Variable annuity
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Variable annuity
Variable annuities are an appealing alternative for retirement planning because they combine financial growth potential with insurance protection. They are, however, sophisticated financial instruments that must be carefully considered in terms of costs, investment risks, and long-term commitment.
What is variable annuity?
An annuity is a type of financial product often offered by insurance firms. It entails making monthly payments to the annuity provider in exchange for future income. A variable annuity is a contract allowing investors to invest in sub-accounts comparable to mutual funds.
The value of an annuity is influenced by several factors, including the annuity contract’s terms and conditions, the payment amount, the duration of the annuity period, and the interest rates in effect at the time.
A variable annuity’s value might change depending on a successful outcome of the underlying investments kept in these sub-accounts. In this article, we will look at the characteristics and benefits of variable annuities and how they may help with long-term financial security.
Understanding variable annuity
Variable annuities allow consumers to invest their money in various investment alternatives, called sub-accounts or investment portfolios. The value of a variable annuity might change depending on how well the underlying assets perform. These annuities are of several kinds, the most prevalent being deferred and instant annuities.
- Deferred annuities
For retirement planning, deferred annuities are popular. They are intended to generate a consistent income source at a later point, usually around retirement. You contribute premiums over time to a deferred annuity, and the cumulative value increases tax-free. Income payments often begin at a future date specified by the annuitant, such as at a particular age or after a given number of years.
- Immediate annuities
As the name implies, immediate annuities begin providing income immediately away. With instant assistance, you pay a lump amount to the insurance provider and directly get recurring income payments. This can be advantageous for people who wish to quickly turn a large payment, such as an inheritance or retirement asset, into a guaranteed income stream.
Due to the withdrawal restrictions, variable annuities should be considered long-term investments. During the accumulation period, they typically allow one withdrawal each year. However, if you withdraw within the contract’s surrender period, which can last up to 10 years, you will usually be required to pay a surrender fee.3 Withdrawals before the age of 59 will result in a 10% tax penalty, as with most retirement account alternatives
Working of variable annuity
Variable annuities are often divided into two separate phases
- Accumulation phase
During this phase, you make purchase payments that can be invested in various ways. For example, you may allocate 40% of your purchase payments to a bond fund, 40% to a stock fund in the US, and 20% to an international stock fund. The money you’ve set aside for each mutual fund investment choice will grow or shrink over time, depending on how well the fund performs.
Furthermore, variable annuities sometimes allow you to direct a part of your purchase payments to a fixed account. Unlike a mutual fund, a fixed account pays a fixed interest rate. The insurance company may periodically change this interest rate, although it generally gives a guaranteed minimum (e.g., 3% per year).
You pick how your assets will be invested among sub-accounts, considering the level of diversity and aggressiveness you like. You can put a portion of your funds in a fixed account that gives a guaranteed minimum rate of return with some variable annuities.
You determine and manage how your assets will be distributed across sub-accounts, considering your preferred level of diversification and aggressiveness. With certain variable annuities, you can invest a part of your funds in a fixed account that provides a guaranteed minimum rate of return.
- Payout phase
You can opt to receive your purchase payments plus investment income and profits (if any) as a lump-sum payment at the start of the payout phase, or you can choose to receive them in regular intervals (usually monthly).
If you select to receive payments in a stream, you may have several options for how long the payments will run. Most annuity contracts allow you to pick whether your annuity payments will run for a specified term (such as 20 years) or an infinite duration (such as your lifespan, the entire lifespan of you and your spouse, or the lifespan of another beneficiary).
During the payout period, your annuity contract may provide you with the choice of receiving set payments or payments that fluctuate depending on the success of the investment in mutual funds alternatives.
The amount of each periodic payment will be determined in part by the period you choose for receiving payments. You should be aware that certain annuities do not enable you to remove funds from your account after you begin receiving monthly annuity payments. Furthermore, some annuity contracts are designed as immediate annuities, which means there is no accumulation period, and you will start receiving annuity payments immediately after purchasing the annuity.
Pros of variable annuity
- Probable inflation hedge
If your portfolio does well in the market, you may see a significant boost in your dividends. This will allow you to keep up with inflation better.
- Initial investment protection
Ideally, the annuity firm would provide you with the rights to your invested funds even if your portfolio performs poorly and you do not make any interest.
- Death benefit
The annuity company will compensate your nominee or beneficiary if you die before receiving payments from your variable annuity plan.
- Lifetime payouts
With such plans, you can receive income for the rest of your life, even if your principal investment is exhausted. You may, however, be required to pay.
