Thematic funds
Table of Contents
Thematic funds
Thematic funds choose industries and sectors related to a certain idea or topic, as the word “thematic” implies. Investing in businesses that revolve around a certain theme that is developing due to economic trends could be profitable.
Managers of thematic funds aim to maximise these windows of opportunity. And as it is an equity fund, it is best suited for risk-taking investors.
What is a thematic fund?
Thematic mutual funds are a type of investment fund that invests in a specific theme or sector. For example, a fund may focus on technology, healthcare, or environmentally friendly companies.
Thematic funds feature a top-down investing philosophy, in contrast to the bottom-up stock-choosing method used by many diversified equities funds.
Types of thematic funds
Prominent categories of thematic mutual funds include a few subjects that have acquired increasing popularity. These are some of these themes:
- PSU funds
A fund manager that invests in government-run company stock.
- Manufacturing theme funds
Stocks of businesses involved in the creation or manufacture of items are included in the portfolio of the manufacturing theme fund.
- Energy funds
Fund managers purchase stocks of businesses involved in the renewable resource industries as part of their energy portfolios.
- ESG theme funds
Shares of businesses assessed based on their environmental, social, and corporate governance performance are included in the portfolio of ESG theme funds.
- MNC funds
These are funds which invest in securities of publicly traded multinational firms.
- Consumption funds
These funds invest in industries focused on industries related to consumer spending, such as automotive, durables, telecommunications, and consumer goods industries.
How to invest in thematic funds?
Investment specialists that specialise in a certain subject or trend handle thematic funds. These managers research businesses before choosing those they think would profit from the theme and offer room for expansion.
Thematic funds are available through several channels, including mutual funds, exchange-traded funds (ETFs), and individual equities. The fund manager chooses which businesses to invest in and when to acquire or trade those investments, as well as manages the assets within the theme fund.
Understanding the investment strategy of thematic funds
Thematic funds can be a good way to invest in a sector that is growing rapidly or that you believe will have long-term potential. However, it is important to remember that these funds can be more volatile and riskier than traditional mutual funds.
Fund providers frequently introduce thematic fund schemes when they recognise a chance to invest and expand around a clearly defined subject.
Thematic funds may be successful if investors choose an appropriate theme. So, to invest wisely, one needs to be well-versed in market and macroeconomic situations. Due to their inability to keep up with industry swings and economic cycles, these funds aren’t recommended for novice investors.
The extended period it takes for theme funds to produce returns also meets the demands of investors looking for long-term gains. Lastly, theme investing is appropriate for people with a strong appetite for risk because it is a component of equities mutual funds.
Risk of thematic funds
Equity funds, by nature, have a higher risk than other categories of mutual funds. However, there are additional risks associated with investing in themed funds. Thematic investment might carry greater risks than other mid-cap and large-cap funds. This is because the target industry might do incredibly well one year and poorly the next.
As a result, investing in a theme fund based on how it did the previous year might result in losses. You will also need to keep your investment for a longer period to offset the losses it experiences during economic downturns.
Frequently Asked Questions
Investing in a thematic mutual fund is a great way to gain exposure to a specific sector or theme you are interested in. These types of funds can provide diversification within your overall portfolio and can also help you to stay ahead of trends in the marketplace.
When considering a thematic mutual fund, it is important to research and choose a fund that aligns with your investment goals. You should also consider the fees associated with the fund, as well as the track record of the fund manager.
Thematic mutual funds are funds that invest in a particular sector or theme. For example, a fund might focus on healthcare or clean energy. Sectoral funds are similar but invest in a specific economic sector, such as healthcare or financials. Focused funds are even more detailed and invest in a particular company or industry.
The amount you should invest in a thematic fund depends on your investment goals and risk tolerance. If you’re investing for the long term and are comfortable with a higher level of risk, you should allocate a larger portion of your portfolio to a thematic fund. Conversely, if you’re investing for the short term or have a low tolerance for risk, you should limit your investment to a thematic fund.
Ultimately, deciding how much to invest in a thematic fund is up to you. Consider your financial goals and risk tolerance when making your decision.
