Advance refunding
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Advance refunding
Due to the large savings it provides and the decreased risk of default, advance refunding is a financial strategy that has grown in popularity among investors. This tactic entails refinancing current debt by issuing new bonds at a lower interest rate. Municipalities and other governmental organisations use it to manage their debt and exploit advantageous market conditions.
What is advance refunding?
Advance refunding is a financial strategy involving issuing new bonds to pay off existing ones before they mature. This is done when interest rates are lower than the rate on the existing debt, allowing the issuer to save money on interest payments. The proceeds from the new bonds are used to pay off the existing bonds, and the savings generated by the lower interest rate can be used to fund capital projects or reduce overall debt service costs. Municipalities and other government entities commonly use advance refunding to manage their debt and exploit favourable market conditions.
Understanding advance refunding
Advance refunding uses the revenues from new bond issuance to pay off a debt from a previous issue. The only time this is feasible is after 90 days have passed. Usually, the interest rate on issuing the new bond is lower than that on the prior unpaid obligation. Advance refunding is typically used by municipalities to lower borrowing costs and take advantage of low-interest rates. An issuance of bonds in which new bonds sell at a lower price than existing bonds is known as advance refunding. The bond issuer places the money received from the sale of the more recent (refunding bond) issue in an escrow account as soon as the older (refunded bond) issue is called.
Advantages of advance refunding
The advantages of advance refunding are as follows:
- Advance refunding allows a borrower to take advantage of lower interest rates by refinancing existing debt before it matures.
- By refinancing at a lower interest rate, a borrower can reduce its debt service costs, resulting in significant savings over the life of the debt.
- By reducing debt service costs, a borrower’s credit rating may improve, making it easier and less expensive to access credit in the future.
- Advance refunding allows a borrower to take advantage of market conditions when they are favourable rather than waiting until debt matures.
- Refinancing existing debt at a lower interest rate reduces the risk of default, lowering the borrower’s debt service costs and improving its financial position.
Regulation of advance refunding
The regulation of advance refunding varies by country and jurisdiction. In the United States, the issuance of municipal bonds and advance refunding is regulated by the Securities and Exchange Commission (SEC) and the Municipal Securities Rulemaking Board (MSRB). The SEC regulates the sale of municipal securities and requires issuers to provide investors with accurate and timely information about the bonds.
The MSRB sets rules for municipal securities dealers, including disclosure requirements and fair dealing standards. In the United States, the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) limits the amount of advance refunding that can be done on tax-exempt bonds. TEFRA restricts the ability of issuers to refinance bonds more than once every 10 years. The regulation of advance refunding is intended to protect investors and ensure that issuers use the savings generated to benefit their communities.
Example of advance refunding
A municipality that has previously issued bonds at a higher interest rate could serve as an example of advance refunding. The municipality can issue new bonds at a lower rate to pay off the previous debts before they mature because interest rates are currently lower. The name of this procedure is advance refunding. The municipality can cut its overall debt and save money on interest payments.
An example would be the US$10 million in bonds a municipality issued at a 5% interest rate. The municipality can now issue new bonds at a cheaper interest rate to pay off the previous bonds before they mature because interest rates are already at 3%. The municipality can avoid paying US$200,000 in interest each year by doing this.
Frequently Asked Questions
Advance refunding works by issuing new bonds at a lower interest rate to pay off existing bonds before they mature. The proceeds from the new bonds are placed into an escrow account, which is used to pay the principal and interest on the existing bonds until they mature. Once the existing bonds are paid off, the issuer can use the savings generated by the lower interest rate on the new bonds to pay for capital projects or to reduce overall debt service costs.
Some of the limitations of advance refunding include restrictions on how often bonds can be refunded, the need to pay issuance costs for new bonds, and the potential for interest rates to rise after the refunding, reducing the savings achieved. Advance refunding can be more difficult to execute when market conditions are unfavourable or the issuer’s creditworthiness has deteriorated since the original bond issuance.