Cons of variable annuity
- No assurance of a return
Variable annuities, unlike fixed annuities, do not promise that you will make profits or have fixed interest on your investment. If your portfolio performs poorly, the value of your annuity will be affected.
- Complexity
Variable annuities are frequently challenging to comprehend. Many investors need help acquiring the concept of its specific requirements. Other forms of annuities are more straightforward.
- Surrender fee
If you remove the entire amount or a portion of the money from your annuity before the contract allows, you must pay a withdrawal or surrender fee.
Example of variable annuity
Assume a person wishes to invest US$10,000 in a variable annuity through an insurance firm. In this situation, the firm will present the investor with plans/strategies for investing the client’s money. The investor must choose the plan to determine the value based on the fund’s risk tolerance. As it is a variable annuity plan, the value of the investment may fluctuate daily. Some plans may allocate 70% of their money to stock and 30% to debt, while others may allocate 50% to equity, 30% to debt, and 20% to mutual funds.
Frequently Asked Questions
The four types of annuities are immediate annuity, deferred annuity, fixed annuity, and variable annuity.
A fixed annuity ensures payment of a specific sum for the duration of the contract. It cannot fall (or rise). The returns on the mutual funds in which a variable annuity is invested fluctuate.
A fixed annuity ensures payment of a specific sum for the duration of the contract. It cannot fall (or rise). The returns on the mutual funds in which a variable annuity is invested fluctuate.
Variable annuities are classified as fixed, immediate, delayed, or variable. Each kind has its features and perks, making it simple to pick one that meets your investing objectives and budgetary requirements. With variable annuities, you can control your investments and watch your money increase over time.
A variable annuity is an investment instrument intended to offer an income stream throughout retirement. It is a contract between an individual and an insurance business in which the individual contributes to the annuity and selects from various investment possibilities where their payments are invested. Understanding a variable annuity entails understanding its investment and insurance characteristics, accumulation and payout phases, investment possibilities, market risk, tax treatment, fees, and optional features.
Related Terms
- Compound Yield
- Discretionary Accounts
- Industry Groups
- Growth Rate
- Foreign Direct Investment (FDI)
- Floating Dividend Rate
- Real Return
- Non-Diversifiable Risk
- Liability-Driven Investment (LDI)
- Guaranteed Investment Contract (GIC)
- Flash Crash
- Cost Basis
- Deferred Annuity
- Cash-on-Cash Return
- Bubble
- Compound Yield
- Discretionary Accounts
- Industry Groups
- Growth Rate
- Foreign Direct Investment (FDI)
- Floating Dividend Rate
- Real Return
- Non-Diversifiable Risk
- Liability-Driven Investment (LDI)
- Guaranteed Investment Contract (GIC)
- Flash Crash
- Cost Basis
- Deferred Annuity
- Cash-on-Cash Return
- Bubble
- Asset Play
- Accrued Market Discount
- Inflation Hedge
- Incremental Yield
- Holding Period Return
- Hedge Effectiveness
- Fallen Angel
- EBITDA Margin
- Dollar Rolls
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- Allotment
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- Impersonators
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- Volatile Market
- Trustee
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- Proxy Voting
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- Capital Gains Distribution
- Investment Insights
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- Portfolio manager
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- Nominal Return
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- Issuer Risk
- Fundamental Analysis
- Account Equity
- Withdrawal
- Realised Profit/Loss
- Unrealised Profit/Loss
- Negotiable Certificates of Deposit
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- Shareholder Yield
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- Tracking Error
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Most Popular Terms
Other Terms
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Tariffs To Turmoil: A Recap Of Market Shocks In 2026