Thematic funds are mutual funds that invest in a specific theme or sector. While they can be a more risky investment than a traditional mutual fund, they can also offer the potential for higher returns. When considering whether or not to invest in a thematic fund, it is important to do your research and understand the risks involved.
There are many benefits to investing in thematic funds.
- For one, these funds allow investors to target specific sectors or themes that they believe will outperform the broader market. This can minimize risk and maximize returns.
- Additionally, these funds can provide diversification benefits, as they often hold various stocks within a given sector or theme. This can help to mitigate the effects of any one stock performing poorly.
- Finally, many thematic funds are managed by experienced and knowledgeable professionals who deeply understand the sector or theme in which they are investing. This can give investors peace of mind knowing that their investment is in good hands.
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CDL Hospitality Trusts: Lease-Based Cash Flows Support Improving Leverage Profile
Company Overview CDL Hospitality Trusts (CDLHT) is a Singapore-listed stapled trust comprising CDL Hospitality Real Estate Investment Trust (H-REIT) and CDL Hospitality Business Trust (HBT). The group owns a diversified portfolio of hospitality and living assets across 11 cities in 8 countries, including Singapore, the UK, Japan, Australia, New Zealand, Germany, Italy and the Maldives. As at end-FY2025, CDLHT’s portfolio comprised 22 operating assets with assets under management of ~S$3.5bn. The trust is sponsored by Millennium & Copthorne Hotels Limited, part of the Hong Leong Group controlled by Singaporean businessman Kwek Leng Beng. FY2025 Credit Performance Highlights CDLHT’s income profile is largely lease-based, with 81.5% of FY2025 NPI derived from leased assets, which supports earnings stability during periods of operational disruption. On a full-year basis, FY2025 performance remained soft, with reported NPI declining 4.1% YoY, reflecting AEI-related disruption at W Singapore and Grand Millennium Auckland that weighed on earnings for much of the year. Excluding assets undergoing AEI, FY2025 NPI was broadly stable at +0.3% YoY, as stronger contributions from the UK, Australia and Japan were largely offset by normalisation in more volatile markets such as the Maldives, as well as declines in smaller European assets. Importantly, performance improved into 2H25, with total NPI rising 3.5% YoY, and 2H25 NPI increasing 6.3% YoY when excluding AEI assets, pointing to a better earnings run-rate as refurbishment impacts eased. With major AEIs largely completed, management guides for earnings and cash-flow improvement from 2026, supported by asset re-launch effects, higher RevPAR potential and stabilising contributions from UK living assets. Leverage improved on a year-on-year basis, with gearing declining to 37.7% at end-FY2025 from 40.7% at end-FY2024, reflecting disciplined capital management. Interest coverage remained stable at 2.3x, despite AEI-related earnings disruption. Liquidity strengthened meaningfully, with cash and available facilities increasing to ~S$593.5mn from S$526.0mn, while a 95.7% unencumbered asset base continues to provide flexibility to manage refinancing needs and absorb near-term earnings volatility. CDLHT has refinanced all 2025 debt maturities, extending debt tenors and lowering borrowing costs. The weighted average debt maturity stands at around 2.6 years, with borrowings skewed toward 3–5-year facilities. A growing proportion of debt is structured as sustainability-linked loans, which are typically lower-cost and more readily extendable, reducing refinancing and liquidity risk. This has smoothed the maturity profile and supports more predictable interest cash outflows as earnings recover. Looking ahead, growth visibility is supported by the forward purchase of Moxy Singapore Clarke Quay, with TOP expected around end-2026, which does not require near-term capital outlay. Overseas assets provide additional medium-term support: Ibis Perth is seeing earnings normalisation following refurbishment, The Castings is expected to move beyond its initial gestation phase from 2026 and contribute to income ramp-up, while Benson Yard benefits from high committed occupancy under academic-year leases, providing a stable and predictable rental income stream. Credit View: We hold a positive view on CDL Hospitality Trusts’ credit profile. Credit quality is supported by a high proportion of contracted lease-based income, which provides cash-flow visibility and helped limit earnings volatility through the AEI-impacted FY2025. While full-year FY2025 performance remained soft, leverage improved year on year, and liquidity remains strong, with a largely unencumbered asset base supporting refinancing flexibility. Overview of CDL Hospitality Trusts’ Outstanding SGD Bonds Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
IOI Properties (IOIPG): Asset-Backed AAIS Credit
