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UltraGreen.ai: BUY Maintained With Lower Target Price of US$0.73 — Segmenting to Defend

Published on Nov 4, 2026 15

Brief Overview UltraGreen.ai, a Singapore-listed healthcare company focused on indocyanine green (ICG) products and imaging solutions, reported a robust set of results for the third quarter and first nine months of the 2026 financial year. Third-quarter revenue, net of discontinued operations, rose 43.9 per cent year-on-year to US$44.6 million, while nine-month revenue climbed 35 per cent year-on-year to US$131.8 million, forming 25 per cent of Phillip Securities Research's full-year 2026 forecast. Growth was underpinned by both the US and rest-of-world (RoW) markets. In a notable strategic move, UltraGreen relaunched its lower-priced generic ICG — functioning as an authorised generic — in late September/early October to compete with Zydus. The company did not disclose its pricing, and withheld vial volumes and average selling prices (ASPs) by region, citing commercial sensitivity. US hospitals now have three categories of ICG to choose from: UltraGreen's branded IC-GREEN; generic copies of IC-GREEN, namely UltraGreen's own authorised generic and Zydus's generic; and separately approved competing brands, including Stryker's SPY AGENT GREEN and Sagent/Provepharm's ready-to-use Zyogreen. Investment Positives Strong Financial Performance Third-quarter and nine-month revenue grew 43.9 per cent and 35 per cent year-on-year to US$44.6 million and US$131.8 million, respectively. US revenue grew 35 per cent year-on-year to US$101.3 million, while RoW revenue grew 36 per cent year-on-year to US$30.5 million. We expect further vial uptake in Europe, Australia, and Switzerland to support continued RoW momentum. Expanding Regulatory Footprint UltraGreen's Verdye was approved in South Africa, a market with approximately 3.3 million relevant procedures per year, where UltraGreen is the first approved ICG provider. This expanded IC-GREEN/Verdye approvals to forty-two countries. Additionally, IC-GREEN received US FDA orphan drug designation for liver cancer imaging, which could carry seven years of US market exclusivity upon approval — a potentially significant competitive moat. Investment Challenges Sequential Decline in Rest-of-World Revenue RoW revenue fell 18 per cent quarter-on-quarter to US$9.4 million, from US$11.4 million in the second quarter, although it was still up 32 per cent year-on-year. Management attributed the decline to a large distributor order in June that artificially boosted second-quarter figures, as well as seasonally weaker demand in July. No deterioration was evident at the customer level. Outlook For UltraGreen, the launch of the authorised generic should materially reduce what Zydus earns from its exclusivity window. Hospitals may favour UltraGreen's generic over other entrants because the authorised generic is chemically similar to IC-GREEN. Outside the US, the medium-term opportunity rests on wider ICG use and on commercialising the camera-and-software platform beyond operating theatres to outpatient clinics. Management indicated camera bundles and leases tied to ICG supply, and software sold both standalone and as camera-integrated applications. However, we believe traction will be uncertain. Recommendation and Target Price Phillip Securities Research maintains its BUY recommendation on UltraGreen.ai with a lower discounted cash flow-based target price of US$0.72, down from US$1.81 previously. The revised assumptions include: UltraGreen's US market share (branded IC-GREEN plus its own authorised generic) falling from 83 per cent to approximately 50 per cent, reducing US vials sold by 40 per cent; US vials splitting evenly between branded IC-GREEN and its own generic; the blended US ASP (branded and generic) falling approximately 40 per cent from the 2025 ASP; and vial volume growth outside the US remaining unchanged at 15 per cent a year, as RoW growth is enabled by UltraGreen's low-cost imaging cameras, which generic-only competitors do not offer. As a result, FY26 and FY27 estimated PATMIs are reduced by 6 per cent and 58 per cent, respectively. UltraGreen.ai is currently trading at a FY27 estimated price-to-earnings ratio of 13.1 times. We view these assumptions as conservative because no expansion is assumed for the overall US ICG market, and the price and volume declines are benchmarked to a US Federal Trade Commission study of oral tablets and capsules, which typically attract more competitors and experience faster price erosion than sterile injectables such as ICG. Key factors to watch include progress on PerfusionWorks' US FDA approval and the RoW vial adoption. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Frequently Asked Questions [market_journal_faq] 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.