Timeline Of Major Market Events In 2026 The first five months of 2026 served as a reminder that markets are shaped not only by earnings and economic data, but also by sudden geopolitical and policy developments. Tariff threats, military conflict in the Middle East, oil price spikes, central bank decisions, and US–China diplomacy all played a role in driving sharp movements across global equities. Here is a quick recap of the timeline of major events from Jan to May 2026. Let’s examine their impact on key markets, such as the US, Europe, and see how global risk sentiment evolved through this volatile and highly event-driven period. 18 Jan 2026 — Trump’s Tariff Threat Over Greenland Dispute Summary President Trump threatened new tariffs on European countries that oppose his proposal to acquire Greenland. The tariffs include an additional 10% import tariff and an escalation to 25% in Jun if no agreement is reached. Market Impact S&P 500: -2.06% Nasdaq: -2.39% (Amazon -2.9%, Tesla & Nvidia -3%+) Dow Jones: -1.8% Source: Morningstar Europe (Investors can access selected European markets on POEMS.) STOXX 600: -1.2% (2-month low) CAC 40: -1.78% DAX 40: -1.33% Source: The Guardian Sector Impact Luxury: -3% Automobile: -2.2% Technology: -2.9% 28 Feb 2026 — US–Israel And Iran War (Effects Extended To Mar) Summary Strikes by the US and Israel on Iran disrupted traffic through the Strait of Hormuz, causing a surge in global oil prices. This severely impacted Asian markets due to their high dependence on Middle Eastern energy. Market Impact Source: JP Morgan Japan Japan was among the economies most exposed to the conflict, with over 90% of its crude oil imports transiting the Strait of Hormuz. Sustained prices above $100 a barrel compounded the pressure on import-reliant industries. Nikkei 225: -6.3% Japan Airlines (JAL): -6%, with continued downward pressure as the conflict dragged into late Mar South Korea South Korea experienced significant market stress, with heavy exposure across shipping, aviation, and technology sectors. On 4 Mar, the KRX triggered Level 1 circuit breakers across the KOSPI and KOSDAQ markets, suspending trading for 20 minutes. KOSPI: -12% Key Sectors & Companies: Shipping & Logistics Pan Ocean, HMM and KSS Line: -16-17% Aviation & Technology Samsung Electronics: -11.7% SK Hynix: -9.6% Hyundai Motor: -15.8% Korean Air: -7.9% Europe Gains were led by chemical giants, automotive heavyweights, and airline and travel stocks. DAX 40: -8% Global equities fell sharply in March, particularly outside the US Source: Janus Henderson 18 Mar 2026 — Oil Price Spike and Inflation Fears Summary A strike on Iran's Pars gas field pushed oil prices sharply higher and renewed fears of Middle East escalation. As energy costs surged, investors grew increasingly concerned about stagflation. The Fed held interest rates steady at 3.5%–3.75%, but markets expected fewer rate cuts ahead. Market Impact Dow Jones: -1.63% S&P 500: -1.36% Nasdaq: -1.46% Europe STOXX 600: -0.7% 8 Apr 2026 — US–Iran Two-Week Ceasefire Summary The ceasefire agreement between the US and Iran temporarily suspended the intense 2026 Iran War and reopened the Strait of Hormuz, reducing geopolitical risk premiums and triggering a major relief rally across global asset markets. Market Impact S&P 500: +2.5% Dow & Nasdaq: +2.7% Asia South Korea was the biggest winner of the ceasefire announcement, driven by strong gains in chipmakers, construction and tech stocks. Japan's Nikkei also surged as risk sentiment improved across the region. KOSPI: +6.87% KOSDAQ: +5.12% Nikkei 225: +5.39% Explore South Korean stocks on POEMS now! Europe Europe saw a moderate recovery, with the travel and industrial sectors recording significant gains, while energy equities fell amid lower commodity prices. STOXX 600: +3.7% DAX 40: +4.7% CAC 40: +4.5% 15 May 2026 — US–China Summit Summary A meeting between the US and China aimed at managing economic friction, trade tariffs, and technology export policies. Investors viewed the summit as a stabilisation exercise rather than a resolution of underlying tensions, tempering the market reaction. Market Impact S&P 500: +0.8% Nasdaq Composite: +0.9% Dow Jones crossed 50,000 for the first time since the Iran war, led by AI-driven gains in Nvidia and Cisco China Shanghai Composite -1.5% CSI 300 -1.7% Investor Takeaways From 2026’s Market Shocks From tariff threats to oil shocks and diplomatic breakthroughs, the first five months of 2026 reminded investors that markets rarely move in a straight line. Each major event triggered a shift in sentiment, forcing investors to quickly reassess risks across regions, sectors, and asset classes. Volatility