Company Overview IOI Properties Group Berhad (IOIPG) is a Malaysian property developer and investment group with a diversified footprint across Malaysia, Singapore, and China. Its businesses span property development, property investment, and hospitality & leisure, with key assets including IOI City Mall, IOI Central Boulevard Towers (Singapore), and multiple integrated townships across Malaysia. The group is majority owned by the Lee Shin Cheng family (~65.7), and is rated AAIS (MARC). FY25 Credit Performance Highlights IOIPG delivered stable topline performance in FY25. Revenue rose 4% YoY to RM3.06bn, supported by stronger contributions from Property Investment and Hospitality & Leisure, which offset a softer development cycle following the absence of land sales that had boosted FY24 results. Property Development remained the largest revenue contributor at 54% (RM1.65bn), followed by Property Investment at 31% (RM945mn) and Hospitality & Leisure at 15% (RM466mn), highlighting a gradually improving but still development-weighted revenue mix. Recurring income continued to strengthen. Property Investment revenue rose 46% YoY, driven by the full-year contribution from IOI Central Boulevard Towers, sustained high occupancy at IOI City Mall, and the acquisition of IOI Mall Damansara in December 2024. Segment operating profit increased in tandem to RM467mn, with margins remaining healthy at 49%, reinforcing the stability and cash-generative nature of the investment portfolio. Office contributions rose meaningfully as IOI Central Boulevard Towers ramped up, with commitment rates reaching 88% as at July 2025. The Hospitality & Leisure segment also showed a marked recovery. Segment revenue surged 70% YoY to RM450mn, while operating losses narrowed sharply to approximately RM5mn, from RM115mn in FY24, reflecting contributions from newly acquired and opened hotels as well as improved occupancy across refurbished assets. While the segment remains marginally loss-making, its drag on group earnings has reduced materially. IOIPG’s credit profile remains strongly asset-backed. Total assets increased by 2% YoY to RM46.9bn, supported by fair value gains on investment properties and selective asset acquisitions, which continue to underpin collateral quality and creditor recovery prospects. Total equity stood at RM24.5bn, providing a substantial capital buffer consistent with its AAIS rating. However, leverage remains elevated on a cash-earnings basis. Total borrowings increased modestly to RM19.6bn, largely to fund Singapore projects, while net gearing remained stable at 0.70x, reflecting an uplift in shareholders’ equity from property revaluations rather than balance-sheet deleveraging. In parallel, total debt/EBITDA rose to 10.6x in FY25 from 8.1x in FY24, highlighting higher leverage following the normalisation of EBITDA post-completion of IOI Central Boulevard Towers. Interest coverage softened as interest expense rose materially on the full-year funding impact of IOI Central, resulting in more moderate coverage metrics and reduced buffer against earnings volatility. Liquidity is adequate but requires ongoing discipline. Cash and cash equivalents increased to RM2.49bn at FY25, supported by operating cash inflows and a meaningful reduction in completed inventories to RM1.27bn, down 34% YoY, improving near-term cash conversion. Credit view: IOIPG’s AAIS credit profile is supported by strong tangible asset backing, a robust equity base, and a steadily improving recurring-income platform. However, the credit remains liquidity-sensitive, given elevated leverage and a still development-weighted cash-flow profile. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
StarHub: Stable Consumer Base, but Credit Story Now Hinges on Margin and FCF Repair
Company Overview StarHub Ltd is a Singapore telecom operator providing Mobile, Broadband, Pay TV, Enterprise ICT, and Cybersecurity services. The shareholder base is anchored by Temasek (via ST Telemedia / STT Communications, ~56%) and NTT Group (~10%), which supports franchise stability and access to strategic partnerships. 3Q25 Credit Performance Highlights StarHub’s consumer franchise remains the cash-flow anchor, with low churn supporting predictability despite ongoing pricing pressure. Mobile churn is 1.3%, and broadband churn is 1.0%, while subscriber additions (+50k QoQ to 2.187mn) help offset softer mobile ARPU (S$22). Broadband growth (+1.4% YoY) also points to steady upselling momentum, keeping the core subscription base a stabiliser for leverage and debt service. The quality of revenues is gradually improving as Enterprise and Cybersecurity continue to scale, offering higher-margin, recurring B2B cash flows that reduce reliance on consumer cyclicality. Cybersecurity grew +17.0% YoY and Managed Services +3.2% YoY, supported by its Modern Digital Infrastructure platform. A +5.7% YoY increase in the orderbook and deeper regional Enterprise integration (SG–MY) strengthen visibility, which is credit-positive given it diversifies the earnings engine beyond consumer ARPU dynamics. That