DBS, SGX and Seatrium in play as STI touched new all-time high

Date: February 17, 2025

• STI hit intraday all-time high of 3,921.3 thanks to DBS
• Index finished week 16 points or 0.4% higher at 3,877.5
• DBS reported record S$11.3b profit for 2024
• Seatrium in play after MOU announcement
• SGX’s shares plunged 5.8% on Friday; market disappointed with measures announced to boost trading
• Analysts raise target prices for DBS to above S$50
• US inflation was hotter-than-expected, odds of rate cut in March now down sharply but all three stock indices rose
• Temasek-linked Cuscaden offers S$0.98 per unit to privatise Paragon REIT

 

DBS, SGX and Seatrium were in focus

DBS, SGX and Seatrium were in focus during a week when the Straits Times Index touched a new intraday all-time high of 3,921.30 last Monday. However, it failed to register a new all-time closing high, pulling back to finish the week at 3,877.50, for a net gain of 16 points or 0.4% which came in tandem with a firm showing on Wall Street despite fresh inflation and interest rate fears.

In DBS’s case, it surged to a new all-time high of S$46.50 on Monday following announcement of an 11% rise in Q4 net profit to S$2.52b that brought full-year net profit to S$11.29b, 12% higher than the previous year and a new record.

“We achieved a record financial performance in 2024 with return on equity of 18 per cent, one of the highest among developed market banks. Balance sheet management supported net interest income growth while improving investor sentiment drove wealth management fees and treasury customer sales to new highs,” said DBS CEO Piyush Gupta in a statement.

The lender proposed a final dividend of S$0.60 per share for Q4, which brings it to S$2.22 per share for the full year – an increase of 27% over the previous year, the bank said. The final dividend will be payable on or around Apr 16.

For the week, DBS managed a S$0.16 or 0.4% rise to S$44.84.

Seatrium in the meantime, surged S$0.39 or 18% on Wednesday and Thursday to S$2.55. On Thursday, the offshore marine company said it has inked a memorandum of understanding (MOU) with BP Exploration & Production, a subsidiary of multinational oil and gas company BP, for a deepwater floating production unit (FPU) in the Gulf of Mexico.

Under the MOU, Seatrium will provide engineering, procurement, construction and commissioning services for the Tiber FPU, which will support the development of BP’s deepwater assets in the gulf.

The stock added a further S$0.03 on Friday to finish the week at S$2.58.

SGX’s shares plunged 5.8% on Friday; analysts downgrade the stock

SGX’s shares on Friday crashed S$0.78 or 5.8% to S$12.69 on volume of 7.2m, reportedly on disappointment over measures announced to boost trading in the local stock market.

Citi Research downgraded its call on the SGX to a “sell” on Friday, as it expects the recent optimism priced into the counter’s valuation to unwind. It also lowered the price target of the stock to S$11.90.

The bank’s downgrade come a day after the equities market review group of the Monetary Authority of Singapore (MAS) announced its first set of measures.

The review group had proposed introducing tax incentives to attract enterprises and fund managers to list in Singapore. It also aims to encourage the launch and growth of funds with substantial investment in local equities.

Citi analyst Tan Yong Hong said that although the research house said previously that SGX’s 12-month forward price-to-earnings multiple of 23.4 times reflected optimism over the recommendations of the review group, commentaries that advised against investments by GIC and the Central Provident Fund in domestic equities “likely disappointed markets”.

Second Minister for Finance Chee Hong Tat, who chairs the review group, said that “GIC’s mission is to preserve and enhance the international purchasing power of Singapore’s reserves”.

He said the sovereign wealth fund should thus not be required to have a specific allocation to local equities if such investments could result in lower overall returns, as doing so would not be in the best interests of Singapore and Singaporeans.

RHB analyst Shekhar Jaiswal, in a Feb 13 report, noted that the trading volume of derivatives and total value of stocks traded on the SGX for the month of January came in “significantly lower” than expectations.

He expects this trend to continue for the rest of the SGX’s financial year despite higher trading activity in real estate investment trusts and stocks on the Straits Times Index.

Mr Jaiswal added that the SGX’s earnings growth outlook remains dependent on strong sentiment in the local stock market, an increase in new listings and a favourable outcome of the ongoing review. He has kept his target valuation for the SGX at $12.80.