can also create opportunities and perspective. The sharp sell-offs showed the cost of uncertainty, while the relief rallies showed how quickly confidence can return when risks begin to fade. For investors, the challenge is not to predict every headline, but to build a portfolio that can withstand uncertainty and still participate when opportunities emerge. In an environment where geopolitics and policy decisions can move markets overnight, staying informed is no longer optional; it is part of investing well. Is your portfolio positioned for what comes next? All the markets covered in this journal — from the US and South Korea to Japan and Europe — are available to trade directly on the POEMS Mobile 3 App. Speak with our trading representatives today to review your positioning and explore opportunities across global markets. Country Exchange DST (Singapore Time) Non-DST (Singapore Time) United States New York Stock Exchange 09:30pm – 04:00am 10:30pm – 05:00am South Korea Korea Exchange 08:00am – 02:30pm 08:00am – 02:30pm Japan Tokyo Stock Exchange 08:00am – 10:30am 11:30am – 02:30pm 08:00am – 10:30am 11:30am – 02:30pm United Kingdom London Stock Exchange 03:00pm – 11:30pm 04:00pm – 12:30pm Germany Deutsche Börse Xetra 03:00pm – 11:30pm 04:00pm – 12:30pm Germany Euronext Paris 03:00pm – 11:30pm 04:00pm – 12:30pm Source: POEMS. Last Updated: 20 May 2026 Markets will be available for trading from Monday to Friday. You may refer to the table for Daylight Saving Time (DST) and Non-Daylight-Saving Time (Non-DST) trading hours. For more information, you may visit the POEMSwebsite or contact our experienced trading representatives for assistance. Pricing information for the relevant markets is available here. Open an Account Now! Appendix/Sources [1]https://www.bbc.com/news/articles/cy4qjwk9n2no [2]https://www.morningstar.com/markets/global-stocks-fall-trump-escalates-tariff-threats-against-europe [3]Wall Street sees worst day since October after Trump tariff threats | Stock markets | The Guardian [4]https://www.theguardian.com/business/2026/jan/20/stock-markets-trump-greenland-tariff-ftse-100-gold [5]https://www.theguardian.com/business/live/2026/jan/19/global-stock-markets-trump-tariff-threats-rachel-reeves-city-business-live-news [6]https://www.reuters.com/markets/europe/european-stocks-slide-trumps-greenland-tariff-threat-rattles-investors-2026-01-19/ [7]https://privatebank.jpmorgan.com/apac/en/insights/markets-and-investing/asf/how-does-the-middle-east-conflict-affect-asia [8]https://finance.yahoo.com/news/japans-nikkei-225-plunges-6-004025047.html [9]https://www.aljazeera.com/economy/2026/3/3/asias-stock-markets-plunge-amid-us-israeli-conflict-with-iran [10]https://finance.yahoo.com/news/south-korea-stock-market-meltdown-061927953.html [11]https://www.koreatimes.co.kr/economy/20260304/krx-activates-circuit-breaker-on-kospi-kosdaq-halting-trade-for-20-minutes [12]https://www.reuters.com/world/asia-pacific/korean-stocks-dive-won-hits-17-year-low-iran-conflict-2026-03-04/ [13]http://eadaily.com/en/news/2026/03/09/due-to-the-war-with-iran-germany-is-falling-into-the-abyss-dax-lost-about-150-billion-euros [14]https://www.reuters.com/business/european-shares-extend-gains-oil-retreats-fed-decision-focus-2026-03-18/ [15]https://www.reuters.com/markets/us/why-oil-spooked-markets-may-be-wrong-about-fed-2026-03-18/ [16]https://www.cnbc.com/2026/03/17/stock-market-today-live-updates.html [17]https://koreajoongangdaily.joins.com/news/2026-04-08/business/finance/Kospi-soars-nearly-7-as-won-hits-onemonth-high-on-ceasefire-optimism/2564249 [18]https://evrimagaci.org/gpt/samsung-and-sk-hynix-surge-on-ceasefire-hopes-537115?srsltid=AfmBOooaq6Q6ng0RBn2qKKEFE5AJBYlRZYVWdvhKNMivzq4Y1weKIj2K [19]https://www.cnbc.com/2026/04/08/asia-markets-today-trump-iran-war-kospi-nikkei-225-oil-hang-seng-index.html [20]https://www.morningstar.com/news/dow-jones/202604078794/asian-energy-stocks-fall-sharply-as-trump-agrees-to-cease-fire [21]https://www.reuters.com/markets/europe/european-shares-climb-middle-east-ceasefire-sparks-relief-rally-2026-04-08/ [22]https://economictimes.indiatimes.com/markets/us-stocks/news/global-markets-australian-shares-fall-as-rba-rate-hike-hits-financials-miners/articleshow/130820185.cms?from=mdr [23]https://www.mufgresearch.com/fx/asia-fx-talk-trump-xi-summit-broadly-constructive-on-the-1st-day-15-may-2026/ 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. 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KOSPI Vs KOSDAQ: Which South Korean Market Is Right For You?