First REIT: Accumulate With a Lower Target Price of S$0.17 — Still Waiting for the Next Move

Published on Nov 4, 2026 12

Brief Overview First REIT reported third-quarter 2026 and nine-month 2026 distribution per unit (DPU) of 0.46 and 1.44 Singapore cents, respectively, representing declines of 11.5% and 12.7% year on year. The results came in slightly below Phillip Securities Research estimates, forming 23% and 73% of the full-year 2026 forecast. The decline was driven by the depreciation of the Indonesian rupiah (down 8% year on year over nine months) and the Japanese yen (down 9.8% year on year over nine months) against the Singapore dollar, combined with the impact of its Indonesian hospital divestments. Nine-month 2026 rental income and net property income declined by 9.5% year on year. Excluding the divestments, rental income would have declined by 6% year on year. The REIT completed the first tranche of its Indonesian hospital divestments on 24 September 2026. The potential divestment of the remaining six Indonesian hospitals to Siloam for approximately S$294.8 million under the existing put option remains under consideration. Phillip Securities Research maintains an Accumulate recommendation with a lower target price of S$0.17, reduced from S$0.23 previously, pending capital redeployment into replacement assets. The valuation is based on 0.8 times third-quarter 2026 price-to-net asset value (P/NAV), reflecting ongoing foreign exchange risks and uncertainty over the future portfolio composition. DPU forecasts have been lowered by 6% for FY26e and 38% for FY27e to reflect the first tranche of Indonesian divestments, while incorporating S$9.7 million in special dividends split evenly between the fourth quarter of 2026 and the first quarter of 2027. Including special dividends, the FY26e dividend yield is 10.2%, declining to 6.9% in FY27e following the divestments. The strategic review remains ongoing, and management has provided no updates on potential acquisitions. Investment Positives Resilient Income in Local Currency Terms Despite the headline decline in DPU, First REIT's underlying income remained resilient when measured in local currency terms. Nine-month 2026 revenue from the Indonesian properties increased by 2.8% year on year in local currency, while Singapore properties recorded a 2% increase year on year. Revenue from the Japanese properties remained stable over the same period. A further positive development was the extension of master lease agreements for two Singapore nursing homes. In August 2026, the master lease agreements for Precious Homes at Bukit Merah and Precious Homes at Bukit Panjang were extended to April 2032 and May 2033, respectively. Importantly, the 2% annual rental escalations embedded in these leases have been retained, providing income visibility and inflation protection over the extended lease terms. Investment Challenges Significant DPU Decline Expected Pending Capital Redeployment The most pressing challenge facing First REIT is the expected sharp decline in DPU following the divestment of its Indonesian properties. With the 11 divested Indonesian properties no longer contributing to earnings, Phillip Securities Research expects FY27e DPU to plunge to 1.24 Singapore cents, representing a decline of 33% year on year. This figure includes the second half of the S$9.7 million special distribution to be paid in the first quarter of 2027. Until the REIT successfully redeploys its capital into replacement assets, earnings will remain significantly diminished. Outlook The divestment proceeds have been used to fund debt repayment, resulting in a significant reduction in aggregate leverage from 42.1% to 27.5% in the third quarter of 2026. Leverage is expected to fall further to 15.6% following the redemption of its S$100 million 3.25% Guaranteed Bonds due in 2027. The all-in cost of debt improved by 10 basis points quarter on quarter to 3.9%, with 75.7% of debt fixed or hedged. However, looking ahead, we note that redeploying capital into replacement assets in developed markets may prove challenging amid rising interest rates. The pivot away from Indonesia is also likely to weigh on yields, given the difficulty of finding assets in developed markets that offer comparable returns to its former Indonesian portfolio. The strategic review remains ongoing, and management has provided no updates on potential acquisitions. Recommendation and Target Price Phillip Securities Research maintains an Accumulate recommendation on First REIT with a lower target price of S$0.17, reduced from S$0.23 previously. The target price is based on 0.8 times third-quarter 2026 P/NAV, reflecting ongoing foreign exchange risks and uncertainty over the future portfolio composition. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Frequently Asked Questions [market_journal_faq] 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.