The benefits of advance refunding include taking advantage of lower interest rates, which can reduce debt service costs and improve an issuer’s credit rating. Advance refunding also allows issuers to refinance debt when market conditions are favourable rather than waiting for bonds to mature. This can result in significant savings over the life of the debt. Advance refunding can reduce the risk of default by lowering an issuer’s debt service costs and improving its financial position.
Advance refunding involves issuing new debt to pay off existing debt before it matures, while current refunding involves issuing new debt to pay off existing debt when it matures. Advance refunding is typically used when interest rates are lower than the rate on the existing debt. In contrast, current refunding is used when interest rates are the same or lower than the rate on the existing debt and the bonds are close to maturity.
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Keppel DC REIT Strengthens Japan Expansion with Major Tokyo Data Centre Acquisition
Brief Overview Keppel DC REIT (KDCREIT) has agreed to jointly acquire a 90% effective interest in two hyperscale data centres in Greater Tokyo for JPY190 billion (S$1,549 million). The acquisition is expected to be 2.6% accretive to FY25 pro-forma distribution per unit (DPU) and will significantly deepen the REIT's Japan presence. The properties offer contractual rent escalation of 2.8% per annum and are under-rented by at least 30%. Investment Positives The acquisition presents multiple compelling growth drivers for long-term income expansion. Tokyo Data Centre 4 and 5 are freehold colocation facilities that are 100% occupied by four investment-grade clients, providing strong tenant quality and full occupancy rates. The properties offer a balanced risk-return profile with a blended weighted average lease expiry (WALE) of 8.3 years, combining reversion opportunities with long-term income visibility. The deal provides substantial embedded rental upside potential, with in-place rents under-rented by at least 30% and contracted average annual rent escalation of approximately 2.8%. More than 5% of rents are due for renewal by 2029, creating near-term reversion opportunities. The acquisition was secured at a 2.1% discount to the properties' valuation of JPY194 billion, representing attractive pricing. Strategically, the acquisition strengthens KDCREIT's position in one of Asia Pacific's most attractive data centre markets. Japan's contribution to portfolio rental income will increase significantly from approximately 9% as at 30 June 2026 to approximately 23% post-acquisition. The properties are located in Inzai City, one of Japan's most established hyperscale data centre clusters. Japan's market fundamentals support long-term growth prospects, underpinned by rising cloud adoption, AI-related deployments and digital transformation. Structural supply constraints, including power constraints, construction bottlenecks and land scarcity, should further enhance the market's growth potential. Investment Negatives The acquisition will increase aggregate leverage from 34% to 38%, representing a meaningful increase in the REIT's debt levels. The financing structure requires a substantial private placement to raise at least S$600 million, which will increase the unit base by approximately 12%, creating dilution for existing unitholders. The acquisition is scheduled to complete in 4Q26, meaning investors will need to wait for the benefits to materialise. Outlook The transaction combines immediate DPU accretion with multiple avenues for long-term income growth. Japan's favourable demand-supply dynamics should support continued growth, while the portfolio's asset under management is expected to grow to S$7.6 billion from S$6.3 billion. Recommendation & Target Price Phillip Securities Research maintains an ACCUMULATE recommendation with an unchanged target price of S$2.46. The analysts have yet to update their financials for the acquisition and private placement but remain positive on the deal's strategic value and accretive nature. Frequently Asked Questions [market_journal_faq] This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. 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. 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Geo Energy Resources Ltd – De-risked, ready to rumble