This is the second part of our South Korean Market Series — New to South Korea? Start with our South Korean Stock Market Guide. Two Markets, One Decision If you've decided that South Korean stocks deserve a place in your portfolio, your next question should be: which Korean stock exchange should I trade on? South Korea has two main stock markets — the KOSPI and the KOSDAQ — and understanding the difference between them can meaningfully shape your investment strategy. Here's the honest answer up front: most international investors will find themselves drawn to the KOSPI for core positions, while the KOSDAQ offers higher-risk, higher-reward opportunities for those comfortable with more volatility. But the full picture is more nuanced — and knowing it gives you an edge. The Basics: Two Boards, One Exchange Both the KOSPI and KOSDAQ are operated by the Korea Exchange (KRX). They share the same trading infrastructure, settlement rules, and regulatory framework. The key differences come down to the types of companies listed, the risk profiles of those companies, and the type of returns each board has historically delivered. A Deeper Comparison What Trades On Each Board? KOSPI: The Household Names The KOSPI is where South Korea's most globally recognisable companies trade. Samsung Electronics and SK Hynix alone make up more than a quarter of the index's total market capitalisation. If you've ever used a Samsung phone, driven a Hyundai, or ordered a product packaged in LG plastics, you've interacted with KOSPI-listed companies. KOSDAQ: The Growth Stories The KOSDAQ is home to a different kind of company — younger, faster-moving, and often operating in sectors where South Korea punches well above its weight globally: biotechnology, online gaming, K-pop entertainment, and software. Which One Should You Trade? The right choice depends on your investment style, risk appetite, and what you're trying to achieve. Here's a simple way to think about it: Practical Tip: Many experienced investors in South Korean equities use the KOSPI for their core holdings and allocate a smaller portion to select KOSDAQ names where they have specific sector conviction — for example, a biotech theme or a particular gaming company. Remember, you don’t have to trade only on one of them. A Few Things To Know Before You Start Trading Daily Price Limits Apply To Both Boards South Korea's KRX applies a ±30% daily price movement limit to all listed stocks. This is a circuit breaker designed to prevent extreme intraday volatility. This means that any particular stock listed on the exchange cannot rise or fall more than 30% in a single trading session — a protection that's particularly relevant on the KOSDAQ, where individual names can move dramatically on news. Liquidity Differs Significantly KOSPI's large-cap stocks trade with high daily volumes, making it easy to enter and exit positions at predictable prices. On the KOSDAQ, mid and small-cap names can have much thinner order books. Always check average daily volume before sizing a KOSDAQ position — especially if you plan to trade in meaningful size. Caution: Some KOSDAQ-listed biotech companies experience extreme price swings around clinical trial announcements. These can be significant opportunities — but also significant risks. Position sizing matters more here than on the KOSPI. Trading Hours Are The Same For Both Both boards trade Monday to Friday, 9:00 AM – 3:30 PM KST (8:00 AM – 2:30 PM SGT). The convenient time zone overlap with Southeast Asia makes both boards accessible during normal working hours — no late nights required. The Bottom Line The KOSPI and the KOSDAQ are complementary, not competing. The KOSPI gives you the stability and scale of South Korea's industrial and technology giants; the KOSDAQ gives you access to the next generation of South Korean innovation. Understanding the distinction — and matching each to the right part of your portfolio — is one of the first things experienced South Korea traders get right. Ready to explore both boards? Our platform gives you direct access to KOSPI and KOSDAQ-listed stocks with competitive FX rates and straightforward account setup. Access The KOSPI And KOSDAQ In One Place Trade South Korean stocks directly — large-cap blue chips and high-growth opportunities, all on one platform. Trade Now Open an Account Now! Explore The Cash Plus Account For enquiries, please contact talktoglobalmarkets@phillip.com.sg 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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Strong Revenue Growth Driven by Strategic Acquisitions Centurion Corporation Limited (CCL), a leading provider of purpose-built worker accommodation (PBWA) and purpose-built student accommodation (PBSA) across multiple markets, has delivered robust first-quarter results for FY2026, with revenue surging 30% year-on-year to S$89.4 million. The company operates accommodation facilities across Singapore, Malaysia, the United Kingdom, and Australia, serving both workers and students with quality housing solutions. Strategic Entry into Australian Key Worker Market CCL has made a significant strategic move by entering the Australian key worker accommodation sector through two acquisitions in April 2026. The company acquired 321 beds in Karratha and 125 beds in South Hedland, both located in the Pilbara region, which produces approximately 96% of Australia's iron ore exports. These key worker accommodations are expected to contribute approximately S$6.5 million in FY2026 revenue, representing 2% of FY2025 