Tesla Q3 2026 Results: Margin Recovery and SELL Rating Outlook

Published on Nov 4, 2026 29

Overview Tesla reported third-quarter 2026 results above expectations, with nine-month revenue and adjusted net profit after minority interests at 82% and 84% of full-year 2026 estimates. Adjusted net profit, excluding share-based compensation and fair value changes on bitcoin and SpaceX shares, fell 4% year-on-year to US$1.7 billion, as a 39% rise in operating expenses and a 73% fall in regulatory credits offset a 9% rise in gross profit. Revenue was flat year-on-year at US$28.0 billion. Deliveries fell 2% year-on-year to 487,000 units against a third-quarter 2025 base lifted by buying ahead of the US electric vehicle tax credit expiry, but beat consensus of 462,000. Active Full Self-Driving subscriptions rose 67% year-on-year to 1.74 million, while free cash flow fell 62% year-on-year to US$1.5 billion as capital expenditure more than doubled to US$4.7 billion. Investment Positives Margins Recover on Vehicle Mix, Energy and Services Gross margin rose 1.6 percentage points year-on-year to 19.6%. Auto gross margin excluding credits improved to 18.1% from 15.4% in the third quarter of 2025, driven by a higher Asia-Pacific delivery mix, as Model Y set delivery records in several markets including Australia, Japan and Taiwan. Energy gross margin rose to 33.1% from 31.4%, supported by tariff refunds and a vendor reimbursement of cell warranty costs. The Services and Other segment delivered strong performance, with revenue rising 33% year-on-year to US$4.6 billion and record gross profit of US$734 million at a 15.9% margin, led by Supercharging and insurance. Tesla exited the quarter with its largest order backlog in four years, and Megapacks are almost sold out for 2027. FSD and Robotaxi Are Scaling Active Full Self-Driving (FSD) subscriptions rose 67% year-on-year to 1.74 million, with half of those on monthly subscriptions, and over 75% of North America deliveries signed up for paid FSD at delivery. The chief financial officer agreed that FSD annual recurring revenue is approaching US$1 billion. FSD is approved in nine European countries, and management expects approval across the EU by the first quarter of 2027. Cybercab rides started in Austin on 3 September, cumulative unsupervised miles rose eightfold in the quarter, and Robotaxi launches in Dallas next month. Semi started volume production in Nevada, and Optimus started early production on the Fremont high-volume line. Investment Challenges OPEX Growth Absorbs the Margin Gains Operating income fell 56% year-on-year to US$718 million, and the operating margin fell to 2.6% from 5.8% in the third quarter of 2025. Operating expenses rose 39% year-on-year to US$4.8 billion, as research and development increased 69% to US$2.8 billion on SI compute depreciation, chip development and ramp costs for Optimus, Megapack 3 and Semi. Share-based compensation rose 76% to US$1.2 billion on the 2025 CEO Performance Award. Management expects operating expenses to keep rising until these products are commercialised. Regulatory credits fell 73% year-on-year to US$113 million, and GAAP net profit fell 43% year-on-year to US$787 million. Auto and Energy Revenue Fell Auto revenue fell 3% year-on-year to US$20.6 billion on lower average selling prices, lower regulatory credits and 2% fewer deliveries, as deliveries of other models fell 48% year-on-year. Energy revenue fell 16% year-on-year to US$2.9 billion, partly due to tariff-related customer refunds, and storage deployments of 13.7 gigawatt-hours, up 10% year-on-year, missed consensus of 15.9 gigawatt-hours. The energy margin was lifted by tariff refunds received and a warranty reimbursement, which may not recur. Free cash flow fell 62% year-on-year to US$1.5 billion as capital expenditure more than doubled to US$4.7 billion. Higher commodity costs and interest rates add further cost pressure. Outlook Full-year 2026 capital expenditure guidance was cut to approximately US$20 billion from over US$25 billion previously and will be funded mainly from operating cash flow, with no draws planned this year on the new US$30 billion debt facilities. However, management expects capital expenditure to rise over the next few years on the Robotaxi fleet, Optimus capacity, solar manufacturing, SI compute and the Terafab chip plant, which needs tens of billions by early 2028 and possibly over US$100 billion in the long term. Optimus should take at least a year to reach 20,000 units a week, with external deliveries from the end of 2027. Unsupervised FSD in customer cars is expected around the second quarter of 2027, and Tesla targets 5 million vehicles a year by around 2030. We note that the third quarter of 2026 was better on margins but not on profit. While gross margin recovered to 19.6% on vehicle mix, energy refunds and services, the 39% rise in operating expenses absorbed the gain, and operating margin of 2.6% is less than half of the third-quarter 2025 level. Part of the energy margin gain came from tariff refunds and a warranty reimbursement that may not recur. We remain cautious in the near term due to margin compression from rising operating expenses and fading regulatory credits, intense competition in China from BYD and domestic EV brands such as Xiaomi and Geely, elevated capital expenditure requirements, and the fact that meaningful revenue from Robotaxi and Optimus is still more than five years away. At 248 times financial year 2026 estimated price-to-earnings, the analyst believes optionality is already priced in. Recommendation and Target Price Phillip Securities Research maintains a SELL recommendation on Tesla with a higher target price of US$230, raised from US$220 previously. The increase reflects an 8% raise in financial year 2026 earnings estimates from higher auto revenue estimates. The weighted average cost of capital and growth rate assumptions of 9% and 5% respectively remain unchanged. *This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.* Frequently Asked Questions [market_journal_faq] 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.

Singapore Air Transport: Sector Rated NEUTRAL as Cargo Growth Offsets Jet Fuel Headwinds — SATS (TP S$5.01), CAO (TP S$2.01), SIA Engineering (TP S$3.90) at BUY