said, the near-term credit narrative is increasingly about execution. EBITDA softened to S$105.9mn (–7.6% YoY) and service EBITDA margin compressed to 20.6%, reflecting weaker mobile/entertainment gross profit and higher operating costs. With DARE+ completed, management is now in the “harvest” phase, targeting ~S$60mn cost savings over FY26–FY28. Delivery will be key to rebuilding margins and restoring free cash flow. FCF remains tight: 3Q25 FCF was S$123.6mn, but 9M25 FCF turned negative (–S$48.2mn) once spectrum-related payments are included; even excluding spectrum, 9M FCF of S$139.8mn (–16.4% YoY) highlights pressure from elevated investment commitments and weaker operating cash generation. Looking ahead, the main watchpoints are (i) whether EBITDA and margins stabilise, further slippage would narrow headroom within the current leverage range, and (ii) whether cost-out execution translates into real FCF recovery, particularly as spectrum and investment commitments continue to compete for cash. The risk is less about near-term solvency and more about buffer erosion: without a clearer rebound in operating cash generation, deleveraging becomes harder, and the credit story stays capped. Credit view: StarHub’s credit profile remains stable on the back of a sticky subscription base and still-healthy interest coverage, but it is now more constrained by execution risk than balance-sheet stress. In our view, sustained margin repair, EBITDA stabilisation, and a credible improvement in free cash flow are the key requirements to preserve credit buffers and the path to any meaningful spread tightening will depend on demonstrating that these improvements are durable rather than one-off. Overview of StarHub Ltd’s Outstanding SGD Bonds Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
Shangri-La Hotel (SLHSP): High leverage mitigated liquidity and sponsor support
Company Overview Shangri-La Asia Ltd (SLHSP) is the Hong Kong–listed flagship of the Kuok Group, multinational conglomerate founded by Malaysian tycoon Robert Kuok. operating 90+ hotels and mixed-use properties under the Shangri-La, Kerry, and JEN brands. Earnings are concentrated in Mainland China and Hong Kong, with the remainder from Southeast Asia and other international markets. The group is unrated and majority-owned by the Kuok Group-related entity (63.1%) 1H25 Credit Performance Highlights Operating performance continued to recover in 1H25, albeit at a subdued pace. Revenue increased marginally by 0.7% YoY to approximately US$1.06bn, as stronger investment property contributions were largely offset by softer hotel demand in China and Singapore. EBITDA was broadly flat at US$252mn (23.8% margin), supported by a ~2% YoY improvement in RevPAR, led by Hong Kong. However, EBITDA remains below pre-pandemic levels, suggesting that the earnings recovery has plateaued and has yet to translate into material balance-sheet repair. As a result, leverage remains structurally elevated and coverage buffers thin. With earnings recovery constrained, gross debt remained high at around US$7.2bn in 1H25, translating into leverage of approximately 14× Debt/EBITDA, elevated for a hotel owner-operator. Interest coverage stood at a modest 2.3×, benefiting from a reduction in average funding costs to 3.98% from 4.45% in FY24. Nonetheless, coverage remains sensitive to earnings volatility, reinforcing the limited margin for operating underperformance. Cash flow generation remains insufficient to meaningfully reduce leverage. The pressure on the balance sheet is further reflected in cash flow metrics. Operating cash flow in 1H25 was US$59.9mn, broadly flat YoY, while free cash flow amounted to US$35.8mn. Operating cash flow continues to be largely absorbed by recurring capital expenditure required to sustain the existing asset base, limiting cash available for debt reduction. This funding reliance elevates the importance of asset quality and sponsor support. In this context, Shangri-La’s franchise strength and ownership of prime hotel assets provide meaningful downside protection. Brand equity underpins continued access to funding and offers optionality for capital recycling, while geographic diversification across Greater China and overseas markets helps mitigate concentration risk. Importantly, Kuok Group sponsorship remains a key credit anchor, supported by long-standing banking relationships, capital-market access and a demonstrated track record of balance-sheet support during periods of weak earnings. Strong liquidity mitigates near-term refinancing risk despite elevated leverage. Liquidity therefore becomes the primary mitigating factor. As of 1H25, SLHSP held US$2.67bn of cash and US$0.73bn of undrawn committed facilities, providing total available liquidity of around US$3.4bn. Importantly, the liquidity is assessed against refinancing needs rather than total debt. Debt maturities are well-staggered at roughly US$0.7–1.6bn per annum through 2029, with available liquidity comfortably covering more than 24 months of maturities, supporting low near-term refinancing risk.