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The infrastructure's excess capacity creates additional revenue streams through toll and jetty fees supported by multi-year contracts. Production capabilities are set to enhance further as 2x70MT trucks arrive in September to replace the current 40MT fleet, supporting operational ramp-up. Looking ahead to FY27, analysts forecast production to surge 40% to 17 million tonnes whilst cash costs are expected to decline. The coal price environment also provides tailwinds, with prices up 53% year-on-year in 3Q26. Gross margins improved to 18.9% from 15.6% previously, supported by a 16.5% rise in average selling prices to US$529 per tonne. Investment Negatives The primary concern centres on the significant production decline in 1H26, where output fell 42% year-on-year to 3.8 million tonnes. This reduction stems from deliberate delays in TRA production ramp-up as the company transitions coal transportation from the existing Atlas road to its proprietary MBJ infrastructure. Additionally, TBR pit boundary expansion due to high wall pushback contributed to operational disruptions, with TBR production dropping 51% to 2 million tonnes. Cash costs increased 12.5% to US$40.6 per tonne, attributed to higher fuel prices, which pressured operational margins during the transition period. Outlook With the integrated infrastructure now operational, Geo's earnings visibility has been substantially de-risked. FY27 represents a milestone year with forecast production growth of 40% and declining cash costs, supported by infrastructure fee income from multi-year contracts and favourable coal price trends. Recommendation & Target Price Phillip Securities Research maintains a BUY recommendation with an unchanged DCF target price of S$0.75. The FY26 earnings forecast remains unchanged following the results. Frequently Asked Questions [market_journal_faq] This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. 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. 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NVIDIA Corporation – Strong Growth Driven by AI Infrastructure Demand
Brief Overview NVIDIA delivered 2Q27 results within expectations, with data centre revenue surging 117% year-on-year to US$89bn. The company guided FY28e revenue growth of about 70% year-on-year, though this is constrained by supply factors. Phillip Securities Research maintains a BUY rating with a raised target price of US$300. Investment Positives Hyperscale revenue showed significant acceleration in 2Q27, growing 102% year-on-year to US$48.7bn, compared to 93% growth in 1Q27. This acceleration was driven by hyperscalers increasing capital expenditure spending on GPU capacity, particularly for Blackwell Ultra. The top four hyperscalers - Google, Amazon, Microsoft, and Meta - increased their 2026e capital expenditure guidance by 5% this quarter to US$748bn, representing 97% year-on-year growth. NVIDIA expects their total capital expenditure to reach US$1.3tn in 2027e, reflecting 74% year-on-year growth. Amazon is deploying an additional 2 million of NVIDIA's GPUs until 2Q29e, whilst Microsoft announced plans to modernise its infrastructure with NVIDIA's Vera Rubin, which commenced shipments in August. The AI Clouds, Industrial & Enterprise (ACIE) segment recorded the fastest growth, with 2Q27 revenue spiking 138% year-on-year, overtaking hyperscale growth rates. This growth was supported by significant contract wins, including AI startups Reflection and Cohere signing multi-year contracts worth US$1bn or more with Nebius for AI workloads running on NVIDIA-powered infrastructure. Sovereign AI revenue more than tripled year-on-year, with substantial partnerships announced. NVIDIA partnered with Noetra, Japan's national AI company, to deploy 13,750 Vera CPUs and 27,500 Rubin GPUs delivering 140MW of AI compute for physical AI. South Korea committed to invest at least US$3bn for NVIDIA and Hyundai to deploy 50,000 Blackwell GPUs for AI model training and deployment. 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Frequently Asked Questions [market_journal_faq] This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. 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. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Salesforce Inc – The End of the SaaSpocalypse
Brief Overview Salesforce delivered mixed second quarter results with revenue meeting expectations but profit after tax and minority interest (PATMI) lagging due to higher research and development and sales & marketing spending. The company is positioning itself as the enterprise AI data layer through Headless and Claudeforce initiatives, extending CRM data into platforms like Claude, Slack and Teams. Management anticipates second half growth driven by premium AI products and usage-based monetisation, with significant growth potential as only 5% of users currently use higher-tier editions. Investment Positives The core Sales and Service Cloud divisions continue to demonstrate resilience as revenue anchors. Revenue increased 11% year-on-year to US$11.3 billion, maintaining consistent growth momentum from the previous quarter's 10% increase. The sales division faces minimal AI disruption since monetisation primarily occurs through upselling existing Salesforce offerings. Customer retention metrics remain exceptionally strong with attrition near record lows, whilst Sales, Service and Slack all delivered seat growth. Existing customers are actively upgrading through premium AI-enabled bundles, particularly Agentforce 1 Edition for premium Sales and Service Cloud. Agentforce application bookings have also more than doubled quarter-on-quarter, whilst premium Slack upgrades