Published on Nov 4, 2026 18

Brief Overview In Sep 2026, the Singapore aviation sector continued its decline. China Aviation Oil (CAO) dropped significantly by 7.5%, followed by SATS and SIA at negative 2.3% and negative 0.7% respectively, while SIA Engineering edged up incrementally by 1.0%. Passenger growth remains under pressure from elevated jet fuel prices. However, cargo has been a relative bright spot, with SIA's cargo volume rising 9.4% year-on-year in September 2026. Load factor improved most in the East Asia route region, up 5.3 percentage points to 55.8%. Phillip Securities Research maintains a Neutral stance on the air transport sector amid the lack of near-term stabilisation in the US-Iran conflict. Investment Positives Strong Cargo Growth Driven by AI and Semiconductor Demand Overall cargo volumes held steady in September 2026, but performance diverged sharply by trade lane. Asia-Pacific to US volumes rose 13% to 17% year-on-year, driven by demand for semiconductors and other high-tech goods. South Korea led the growth with volumes up 54% year-on-year, and Singapore posted gains of 26% year-on-year. Singapore's position as a regional processing and re-export hub for artificial intelligence supports its growth, even though it lacks sizeable domestic AI trade production capability. Cargo rates remained elevated. China's Mid-Autumn Festival and National Day Golden Week holidays prompted exporters to rush shipments out before factories closed, which would typically push air freight rates higher. Global spot rates held at US$3.45 per kilogramme, up 33% year-on-year, while Asia-Pacific to US spot rates averaged US$6.75 per kilogramme, up 40% year-on-year. Singapore to US rates were up 62% year-on-year, which supports SIA's cargo yields on US-bound flows. Capacity Expansion into the Fourth Quarter Airlines continue to add international capacity into the fourth quarter of 2026 despite elevated jet fuel prices. Chinese carriers plan to raise international seats by about 9% year-on-year, with available seat kilometres to increase 13%. Long-haul routes to Europe, Russia and Canada are driving the growth. Singapore's fourth-quarter flight capacity is set to rise about 4% year-on-year, driven by the China-Singapore route, where SIA is adding 24% more seats. We believe this could reflect SIA's deepening partnership with Air China to enhance route coordination and revenue sharing. SIA Engineering Benefits from Boeing 777X Certification Delays SIA's largest aircraft backlog is 31 Boeing 777X aircraft, intended to replace the Airbus A380s (12 units, average age 12.7 years) and Boeing 777-300ERs (22 units, average age 16.5 years), the oldest passenger aircraft in the fleet. The 777X is not expected to be delivered before April 2027 because of certification delays, with 665 unfulfilled 777X orders from at least 17 customers. The delays keep these maintenance-heavy aircraft flying longer, supporting near-term demand for SIA Engineering. Furthermore, SIA's largest unit base, the A350XWB (65 units with an average age of 7.5 years), will power SIA Engineering's SAESL joint venture going forward as SAESL expands engine servicing capacity from 300 to 400 engines per annum. SATS Positioned for AI-Driven Airfreight and Middle East Expansion Although e-commerce-driven tailwinds may be weaker, the analyst believes AI-driven airfreight will continue to support SIA's cargo demand. SATS is also expected to expand in the Middle East market alongside Riyadh Air's cargo infrastructure build-out. CAO Special Dividend Potential CAO may benefit from trading margins as regional fuel price differentials have widened. The likelihood of a special dividend or higher payout ratio — currently the lowest among Sinopec subsidiaries, backed by US$589 million in net cash — is identified as the near-term catalyst. Investment Challenges CAO Facing Higher Procurement Costs CAO's decline reflects sustained high jet fuel prices feeding through to cost of sales. With its lower-cost inventory largely used, the benefit from cheaper procurement has faded, and future jet fuel procurement will have to be at current elevated costs. Asia-Europe Cargo Route Remains Weak The Asia-Europe route remained under pressure. Hong Kong to Europe volumes were still down approximately 30% year-on-year as the EU's removal of de minimis exemptions in July 2026 continued to weigh on e-commerce flows. Elevated Jet Fuel Prices Persistently high jet fuel prices remain a headwind for SIA and the broader sector. Singapore jet fuel price normalisation is not expected until 2029. Outlook The sector outlook is mixed. Cargo growth driven by AI and semiconductor demand continues to provide a tailwind, but elevated jet fuel prices and weak Asia-Europe trade lanes present headwinds. SIA's fourth-quarter capacity expansion and deepening partnerships signal cautious optimism, while SIA Engineering benefits from aircraft delivery delays that keep older, maintenance-intensive fleets in operation. Recommendation and Target Price Phillip Securities Research maintains a Neutral sector stance on Singapore air transport. At the individual stock level, SIA carries a Neutral rating with a target price of S$7.09. SATS is rated BUY with a target price of S$5.01. China Aviation Oil is rated BUY with a target price of S$2.01. SIA Engineering is rated BUY with a target price of S$3.90. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Frequently Asked Questions [market_journal_faq] 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.