revenue, assuming acquisitions complete from July 2026. The Positives: Acquisition-Led Growth Strategy Asset acquisitions continue to drive substantial growth across CCL's portfolio. Malaysia PBWA revenue increased 30% year-on-year to S$6.2 million, primarily driven by the acquisition of the Harum Megah portfolio with 7,000 beds in September 2025, expanding Malaysia capacity by 24%. Singapore and Australia revenue also experienced significant growth of 29% and 107% year-on-year respectively. The Singapore growth was supported by Centurion Accommodation REIT's acquisition of the remaining 55% stake in the 8,000-bed Westlite Mandai, whilst Australia benefited from the newly completed 732-bed Sydney PBSA, EPIISOD Macquarie Park, which increased Australia’s capacity by 82%. High occupancy rates remain a key strength, with Singapore PBWA maintaining healthy occupancy at 95% in 1Q26, despite a slight dip from 98% due to new bed ramp-up. UK PBSA occupancy remained strong at 98%, supported by continued rising demand from international students. The Negatives: Malaysian Market Challenges The primary concern lies in Malaysia, where PBWA occupancy declined to 73% in 1Q26 from 80% in the previous year. This decrease reflects the government's advancement of policies to curb foreign labour dependency, resulting in approximately 10% reduction in the foreign workforce. However, longer-term prospects remain supported by the enforcement of Act 446, which mandates regulated accommodation for all workers. Enhanced Financial Outlook Phillip Securities Research maintains a BUY recommendation with a raised target price of S$1.85, up from the previous S$1.81. The analysts have increased FY2026 revenue and adjusted PATMI forecasts by 6% and 8% respectively, driven by higher expected contributions from the management contract for EPIISOD Macquarie Park and the Australian key worker accommodation acquisitions. Management service fees from CAREIT contributed S$7 million to 1Q26 revenue, compared to just S$0.2 million in 1Q25, with expectations for CAREIT management fees to contribute approximately S$16 million to FY2026 PATMI, representing 15% of FY2025 adjusted PATMI. 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. 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NetLink NBN Trust Maintains Steady Cash Flow Despite Rising Costs, Target Price Raised to S$0.96
Company Overview NetLink NBN Trust operates as Singapore's dominant fibre network infrastructure provider, managing the nation's residential and non-residential broadband connections through its regulated asset base (RAB) model. The trust generates revenue primarily from residential fibre connections, non-residential services, and co-location facilities. Financial Performance and Outlook NetLink NBN Trust delivered mixed FY26 results, with revenue meeting expectations whilst EBITDA fell slightly short at 96% of forecasts. The trust achieved revenue of S$206.3 million, representing a 2.1% increase year-on-year. However, EBITDA declined 4.9% to S$139.5 million, reflecting margin pressures from rising operational costs and higher non-RAB revenue contributions. Distribution per unit (DPU) showed resilience, with the final 2H26 DPU improving 1.1% year-on-year to 2.71 cents, bringing the full-year FY26 DPU to 5.42 cents, also up 1.1%. This performance was supported by stable operating cash flows of S$258 million, which adequately covered the S$211 million in dividend distributions. Key Positive Factors NetLink's operational stability remains its core strength. Operating cash flow maintained consistency at S$258 million in FY26, matching the previous year's performance despite EBITDA pressures. This stability was enhanced by a significant decline in cash taxes paid, whilst cash available for distribution reached S$211 million, supplemented by additional borrowings of S$135 million. The residential fibre connection segment showed signs of recovery in the second half, adding 3,700 connections after experiencing a major contraction of 9,700 connections in the first half. This improvement reflects operators' completion of inactive connection removals as services upgrade from 1GB to 10GB speeds. Key Challenges The trust faces mounting pressure from broad-based fixed cost increases. Staff costs surged 31% year-on-year in 2H26, primarily due to the inability to capitalise project-related activities. Operations and maintenance expenses rose 13%, attributed to the new Seletar office, whilst other operating expenses increased 7% due to higher property taxes and IT costs. Investment Recommendation Phillip Securities Research maintains a NEUTRAL recommendation whilst raising the target price to S$0.96 from the previous S$0.93, reflecting updated valuations. The trust's distribution yield of 5.4% remains attractive, supported by stable cash flows. However, FY27 expectations are tempered by anticipated rising fixed operating costs and finance expenses. 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. 