OUE REIT: Prime Singapore Assets Support BBB- Profile
Company Overview OUE Real Estate Investment Trust (OUE REIT) is a S$5.8bn AUM Singapore-centric diversified REIT with exposure to office (48%), hospitality (36%), and retail (16%). Key assets include One Raffles Place, OUE Bayfront, OUE Downtown Office, Mandarin Gallery, Hilton Singapore Orchard, and Crowne Plaza Changi Airport. Major shareholders include Temasek (9.31%), OCBC (1.25%), and Prudential (0.75%). The REIT is rated BBB- (S&P). FY2025 Credit Performance Highlights Reported operating metrics declined in FY2025, with revenue falling 7.4% YoY to S$273.6mn and NPI declining 6.2% YoY to S$219.6mn. This was primarily due to the absence of contributions from Lippo Plaza Shanghai following its divestment in December 2024, rather than operating weakness. Excluding this asset, underlying performance remained stable, with like-for-like revenue and NPI increasing 0.1% YoY and 1.6% YoY, respectively, supported by steady Singapore office demand and stable hospitality operations. Portfolio quality continues to underpin cash-flow resilience. Core assets such as One Raffles Place, OUE Bayfront and OUE Downtown Office anchor the portfolio in prime CBD locations, while hospitality exposure is provided by Hilton Singapore Orchard and Crowne Plaza Changi Airport. Portfolio occupancy remained high at 95.4%, reflecting the defensive nature of centrally located Singapore assets and sustained tenant demand. The income mix is supportive, with the commercial segment contributing approximately 64% of total revenue, providing stable, contracted cash flows with positive rental reversions. Hospitality earnings are structurally de-risked through long-term master lease agreements incorporating minimum rent floors of S$67.5mn per annum, materially limiting downside volatility and enhancing cash-flow predictability for bondholders. The most meaningful credit improvement in FY2025 came through lower funding costs. Finance costs declined 17.6% YoY to S$87.8mn, reflecting a more favourable interest-rate environment and proactive balance-sheet optimisation. This translated into a 13.9% YoY increase in amount available for distribution to S$123.8mn, signalling stronger cash retained after interest and improved cash-flow conversion despite lower reported revenue. Balance-sheet metrics strengthened further following deleveraging. Aggregate leverage declined to 38.5% from 39.9% in FY2024, supported by debt repayment using divestment proceeds. Total debt stood at approximately S$2.17bn, while the weighted average cost of debt fell to 3.9% p.a. from 4.7% a year earlier. Fixed-rate exposure increased to 79.2%, reducing near-term rate sensitivity, and interest coverage improved to 2.4x, providing a reasonable buffer within the BBB- rating category. Liquidity risk remains well contained. Debt maturities are well staggered, with no more than 18.5% of total debt maturing in any single year, limiting refinancing pressure. Funding is diversified between bank borrowings (53.9%) and MTNs (46.1%), while balance-sheet flexibility is preserved by 83.0% unsecured debt and 87.0% unencumbered assets, supporting continued access to funding even under stressed market conditions. Credit view: We remain constructive on OUE REIT’s credit profile. The portfolio continues to generate resilient cash flows, while lower funding costs and disciplined capital management have materially improved debt sustainability. The leverage has improved to 38.5% and the improvement in interest coverage, high fixed-rate exposure and strong liquidity buffers mitigate downside risks. Overview of OUE’s Outstanding SGD Bonds Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