Meta Platforms: BUY Rating Maintained With Target Price of US$800 as AI-Powered Advertising Drives Strong Growth

Published on Nov 4, 2026 18

Brief Overview Meta Platforms reported third-quarter 2026 earnings in line with expectations. Revenue increased 26% year-on-year to US$64.6 billion, driven by all-time high user engagement and improved advertising performance, while adjusted net profit after minority interests grew 2% year-on-year to US$19.1 billion. Third-quarter revenue and net profit were at 71% and 70% of full-year 2026 estimates, subject to the seasonal nature of the advertising business. Notably, Meta reported its first-ever quarterly negative free cash flow of US$2.1 billion as it continued to ramp up artificial intelligence investment. Investment Positives Solid Core Advertising Business Meta's advertising revenue grew 26% year-on-year to US$63.1 billion in the third quarter of 2026, driven by 10% growth in ad impressions from stronger engagement, user growth, and ad load optimisation, and a 14% increase in average price per ad on improved ad performance. Deeper integration of Meta's AI-powered content recommendation capabilities continued to drive engagement, with Instagram and Facebook global time spent per user on Reels and Feed reaching an all-time high, while Threads time spent per user increased by over 20% year-on-year. Improvements to GEM ad-ranking models also lifted in-app conversions by 9.6% year-on-year. Adoption of Meta AI Business Assistant remained encouraging, with advertisers increasing ad spend by 9% year-on-year versus non-adopters. Establishment of New Class C Common Stock Meta announced a new class of publicly listed, non-voting Class C common stock, effective January 2027. Existing Class A and Class B shareholders will receive one additional Class C share for each share held through a one-for-one stock dividend, effectively a two-for-one stock split. The analyst believes the issuance could provide an additional funding source for Meta's substantial AI spending, reducing reliance on debt financing while preserving management's voting rights to execute its long-term strategic roadmap. The company has disclosed US$825 billion in lease and contractual commitments related to data centres, servers and third-party cloud capacity over the next ten years. The new share class could also help attract and retain AI talent through share-based compensation, reducing reliance on cash compensation amid rising operating expenses. Investment Challenges Unprofitable Reality Labs Meta's non-core Reality Labs segment reported an operating loss of US$4.1 billion, narrowing 7% year-on-year. Segment revenue rose 59% year-on-year to US$1.1 billion, supported by strong AI glasses growth despite lower Quest headset sales. Meta expects Reality Labs' operating losses to narrow to US$18 billion to US$19 billion in financial year 2026 and approximately US$15 billion in financial year 2027 as it prioritises AI investment and expects Muse integration to drive AI glasses sales. Negative Free Cash Flow Meta reported its first-ever quarterly negative free cash flow of US$2.1 billion in the third quarter of 2026 as it continued to ramp up investment in servers, data centres and network infrastructure. Operating cash flow growth slowed to 9% year-on-year to US$32.8 billion and was entirely offset by an 80% year-on-year increase in capital expenditure to US$34.9 billion. The company's net cash position contracted to US$1.53 billion from US$6.6 billion in the second quarter as massive spending continued to weigh on the balance sheet. Margin Under Pressure Meta's operating expenses increased 32% year-on-year in the third quarter, driven by higher legal, AI infrastructure, and third-party AI token costs. The accelerating operating expenses weighed on operational profitability, with adjusted operating income growth slowing to 11% year-on-year to US$22.9 billion, from 18% in the third quarter of 2025. Meta's operating margin declined for the third consecutive quarter to 35.4% from 36.8%, indicating lower operating efficiency as the company scaled its AI infrastructure. The company expects cost efficiency to improve by more than ten times in financial year 2027, driven by off-peak capacity utilisation, deployment of smaller and more efficient models, and inference optimisation that maximises GPU usage. Outlook Meta guided for fourth-quarter 2026 revenue of US$73 billion to US$76 billion, implying an accelerating growth rate of 22% to 27%, with a 1% foreign exchange tailwind. The company increased full-year 2026 total expenses to US$175 billion to US$179 billion, reflecting US$9.9 billion in legal charges recognised in the third quarter related to the settlement of a multi-state youth safety case. Full-year 2026 capital expenditure is expected to be US$135 billion to US$145 billion, narrowed from the prior outlook of US$130 billion to US$145 billion. Meta reported over 10 million Muse personal AI agent setups in the United States and Canada within six weeks of launch, with around 25% of users engaging with it on any given day for shopping. Despite strong early traction, the analyst expects minimal near-term revenue contribution from Muse, as adoption and monetisation remain early-stage and high compute requirements could limit global scalability. Over time, the analyst believes Muse AI models could create incremental revenue opportunities through Muse Model API and Muse Code at competitive pricing, monetised under usage-based fees or a subscription model. Meta's core advertising business is expected to remain a key growth driver, supported by AI-driven improvements in ad ranking and recommendation systems to deliver more personalised advertisements, alongside wider adoption of generative AI tools that help advertisers create and optimise campaigns more efficiently. Recommendation and Target Price Phillip Securities Research maintains a BUY rating on Meta Platforms with an increased target price of US$800, raised from the previous US$750. Full-year 2026 and 2027 revenue and net profit forecasts have been increased by 2% and 5% respectively, due to incremental revenue from subscriptions. We believe the Class C share issuance provides additional financial flexibility to support Meta's substantial AI investment while preserving management control. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Frequently Asked Questions [market_journal_faq] Disclaimer 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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Keppel DC REIT: Target Price S$2.33 — Strong DPU Growth Underpinned by Robust Rental Reversions

