navigated this whilst offering a premium on certainty. The STI is +20% higher YTD. There was increased certainty to ROEs. This was partly due to efficiencies from deploying AI - especially in banks, financials and healthcare. An additional layer of certainty came from policy delivery, resulting in equity market reforms and priority setting for transport, fiscal stimulus, infrastructure development, etc. These should support earnings upgrades in consumer, REITs, SMIDs & transport. Finally, rational competition has increased margin certainty in internet and telcos. Winning stocks: CICT, CD, CSE, GRAB, MLT, OCBC, SGX, SSG, ST.
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