tripled following Slackbot's March 2026 launch. The agentic AI momentum continues to accelerate significantly. Agentforce annual recurring revenue exceeded US$1.5 billion, representing approximately 3.3% of FY27 revenue guidance midpoint and marking growth of more than 240% year-on-year. The consumption-based pricing model encourages rapid customer adoption, with Agentforce bookings doubling quarter-on-quarter. Notably, 50% of new bookings came from existing customers purchasing additional credits after initial deployment. Growth products including Agentforce, Headless and Data 360 collectively reached nearly US$3.9 billion in annual recurring revenue. Salesforce benefits from owning crucial customer data, workflows, permissions and governance layers that support data quality, whilst customers increasingly prefer AI embedded within existing software rather than managing complex internal AI systems. Investment Negatives The report identifies higher research and development, marketing and sales expenses as factors contributing to lower-than-expected earnings performance. These increased operational costs resulted in PATMI lagging behind revenue performance during the quarter. Outlook Management expects second half growth to be driven by premium AI products including Agentforce, Slackbot and Claudeforce, alongside usage-based monetisation and customer upgrades. The growth runway remains substantial given that only 5% of users currently utilise higher-tier editions. Recommendation & Target Price Phillip Securities Research maintains a NEUTRAL recommendation whilst raising the DCF target price to US$243 from the previous US$166. The analysts increased their terminal growth rate from 3% to 5.5%, reflecting improved market confidence in Salesforce's core CRM business, the Anthropic Claudeforce partnership, and stronger software sector sentiment as enterprise AI monetisation gains traction. Frequently Asked Questions [market_journal_faq] This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. 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. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Thomson Medical Group Ltd Shows Turnaround Progress Despite Volume Challenges
Brief Overview Thomson Medical Group delivered FY26 results largely in line with expectations, with revenue and EBITDA meeting 97% and 98% of forecasts respectively. The company experienced earnings recovery across all three operating countries - Singapore, Malaysia, and Vietnam - with EBITDA expanding 21% year-on-year in the second half to S$43.6mn. Growing revenue intensity has driven earnings improvements, though currency headwinds affected results. Investment Positives The primary positive driver for Thomson Medical has been the significant growth in average bill size across all three operating markets. Singapore recorded the largest increase in average bill size at 421.8%, driven by a combination of increased case complexity and a higher product mix as procedures were shifted to outpatient day surgery. Malaysia also benefited from improved revenue intensity, with average bill size growing 111.9%. This improvement was supported by oncology and gastroenterology cases, alongside the return of some insurance payers. The Malaysian operations saw EBITDA expand 34.6% as the business rebuilds its insurance relationships. Vietnam demonstrated strong operational momentum with inpatient volumes increasing 46.5% and average bill size growing 2.1%. The Vietnamese operations benefited from higher volumes including robotic surgery procedures and increased capacity, resulting in EBITDA growth of 52.4%. The group's strategic pivot away from Singapore's historical reliance on obstetrics and gynaecology cases is showing results, with the addition of more orthopaedics, ENT and general surgery procedures improving the revenue mix. Investment Negatives The key challenge facing Thomson Medical is declining volumes across the group. Total inpatient volumes fell 7.8% year-on-year to 39,000 patients in FY26. Singapore experienced a 9% decline in inpatient volumes, primarily due to lower delivery cases in obstetrics. Malaysia recorded an 11.5% drop in inpatient volumes, which the analyst attributes to the absence of insurance payers. Finance costs continue to weigh on earnings despite a 16.5% reduction due to lower interest rates. The company also recorded a S$15.2mn goodwill impairment due to a higher discount rate assumption. Outlook The analyst views Thomson Medical as successfully executing its operational turnaround strategy. The company is effectively diversifying Singapore away from obstetrics cases whilst Malaysia rebuilds its insurance partnerships with foreign patients and oncology leading increased revenue intensity. However, finance costs remain a burden on earnings performance. Recommendation & Target Price Phillip Securities Research has upgraded Thomson Medical to BUY due to recent share price performance. The target price remains unchanged at S$0.071 using a sum-of-the-parts valuation approach. The analyst maintained FY27e earnings forecasts while rolling over valuations to FY27e earnings. Frequently Asked Questions [market_journal_faq] This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. 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. 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iX Biopharma Ltd – Galloping Closer with Partners