Published on Nov 4, 2026 18

Brief Overview Keppel DC REIT (KDCREIT) delivered 3Q26 distribution per unit (DPU) of 2.86 Singapore cents, representing a 12.6% year-on-year increase, while 9M26 DPU of 8.57 Singapore cents rose 11.7% year-on-year. The results were in line with Phillip Securities Research's expectations, forming 25% and 74% of the full-year FY26e forecast respectively. Growth was driven by the accretive acquisition of Tokyo Data Centre 3, positive rental reversions and escalations across the portfolio, and increased effective interests in Keppel DC Singapore 3 and 4, partially offset by the divestment of Kelsterbach Data Centre, the absence of income from Cardiff DC, and higher finance expenses. Portfolio occupancy improved 0.5 percentage points quarter-on-quarter to 93%, while contracted power capacity edged up to approximately 96%. Investment Positives Healthy Balance Sheet Despite Recent Acquisitions Despite an active acquisition programme, KDCREIT's balance sheet remains in sound health. Aggregate leverage increased 220 basis points quarter-on-quarter to 36.2% following the partial drawdown of Japanese yen loans to fund Tokyo DC 4 and 5, rising to 38.8% on a pro forma basis following the completion of those acquisitions on 1 October 2026. The 3Q26 cost of debt remained stable quarter-on-quarter at 2.7%, while the interest coverage ratio stayed healthy at 6.5 times. Phillip Securities Research expects FY26e cost of debt to remain at approximately 2.7%, with the proportion of fixed-rate debt expected to increase from 69.6% to the high-80% range by December 2026 as Japanese yen interest rate swaps take effect. This progression towards a higher fixed-rate debt mix should provide further stability against interest rate fluctuations. Strong Rental Reversions and Occupancy Improvement Rental reversions remained robust at approximately 16% in 3Q26, building on a 9M26 average of approximately 14%. This strong leasing momentum underscores the continued demand for data centre capacity across the REIT's markets. We expect FY26e rental reversions to remain around the 9M26 level of approximately 14%, with only 1.1% of leases by gross rental income due for renewal in 4Q26, limiting near-term downside risk from lease expiries. Revenue Uplift from Gore Hill DC Revenue at Gore Hill Data Centre is set to more than double as new contracts commence in 4Q26. This step-up in income contribution provides a meaningful boost to the REIT's revenue base in the near term. Accretive Acquisitions and Pipeline The completion of Tokyo DC 4 and 5 on 1 October 2026 adds to the REIT's earnings base from 4Q26 onwards. Full-year contributions from these recent acquisitions, combined with organic rental growth, are expected to drive 4.5% DPU growth in FY27e. KDCREIT remains on the lookout for accretive acquisition opportunities in established data centre hubs, including Japan, South Korea, Singapore and Europe, with a preference for assets leased to hyperscale customers. Asset Enhancement Upside The Keppel DC Singapore 8 asset enhancement initiative remains on track for completion in the second half of 2027, providing further upside to DPU growth beyond the current forecast period. No Neocloud Exposure KDCREIT has no exposure to neocloud providers and has not experienced any adverse impact from concerns over neocloud providers' funding and delays in artificial intelligence infrastructure buildout. This insulates the REIT from a risk factor that has weighed on other data centre operators. Enlarged Unit Base Supported by Private Placement The September 2026 private placement enlarged the unit base by approximately 12%, providing equity funding ahead of Tokyo DC 4 and 5 contributions from 1 October 2026. This approach maintained a prudent capital structure while funding growth. Investment Challenges No Material Improvement at the Guangdong Data Centres Rent collection from Bluesea at the Guangdong Data Centres remains unresolved, with loss allowances continuing to weigh on earnings. Recovery of over S$65 million in overdue rent is deemed unlikely in the near term. Guangdong DC's rental income and corresponding loss allowances are recognised under gross revenue and property expenses respectively. Our estimates exclude contributions from the Guangdong Data Centres. Higher Finance Expenses Finance costs rose 34.1% year-on-year in 3Q26 to S$16.0 million, driven by new acquisition loans drawn in 4Q25 and consideration for the KDC SGP 7 and 8 lease extension. This increase partially offset the revenue gains from acquisitions and rental reversions. Temporary Income Loss from SGP1 Redevelopment Full-year contributions from recent acquisitions and organic rental growth are expected to drive DPU growth in FY27e, but this will be partially offset by temporary income loss from the phased reduction in occupancy at SGP1 ahead of its redevelopment. Outlook KDCREIT is well positioned for continued DPU growth, supported by full-year contributions from recently acquired assets, strong organic rental reversions, and the imminent revenue uplift at Gore Hill DC. The REIT's focus on hyperscale-leased assets in established data centre markets provides a durable income stream. The Keppel DC Singapore 8 asset enhancement initiative, on track for completion in the second half of 2027, offers additional DPU upside. These positives are moderated by the ongoing Guangdong DC rent collection issue, higher finance costs, and the temporary income drag from the SGP1 redevelopment. The stock currently trades at a FY26e DPU yield of 5.5%. Recommendation and Target Price Phillip Securities Research maintains an ACCUMULATE recommendation on Keppel DC REIT with a lower dividend discount model-derived target price of S$2.33, down from the previous target of S$2.46. The reduction reflects a 25 basis point increase in the cost of equity to account for the higher interest rate environment. The FY26e DPU estimate has been raised by 1% after incorporating Tokyo DC 4 and 5 and the associated private placement. At the last closing price of S$2.13, the target price of S$2.33 implies a total return of 14.9%, inclusive of forecast distributions. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Frequently Asked Questions [market_journal_faq] 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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Frasers Centrepoint Trust: Record FY26 DPU With BUY Rating and Target Price of S$2.50