Fed pauses with mandates stabilizing Event The U.S. Federal Open Market Committee (FOMC) concluded its meeting on 27-28 January 2026, maintaining the federal funds rate at 3.50%–3.75% after delivering 75 bps of cumulative easing over the prior three meetings. The Committee framed its decision around a more balanced trade-off between stabilising labour-market conditions and inflation that remains above target, signalling a shift into a more patient phase of the easing cycle. Key points to note: Split vote reflects easing tensions between inflation and labour risks The FOMC voted 10–2 to keep rates unchanged, with Governors Stephen Miran and Christopher Waller dissenting in favour of an immediate 25 bps cut. Chair Powell characterised the decision as broadly supported, noting that the tension between inflation and unemployment has eased relative to earlier in the cycle, allowing the Committee to adopt a more balanced policy stance. Inflation eased from its peak while labour stabilize Powell reiterated that inflation has eased significantly from its mid-2022 highs but remains somewhat elevated relative to the Fed’s 2% target. He noted that recent inflation readings have been influenced by higher prices stemming from tariffs, while disinflation appears to be continuing in the services sector. At the same time, labour-market conditions are showing signs of stabilisation following a period of gradual softening, with the unemployment rate broadly unchanged. Taken together, this backdrop supports a patient, data-dependent approach to future policy decisions. Fed reaffirms focus on both sides of the dual mandate Powell reiterated that monetary policy remains guided by the Fed’s dual mandate of maximum employment and stable prices. He emphasised that decisions will continue to balance progress on inflation with developments in the labour market, reinforcing a two-sided risk-management approach rather than a singular focus on inflation. No forward guidance with a meeting-by-meeting approach reaffirmed The Fed made clear it has not taken any decisions regarding future rate moves. Powell pushed back against expectations of a pre-committed easing trajectory, reiterating that policy decisions will be made on a meeting-by-meeting basis, guided by incoming data, the evolving outlook, and the balance of risks. Outlook: We expect the Fed to keep policy rates unchanged in the near term, with the next rate cut in June, broadly in line with market pricing. Improving labour-market conditions and inflation that remains above the Fed’s 2% target give policymakers room to stay on hold for now, reinforcing a pause through the first half of the year. We think that rate cuts will only resume once inflation shows clearer progress beyond tariff-related effects or labour conditions begin to soften meaningfully. Chair Powell made clear that rate hikes are not the base case, with the bar for tightening set very high. Instead, the easing path is likely to be gradual and data-dependent, with tariff-driven goods inflation expected to peak and fade over the year. If the disinflation materialises without a re-tightening in the labour market, it would open the door for further cuts later in the year. Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
Perennial Holdings: Strengthening Healthcare Platform Supports Gradual Credit Improvement
Company Overview Perennial Holdings is an integrated real estate and healthcare company headquartered in Singapore, with operations spanning China, Singapore, Malaysia, and Ghana. China remains its core market, supported by healthcare and eldercare platforms concentrated in key cities such as Kunming, Chengdu, Guangzhou, and Xi’an. The group operates under a hybrid model that combines property ownership, development, and healthcare operations. Its shareholder base includes Kuok Khoon Hong (29%), Wilmar International (16%), Hopu Investments (14%), Perpetual Capital (11%), Ron Sim (13%), Bangkok Bank (9%), and Pua Seck Guan (8%). 1H2025 Performance Perennial’s operating momentum continues to strengthen as its healthcare and eldercare platforms gain scale. Portfolio occupancy has risen to 65% as of YTD 2025 (from 51% in 2022), while mature assets have reached a robust 86% occupancy, underscoring strong utilisation once stabilised. Earnings reflect this ramp-up, with adjusted EBITDA at S$223.6 million in FY2024 and S$13.5 million in 1H2025, marking a solid 65% YoY growth. Importantly, the business has shifted structurally toward recurring income, with over 55% of revenue now driven by healthcare operations. Further scalability is supported by a 4,500-bed brownfield pipeline across Guangzhou, Chengdu, Shanghai, and Hainan (launching 4Q2026–4Q2027) and the upcoming Kunming Medical City in 1Q2026, which will anchor recurring EBITDA growth over the medium term. Despite improving operations, the credit