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Company Overview Sea Ltd. operates as a leading digital entertainment, e-commerce, and digital financial services company across Southeast Asia and beyond. The company's primary business segments include Shopee (e-commerce platform), Garena (digital entertainment), and SeaMoney (digital financial services including Monee lending). Strong Performance Across All Business Segments Sea Ltd. delivered robust first quarter 2026 results with revenue growing 47% year-on-year, demonstrating the company's continued expansion momentum. This growth was underpinned by strong performance across all three core business divisions, with Shopee revenue increasing 44% year-on-year, Monee's loan book expanding 41% year-on-year, and Garena bookings rising 20% year-on-year. The company's aggressive investment strategy in Shopee proved effective, with gross merchandise value growing 30% year-on-year and gross orders increasing 29% year-on-year. Sales and marketing expenses rose sharply by 52% year-on-year as management ramped up investments to strengthen market position and user acquisition. This strategic investment approach contributed to Shopee's ecosystem deepening, with ShopeeVIP subscribers growing 40% quarter-on-quarter and live-streaming orders increasing 50% year-on-year. Financial Services and Gaming Excellence SeaMoney's Monee division demonstrated exceptional growth with loan principal outstanding reaching US$9.9 billion, representing 71% year-on-year growth. The platform successfully expanded into more affluent borrowers whilst maintaining credit quality, with the 90-day non-performing loan ratio remaining stable at 1.1%. This performance compares favourably to traditional banks and standalone fintech lenders, highlighting Monee's competitive advantage through its rich e-commerce ecosystem data for superior underwriting and risk assessment. Garena delivered its strongest quarterly performance since FY21, with revenue growing 41% year-on-year. The gaming division benefited from continued Free Fire strength and record contributions from Arena of Valor, which achieved record quarterly bookings in its tenth operational year. Management expects 2026 to be a record year for the franchise, indicating sustained momentum beyond the current quarter. Investment Recommendation and Outlook Phillip Securities Research maintains its BUY recommendation with an unchanged target price of US$170.00. The research house views the increased investment spending as strategically beneficial for long-term competitive positioning, supporting user acquisition, merchant retention, and ecosystem engagement. Despite slightly underperforming profit expectations due to higher growth investments, the company's revenue performance met expectations, with first quarter results representing 24% of full-year revenue estimates. 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. 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SIA Engineering Co. Ltd Upgraded to BUY with S$4.06 Target Price Amid Strong Associates Performance
Company Overview SIA Engineering Co. Ltd is a leading aviation maintenance, repair and overhaul (MRO) services provider operating across engine and component maintenance, as well as airframe and line maintenance segments. The company serves the Southeast Asian aviation market through its extensive network of facilities and strategic partnerships. Strong Financial Performance Drives Rating Upgrade Phillip Securities Research has upgraded SIA Engineering Co. Ltd to BUY from ACCUMULATE, setting a target price of S$4.06, down from the previous S$4.14 due to share price weakness. The research house rolled forward financials and reduced the price-to-earnings multiple from 26x to 25x to account for heightened sector-wide risks from the US-Iran conflict. The company delivered robust results for 2H26/FY26, with profit after tax and minority interests (PATMI) rising 20.9%/21.0% year-on-year to S$85.6 million/S$168.9 million, representing 47.8%/94.4% of Phillip Securities' FY26 estimates. This strong performance was primarily driven by a 22.5% surge in associates and joint venture income during FY26. Key Positives Supporting Growth Trajectory The standout performance came from associates and joint venture earnings, which rose 22.5% year-on-year to S$145.3 million. The engine and component segment was the primary driver of this growth, increasing 23.1% to S$139.2 million, supported by higher engine repair deliveries, 20% higher engine inductions, and doubled test facility capacity. The airframe and line maintenance operations also contributed positively, generating S$6.1 million (+10.9%) supported by stronger heavy check volumes and a 3.3% increase in flights handled at Changi Airport. Operational Challenges and Gestation Losses Despite the strong overall performance, gestation losses in subsidiaries persist as a headwind. These losses widened significantly to S$16.1 million in FY26 from S$2.0 million in FY25, weighing on the airframe and line maintenance segment. Base Maintenance Malaysia's Subang heavy check facility commenced operations in November 2025, with its second hangar not expected to be operational until 2H27. Additionally, TIA Engineering's Cambodia line maintenance operations began in September 2025, with operations expected to remain below full capacity. Future Growth Drivers Looking ahead, Phillip Securities Research identifies several key growth catalysts: SAESL engine capacity is set to increase 33% to 400 engines per annum by 2028, new Pratt & Whitney GTF engine-related coating capabilities in 2027 to capture elevated shop visit volumes, and expansion of landing gear and airframe maintenance capacity across Southeast Asia. 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. 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Thai Beverage Achieves Record Margins Amid Mixed Performance, Upgraded to BUY with S$0.53 Target