Published on Nov 4, 2026 9

Brief Overview Frasers Centrepoint Trust (FCT) reported second-half and full-year financial year 2026 distribution per unit (DPU) of 6.21 and 12.35 Singapore cents, representing year-on-year increases of 2.6% and 2.0% respectively. These figures came in line with Phillip Securities Research estimates, representing 50% and 99% of the full-year forecast, despite S$7.6 million in distributable income being retained during the year. Second-half and full-year net property income (NPI) grew 12% and 16% year on year, driven by the full-year contribution from Northpoint City South Wing following its acquisition in May 2025 and organic rental growth. Full-year rental reversions remained healthy at positive 6.6%, with committed retail occupancy at 99.7%. Shopper traffic grew 1.8% while tenants' sales increased 1.3%, with occupancy cost remaining at a healthy 16.3%, providing room for further rental growth. The asset enhancement initiative (AEI) at Hougang Mall has been completed, achieving approximately 8% return on investment — above target — and adding more than 13,000 square feet of net lettable area (NLA) across prime retail floors. Investment Positives Healthy Financial Position FCT's aggregate leverage improved following the repayment of higher-cost debt using proceeds from the White Sands divestment. Fourth-quarter 2026 average all-in cost of debt was 3.1%, bringing the full-year cost of debt to 3.2%, down meaningfully from 3.8% in financial year 2025. The proportion of fixed-rate debt is expected to increase from 68.6% to 75.9% following the debt repayment. Importantly, FCT has no refinancing requirements in financial year 2027, and the we expect the all-in cost of debt to inch up only marginally to approximately 3.3% amid a gradual increase in base rates. This provides financial stability and earnings visibility as the trust navigates a transitional year. Increase in Portfolio Valuation Net asset value rose 4% year-on-year to S$2.32, underpinned by S$66 million in fair value gains from investment properties. Including FCT's 50% share of NEX and Waterway Point, portfolio valuations increased 1.7% year-on-year. This improvement reflects stronger asset performance and uplift from asset enhancement initiatives, with capitalisation rates remaining unchanged. Investment Challenges We identified no material negatives for this reporting period. This reflects the trust's stable operating fundamentals and sound financial management during the year under review. Outlook Financial year 2027 is likely to be a transitional year as concurrent AEIs at NEX and Causeway Point temporarily weigh on rental income. However, the distribution of S$7.6 million in retained distributable income is expected to help support DPU. At NEX, Phase 1 of the AEI at the former Isetan space has achieved 98% leasing pre-commitment. Phase 2, commencing in January 2027, is expected to add 44,000 square feet of NLA by converting carpark space into retail space. At Causeway Point, the AEI is scheduled to commence in the second quarter of 2027 and complete by the end of 2029. The planned 32,000-square-foot The HomePage @ Causeway Point, developed under a memorandum of understanding with the National Library Board and targeted to open in 2028, will introduce a differentiated reading and community space alongside the mall's existing retail and lifestyle offerings. As the space falls under URA's Community/Sports Facilities Scheme, FCT can decant the gross floor area to other parts of Causeway Point, converting it into income-generating NLA. This includes creating a new Basement 3 retail area from existing space, enabling FCT to optimise space allocation and introduce retail uses on more commercially attractive floors. Alongside a refreshed tenant mix across close to 250 stores, these initiatives should enhance tenant appeal and rental productivity. While near-term rental disruption and execution risks remain, the AEIs are expected to support medium-term NPI and DPU growth. Longer-term DPU growth drivers include AEI completions and sustained mid-single-digit positive rental reversions. We expect FCT to maintain broadly stable DPU in financial year 2027 despite upcoming AEIs, supported by the distribution of retained distributable income and a higher proportion of management fees paid in units (54% in financial year 2026). FCT trades at a forward financial year 2027 distribution yield of 5.7%. Recommendation and Target Price Phillip Securities Research maintains a BUY recommendation on Frasers Centrepoint Trust with a lower discounted dividend model-based target price of S$2.50, reduced from S$2.70 previously. The lower target price reflects the roll-forward of forecasts, a 4% trim to the financial year 2027 DPU estimate to 12.37 Singapore cents to account for the impact of major AEIs, and a 25-basis-point increase in the cost of equity assumption to reflect the prevailing environment. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Frequently Asked Questions [market_journal_faq] 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.