Brief Overview iX Biopharma's FY26 results fell below expectations, with revenue and net loss at 72% and 170% of forecast respectively. The US$40.9mn Wafermine Programme from the US Department of Defense has commenced, with the company recognising S$1.2mn as development services. The analyst expects revenue to triple in FY27e, driven by compounding pharmacy operations, Wafermine sales, and development services. Investment Positives The primary investment driver centres on the Wafermine development programme, which is just beginning to gain momentum. Since receiving the Department of Defense award in February, approximately four months of development work have been completed. The analyst expects revenue to climb significantly as more development work for Emergency Use Authorisation (EUA) and Phase 3 trials is undertaken. The company has secured substantial funding through the US$40.9mn Wafermine Programme, which will finance both Phase 3 and EUA development activities. This programme has already started generating revenue, with S$1.2mn recognised as development services in the current period. Revenue diversification is expected to strengthen the business model, with three key growth drivers anticipated for FY27e: the compounding pharmacy operations with partner Orion Speciality, Wafermine sales, and continued development services revenue. The company also benefited from currency movements, with other gains of S$2.1mn resulting from the strengthening of the Australian dollar against the Singapore dollar. Investment Negatives Operating expenses were significantly higher than anticipated, presenting a key challenge for the company. The main contributors were a S$2.08mn share performance plan (non-cash) and S$1mn in one-off professional fees related to securing the Department of Defense funding contract. However, excluding these items, operating expenses remained largely stable. General and administrative expenses increased by 58%, primarily due to the S$2mn performance share plan. Research and development costs also rose by 52% to S$2.5mn. The transfer of equipment from Australia to the United States resulted in lower medicinal cannabis sales, with approximately S$3mn in lost revenue. Cannabis sales specifically declined by 46% to S$3.5mn, contributing to the overall revenue shortfall. Outlook The analyst has incorporated higher upfront costs from US wholesale compounding pharmacy operations and increased performance shares into updated forecasts. Key milestones ahead include the Wafermine EUA submission in 4Q26, EUA approval in 1Q27, EUA production in 2Q27, and Phase 3 trials approval in 2Q27. The US production line is expected to commence in 1Q27, with three additional lines starting in 2Q27. Recommendation & Target Price Phillip Securities Research maintains a BUY recommendation with an unchanged DCF SOTP target price of S$1.00. 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CapitaLand Investment Limited – Event-Driven Fees Supported a Strong 1H26
Brief Overview CapitaLand Investment Limited (CLI) reported 1H26 revenue 2% lower year-on-year while PATMI rose 14% YoY, in line with expectations and forming 44% and 52% of Phillip Securities Research's FY26e forecasts respectively. PATMI growth was driven by stronger event-driven fees from Listed and Private Funds Management, as well as lower interest costs of 7% YoY. In addition, S$7-9 billion of embedded value has been identified in non-core investments across legacy funds, balance sheet assets, and non-strategic holdings, providing scope for capital recycling and value realisation. Funds under management grew to S$128 billion from S$125 billion in FY25, supported by S$3.7 billion raised in 1H26. Investment Positives Significant fee revenue growth in Listed and Private Funds Management represents the key positive. Listed Funds Management revenue grew 45% YoY, driven by a sharp increase in event-driven fees from S$4 million in 1H25 to S$66 million in 1H26, supported by over S$10 billion in transactions. Private Funds Management fee revenue grew 59% YoY, driven by the Wingate acquisition and higher operating activity across the platform. Operating PATMI of S$293 million rose 13% YoY, while revenue from the Fund and REIT Management Business (FRB) grew 20% YoY, partially offsetting a 24% decline in Real Estate Investment Business (REIB) revenue due to the deconsolidation of Synergy and divestments. Investment Negatives Net gearing edged up from 0.41x to 0.45x on a quarter-on-quarter basis, leaving S$6 billion of debt headroom before reaching CLI's 0.9x internal threshold. Nevertheless, the cost of debt continued to decline, falling by 0.1 percentage point QoQ to 3.5%, down from 3.9% in FY25. The