Trending Sector
Singapore aviation/aerospace
4 reasons to look at aviation and aerospace stocks
- #1: SIA’s latest December operating statistics of 1) robust load factors and 2) continued recovery in passenger traffic paint a positive outlook for aviation sector in 2024
- IATA expects total passenger demand in APAC to return to pre-COVID levels this year
- China’s aviation regulator also sees international flights reaching 80% of pre-COVID levels this year
- #2: Continued recovery in the global travel/aviation industry should underpin robust maintainenance workload for ST Engineering (BUY, TP S$4.50) and SIA Engineering (BUY, S$2.80)
- #3: Barring further escalations, stable oil prices at US$75-80/bbl for 2024F bode well for SIA’s (HOLD, S$6.80) profitability
- #4: There may be scope for higher airfreight demand due to diversions from the ongoing Red Sea tensions, benefitting cargo providers/handlers
Residential Property
A stable year ahead for transactions despite the December slump
Source: URA, DBS Bank
- New private home sales fell 20.6% yoy / 82.8% mom in Dec-23, reaching a 15-year low
- Heightened macroeconomic uncertainties, higher interest rates, increase in ABSD for foreigners, fewer property launches, in addition to a seasonal lull in December could be some reasons for the decline in property transactions.
- Our analyst’s view: Jan’24 should see a pick-up on the back of a robust launch pipeline but transactions this year should remain flattish on a y-o-y basis with a downside bias if the economic outlook worsens. Property prices should remain stable and could tick up marginally between 0-3%.
- We have a HOLD call on both Propnex and APAC Realty given the muted environment.
- Prefer Propnex over APAC Realty for its leadership position and larger sales network. Propnex is expected to have higher net margins of 6.3% vs APAC Realty’s 2.4% for FY24F. Both counters are currently trading at forward FY24 dividend yields of c.7-8%
Singapore Retail REITs
Paragon REIT gives a miss on ROFR asset Seletar Mall?
- News reports disclose that Allgreen properties is in exclusive due diligence to buy Seletar Mall
- Rumoured acquisition price of S$520m implies a deal cap rate of c.3.9% – 4.3% on our estimates, supporting our thesis that retail valuations are resilient
- Paragon REIT can debt fund the asset in full but at the expense of an increase in gearing to c.39%; preference to keep balance sheet flexible for now
- Recent tight retail transactions in the market at c.4% cap (below valuer cap of 4.5%) shines a favourable light on NEX mall deal if executed by FCT at an estimated c.4.8% cap rate
Stocks to Watch
Singapore Airlines
Operating statistics for December 2023
- Robust load factors across all route regions underpinned by year-end peak travel season, with the Group’s passenger load factor (PLF) at 89.4% (-0.3 ppt y-o-y, Dec-22: 89.7%)
- Passenger traffic grew 15.8% y-o-y while passenger capacity grew 16.1%
- Cargo carriage grew 4.3% y-o-y on the back of stronger e-commerce demand, but recorded lower load factor (52.6%, -1.7% ppt y-o-y) given higher belly capacity
- We currently have a HOLD recommendation with TP S$6.80