Netflix Inc: Viewing Time a Big Concern — Target Price US$100

Published on Nov 4, 2026 14

Brief Overview Netflix Inc (NFLX) reported 3Q26 results that were broadly in line with expectations, with revenue rising 12% year-on-year, driven by membership growth, higher pricing and increased advertising revenue. Adjusted profit after tax and minority interests (PATMI) slightly exceeded expectations due to the timing of operating expenses. On a nine-month basis, 9M26 revenue and adjusted PATMI reached 74% and 75% of Phillip Securities Research's FY26 estimates, respectively. However, 4Q26 revenue growth guidance of 11.5% year-on-year implies a fourth consecutive quarter of decelerating growth, while FY26 advertising revenue guidance was lowered by 10%, from US$3 billion to US$2.7 billion, owing to a slower-than-expected rollout. Investment Positives Pricing Power Remains on Display Netflix continues to demonstrate strong pricing power, having implemented subscription price increases across multiple markets. This trend is consistent with the response observed following its US price increase in March, underscoring the platform's strong customer stickiness. Importantly, Netflix still offers one of the lowest costs per viewing hour among major streaming platforms in the United States. Phillip Securities Research believes there remains room for further price increases, which would provide a meaningful lever for revenue growth going forward. The ability to raise prices without significantly eroding subscriber numbers speaks to the quality and breadth of content that Netflix provides, and sets the company apart from many of its competitors. Advertising Remains a Key Growth Driver Despite a 10% downward revision in FY26 advertising revenue guidance — from US$3 billion to US$2.7 billion due to rollout delays — the revised figure still represents robust growth of approximately 80% year-on-year. Phillip Securities Research remains positive on Netflix's advertising potential, supported by improving monetisation capabilities. The planned rollout of ad-supported tiers across 15 additional countries in FY27 should further broaden Netflix's addressable market. Advertising provides Netflix with an additional monetisation lever, particularly in price-sensitive markets, supporting both revenue growth and diversification beyond subscription fees. This dual revenue model — subscription and advertising — strengthens the long-term earnings profile of the company. Investment Challenges Weakening Engagement and Soft Guidance The most significant near-term concern is weakening viewer engagement. Netflix's guided 4Q26 revenue growth of 11.5% year-on-year marks the fourth consecutive quarter of deceleration. Viewing hours grew just 2% year –on year, suggesting a decline in average viewing time per subscriber. Phillip Securities Research attributes this softness to two factors. First, there has been a lack of blockbuster titles matching the success of FY25 hits such as Stranger Things, Squid Game and Demon Hunters. Second, there is intensifying competition for screen time from platforms such as YouTube and TikTok. We believe sustained engagement weakness could eventually erode Netflix's pricing power and longer-term revenue growth, making this a critical metric to monitor in coming quarters. Outlook Netflix guided US$13.4 billion in revenue for 4Q26, representing growth of 11.5% year-on-year. The company expects 4Q26 operating margin to expand by 150 basis points to 26.0%. Looking further ahead, FY26 revenue growth remains in the range of 13–14%. Phillip Securities Research remains cautiously positive on Netflix's long-term outlook, supported by its strong pricing power and industry-leading profitability. However, near-term growth is likely to remain subdued amid weakening viewer engagement, a softer content slate and intensifying competition for screen time. In response, Netflix recently announced a major restructuring, including approximately 1,000 job cuts and senior leadership changes, notably the appointment of former Disney executive Peter Rice as Chief Content Officer. This signals a strategic reset in its content approach, although meaningful improvements in engagement and growth will likely take time to materialise. We believe a reacceleration in viewing hours and advertising monetisation will be key catalysts for a share price recovery. The recent pullback has created an attractive opportunity for investors to build a position, with Netflix trading at a FY26 forward P/E at 18.3 times compared with previously 31.2 times. Recommendation and Target Price Phillip Securities Research maintains a BUY recommendation on Netflix with a lower target price of US$100, down from the previous target of US$110. The reduction reflects a 2% and 1% cut to FY26 revenue and PATMI estimates, respectively, due to slower growth. The terminal growth assumption has also been lowered from 3.5% to 3%. Despite the target price reduction, we continue to favour Netflix's strong pricing power, promising advertising potential and industry-leading profitability. This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst. Frequently Asked Questions [market_journal_faq] 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.

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