cost of debt is expected to remain at current levels in FY26e. Outlook CLI remains focused on scaling its fund management business through high-conviction themes such as lodging, logistics, self-storage, private credit, and data centres, particularly in resilient markets such as Singapore, to attract institutional capital and drive fee income growth. It has identified S$7-9 billion of embedded value in non-core legacy funds and balance sheet assets for potential recycling, with around two-thirds located in China and 30-40% in private funds. While CLI intends to divest non-core China investments, it remains committed to growing its China fund management franchise, as evidenced by the CNY3.15 billion China Commercial Private REIT listing on 11 August and a second C-REIT listing targeted for 2H26. The analyst expects fund management revenue to continue growing in FY26, although transaction-related activity may moderate from the strong levels recorded in 1H26. Recommendation & Target Price Phillip Securities Research maintains a BUY recommendation with an unchanged sum-of-the-parts target price of S$3.69. There are no changes to forecasts. The analyst believes CLI's ability to monetise its China assets at reasonable valuations rather than distressed prices, and redeploy the proceeds into core growth opportunities, could unlock embedded value and provide a catalyst for a re-rating of the stock. Frequently Asked Questions [market_journal_faq] This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. 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. 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City Developments Limited: Strong 1H26 Results with Strategic Review Catalyst
Brief Overview City Developments Limited (CDL) reported robust 1H26 results, with revenue and PATMI growing 61% and 231% year-on-year respectively, ahead of expectations and forming 67% and 70% of Phillip Securities Research's FY26e forecasts. Growth was driven by the property development segment, where revenue and pre-tax profit surged 166% and 122% respectively on the full recognition of the fully sold Lumina Grand EC, alongside contributions from well-sold projects. Hotel operations turned around from a pre-tax loss of S$84.4 million in 1H25 to a pre-tax profit of S$42 million. The 1H26 interim dividend doubled year-on-year to 6 cents per share. Investment Positives Property development delivered strong growth, with a robust launch pipeline ahead. In 1H26, the Group and its joint-venture associates sold 352 units worth S$892 million, anchored by the launch of the ultra-luxury Newport Residences on Anson Road, which is 83% sold to date. Other projects, including The Orie, The Myst, Zyon Grand, and Norwood Grand, also sold well, with more than 90% sold to date. CDL acquired two prime Government Land Sales (GLS) sites at Tanjong Rhu Road and Peck Hay Road in 1H26, bringing its launch pipeline to around 2,200 units across five projects. Hotel operations recovered significantly, supported by a 4.9% year-on-year increase in global RevPAR, contributions from the acquisition of Holiday Inn London – Kensington High Street, and net exchange gains of S$38 million in 1H26 versus a S$63 million loss in 1H25. The strategic review, expected by end-September, should provide greater clarity on future strategic direction, capital allocation, and implementation. Re-rating potential exists from an accelerated pace of asset recycling and deleveraging, as well as expanding its fund management business to grow recurring income. Investment Negatives Net gearing increased from 71% in FY25 to 75%, mainly due to payments for the Tanjong Rhu and Peck Hay Road GLS sites. The strategic review should provide greater clarity on the roadmap to reduce net gearing towards the medium-term target of 60%, with further divestments likely. The cost of borrowing declined from 3.7% in FY25 to 3.4% in 1H26. Outlook Management indicated the strategic review is substantially complete, with only final refinements remaining. Potential divestment targets include underperforming legacy UK development sites and commercial properties in China, where market conditions remain challenging. Singapore remains a key source of resilience, with office and retail occupancy at 96.9% and 97.7% respectively. Residential sales momentum should remain strong, supported by the upcoming October 2026 launch of Lucerne Grand, located next to Lakeside MRT station, well positioned to benefit from the future development of the Jurong Lake District. Recommendation & Target Price Phillip Securities Research maintains a BUY recommendation with an unchanged RNAV target price of S$11.32, representing a 25% discount to their RNAV of S$15.09. FY26e forecasts are unchanged despite the strong 1H26 earnings beat, as 1H26 benefited from the full recognition of Lumina Grand. Frequently Asked Questions [market_journal_faq] This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. 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. 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