Company Overview Thai Beverage PLC is a leading beverage company operating across spirits, beer, and non-alcoholic beverages segments, with spirits contributing 73% of net profits. The company maintains a significant market position in Thailand's alcoholic beverage sector. Record-Breaking Gross Margins Drive Performance Thai Beverage delivered results within expectations for the first half of 2026, with revenue and profit after tax and minority interests representing 50% and 59% of full-year forecasts respectively. The standout achievement was the company's gross margins, which expanded by 1.7 percentage points to reach a record 32.3% in 1H26. This margin expansion was primarily driven by substantially lower material costs, particularly malt and molasses. Beer operations benefited significantly from a 30% drop in malt prices, with material costs declining from 15.4% of sales to just 9.5%. The beer segment also implemented price increases at Sabeco, contributing to a 3.3 percentage point rise in beer gross margins. Strong Underlying Earnings Growth Despite facing headwinds, underlying profit after tax and minority interests grew 8.5% year-on-year to THB16 billion. Beer earnings demonstrated remarkable resilience with 41% growth, even as volumes contracted 0.6% year-on-year. Margins in the beer segment expanded by 2.4 percentage points to 27.6%, benefiting from the massive 6 percentage point decline in material costs. The spirits division, which forms the backbone of profitability, achieved 5.6% earnings growth supported by a modest 1% rise in margins due to lower material and operating costs. Challenges in Non-Alcoholic Beverages The positive performance was partially offset by difficulties in the non-alcoholic beverage segment, which experienced earnings decline. The division faced an almost 3% year-on-year volume drop to 1,618 million litres, compounded by start-up losses at F&N AgriValley, foreign exchange losses, and reduced cross-border trade due to geopolitical developments. Outlook and Recommendation Upgrade Phillip Securities Research upgraded its recommendation from ACCUMULATE to BUY, maintaining the target price of S$0.53 based on 12x FY26e price-to-earnings ratio. The research house expects lower raw material costs to persist until year-end due to purchases made before the recent Middle East conflict. Additionally, the upcoming World Cup is anticipated to provide a volume boost in the second half of 2026, despite ongoing sluggish consumer spending conditions. 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. 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Company Overview United Hampshire US REIT (UHREIT) operates a defensive retail property portfolio focused on grocery and necessity retail properties, alongside self-storage facilities in the United States. The REIT's strategy centres on essential retail segments that demonstrate resilience during economic cycles, providing stable income streams through long-term leases with established tenants. Strong First Quarter Performance Drives Growth UHREIT delivered solid first quarter 2026 results, with distributable income reaching US$6.9 million, representing a 10% year-on-year increase and meeting analyst expectations. This performance contributed 24% of the full-year forecast for FY26. Net property income demonstrated even stronger growth at 12.7% year-on-year, driven by several key factors, including the commencement of new leases, rental escalations and contributions from recent strategic acquisitions. The growth was bolstered by two significant property additions: Dover Marketplace, acquired in August 2025, and Wallingford Fair Shopping Centre, purchased in January 2026. Whilst net property income growth outpaced distributable income growth, this difference was due to higher finance costs associated with additional borrowings required to fund these acquisitions. Operational Excellence and Portfolio Resilience The REIT's operational performance remained robust, with 164,000 square feet of leases secured during the first quarter at positive rental reversion, demonstrating the quality and desirability of the portfolio. Grocery and necessity properties maintained high occupancy levels at 97.7% quarter-on-quarter, whilst self-storage properties showed improvement, with occupancy rising 55 basis points to 89.2%. Key Strengths Supporting Outlook UHREIT's portfolio benefits from several defensive characteristics that underpin its stability. The grocery and necessity segment maintains high occupancy at 97.7%, supported by a weighted average lease expiry of 8 years and an impressive 90% tenant retention rate. The REIT faces minimal leasing risk in the near term, with only 2% of grocery and necessity leases expiring in FY26 and 5.2% in FY27, providing strong income visibility and sustainable growth prospects. Financial metrics remain attractive, with the cost of debt continuing to decline. The all-in cost of debt improved by10 basis points quarter-on-quarter to 4.91% in first quarter 2026, with expectations of a further reduction to approximately 4.6%. The REIT maintains a healthy capital structure, with 70.2% of debt on fixed rates, aggregate leverage at 41.1% and an interest coverage ratio of 2.4 times. Importantly, there are no refinancing requirements until 2028. Investment Recommendation Phillip Securities Research maintains a BUY rating with an unchanged dividend discount model-based target price of US$0.69. The REIT currently offers an attractive FY26 dividend yield of 8.6% and trades at a price-to-net asset value of 0.74x, presenting compelling value for income-focused investors. 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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