Analysts raise target prices for DBS to above S$50

Maybank Securities raised its target price for DBS by nearly 10% to S$51.37 from S$46.91, with a “buy” rating. RHB on Tuesday maintained its “buy” rating, and raised its target price by nearly 15% to S$51.20 from S$44.70.

Maybank said DBS was giving significant visibility on capital returns. While earnings could grow at just 1% compound annual growth rate between FY2025 and FY2027, dividends could expand at 7%, delivering yields higher than 6.5%, it said.

Maybank upgraded its estimate for dividend per share (DPS) by 14 to 22% between FY2025 and FY2027.

“The group’s capital returns policies should deliver dividend yields of more than 6.5%. All this justifies a higher valuation, in our view,” it said.

RHB said that one key highlight was DBS’ management providing clarity on the quantum of excess capital of S$8 billion, and reaffirming its commitment to return this to shareholders over the next three years.

That will start with a capital return dividend of S$0.15 per share per quarter for FY2025 that DBS announced on Monday.

That is over and above its earlier share buyback programme and a S$0.24 increase in ordinary DPS this year, RHB noted. After factoring in the capital return dividend, RHB’s estimate for its FY2025 DPS is S$3.06, from S$2.46.

Over the 10 months spanning April 17, 2024 to Feb 10, 2025, the Straits Times Index (STI) surged 23.2% to a record high of 3,921.30, despite gains being unevenly distributed among constituents, with three gainers for every two decliners. The STI also booked net institutional inflow of S$489 million over the 10-month period.

Singtel, UOB, SGX, OCBC, and ST Engineering booked the most net institutional inflow over the 10-month period, while Yangzijiang Shipbuilding saw the strongest gains among the STI constituents with a 65% price gain, followed by SGX gaining 53% and Hongkong Land gaining 45%.

US inflation was hotter-than-expected, odds of rate cut now down sharply

The US consumer price index rose 0.5% in January and 3% from a year earlier, according to the latest data released Wednesday from the Bureau of Labor Statistics. That was significantly stronger than economists had forecast and a notable acceleration from December’s monthly rise of 0.4% and 2.9% year-over-year measure.

Core inflation surged by 0.4% month over month in January, after rising just 0.2% in December. Compared to a year ago, core CPI measured 3.3% year over year, an acceleration from December’s 3.2% pace.

The producer price index increased by 0.4% in January, the Bureau of Labor Statistics said on Thursdayh. That was above economists’ 0.2% consensus estimate and compares with a revised increase of 0.5% in December. The PPI was 3.4% higher than a year earlier, versus a 3.5% rise in the year through December.

The odds of a rate cut at the upcoming March 18-19 meeting were just 2.5% after Wednesday’s inflation release, according to the CME FedWatch tool. And looking out over the next few months, the probability that the Fed would hold rates steady is higher all the way through until the September meeting.

“There is no getting away from the fact that this is a hot report,” writes James Knightley, chief international economist at ING. “With the sense that potential tariffs run [an] upside risk for inflation, the market is understandably of the view that the Federal Reserve is going to find it challenging to justify rate cuts in the near future’’.

Despite this, all three major indices gained for the week – the S&P 500 rose 1.5%, the tech-heavy Nasdaq Composite surged 2.6% and the Dow Jones Industrial Average added 0.5%.

Temasek-linked Cuscaden offers S$0.98 per unit to privatise Paragon REIT

Times Properties, a wholly owned subsidiary of Cuscaden Peak Investments, is looking to take Paragon Real Estate Investment Trust (REIT) private by way of a trust scheme of arrangement, for S$0.98 per unit.

The offeror is looking to buy all units in Paragon REIT held by unitholders other than Cuscaden Peak and its subsidiaries. The offer values the Reit at S$2.8 billion.

Cuscaden Peak Investments is wholly owned by Cuscaden Peak, which is in turn owned equally by Adenium, a wholly owned subsidiary of CLA Real Estate, and Mapletree Fortress, an indirect wholly owned subsidiary of Mapletree Investments. Both CLA and Mapletree are part of the Temasek stable.

In 2022, investment vehicle Cuscaden Peak acquired the then-listed Singapore Press Holdings (SPH) REIT, which was mainly a property business after spinning off its media assets. SPH was then renamed Cuscaden Peak Investments.

Cuscaden Peak acquired about a 61% stake in SPH REIT as part of a chain offer following the privatisation of SPH. SPH REIT was renamed Paragon REIT with effect from Jan 3, 2023.

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