profile remains constrained by elevated leverage and tight interest coverage. Debt/Total Assets has risen to 0.41× (from 0.38×), while Net Debt/Equity has increased to 0.83× (from 0.71×), reflecting ongoing project investment and slower capital recycling. Though the adjusted ICR of ~1.0× better captures cash-servicing ability compared to the reported 0.15×, both measures highlight thin headroom amid funding- cost volatility. Refinancing execution has been constructive—with ~86% of unsecured facilities rolled over and all secured loans under renewal—but the schedule remains front-loaded, keeping liquidity dependent on timely renewals and selective asset monetisation. A diverse lending syndicate (DBS, UOB, OCBC, Maybank, BBL, SMBC, ICBC, BoC) helps mitigate concentration risk. Looking ahead, several milestones will be key to shaping Perennial’s credit trajectory. The ramp-up in occupancy and EBITDA following the launch of Kunming Medical City in 1Q2026 will be crucial in lifting the adjusted ICR toward a more sustainable level above 1.5×. Liquidity conditions also hinge on the timely completion of remaining unsecured renewals and the ability to secure longer tenors beyond the typical three-year cycle. In addition, refinancing spreads will need close monitoring, as Perennial’s thin coverage base leaves the credit profile sensitive to funding-cost volatility. Credit View: Perennial’s credit profile has shown gradual improvement, underpinned by better operating momentum and clearer visibility on recurring healthcare earnings. However, leverage remains high and ICR tight amid a front-loaded refinancing schedule. We stay cautiously constructive, recognising improving fundamentals but noting continued reliance on refinancing and capital recycling. Overview of Perennial Holdings’ Outstanding SGD Bonds Disclaimer These commentaries are intended for general circulation and do not have regard to the specific investment objectives, financial situation and particular needs of any person. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. You should seek advice from a financial adviser regarding the suitability of any investment product(s) mentioned herein, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to invest in such products. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of units in any fund and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries. Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.
Keppel REIT: Prime CBD Franchise and Leasing Momentum Support a Stable BBB Credit
Company Overview Keppel REIT is a Singapore-listed REIT with a S$9.5bn portfolio value of predominantly Grade-A office assets across Singapore (78%), Australia (18%), South Korea (3%), and Japan (1%). The portfolio is anchored by landmark Singapore CBD assets, including Marina Bay Financial Centre (MBFC), Ocean Financial Centre (OFC), and One Raffles Quay (ORQ). The REIT is sponsored by Keppel Corporation and is rated BBB (S&P). 3Q25 Credit Performance Highlights Operating performance remains resilient, supporting steady, recurring income and debt service capacity. 3Q25 NPI rose 8.6% YoY to S$161.3mn, driven by stronger contributions from 255 George Street and improved occupancy at 2 Blue Street in Australia. The uplift in recurring income improves cash-flow visibility and underpins Keppel REIT’s ability to service interest and manage upcoming maturities. Portfolio quality remains a core strength, with prime CBD exposure and sticky tenant demand supporting rents through the cycle. The S$9.5bn AUM is concentrated in Grade-A CBD offices, with portfolio valuations suggesting yields of ~3.15–3.55% for core Singapore assets. Tenant quality is solid, with the top 10 tenants contributing ~30% of rental income, and leasing metrics remain constructive, occupancy improved to 96.3% (3Q25), and WALE is 4.7 years (top 10 tenants 8.9 years). Leasing momentum is evident in ~12% positive rental reversions on new/renewed leases and a 74.9% retention rate, while new Singapore leases were signed at S$12.85 psf pm versus expiring S$11.35–S$12.15, pointing to embedded rental uplift in core CBD locations. The Top Ryde City acquisition (A$393.8mn; entry yield ~6.7%) adds modest diversification via suburban retail and ~1.5% DPU accretive, but it remains small (
