Singapore Strategy & Top Picks 2018 - RHB Invest 2017-12-19: There Is Still Potential To Generate Alpha

Singapore Strategy & Top Picks 2018 - RHB Invest 2017-12-19: There Is Still Potential To Generate Alpha Stock Market Strategy Singapore Top Stock Picks 2018 APAC REALTY LIMITED CLN.SI AVI-TECH ELECTRONICS LIMITED BKY.SI MOYA HOLDINGS ASIA LIMITED 5WE.SI FOOD EMPIRE HOLDINGS LIMITED F03.SI HRNETGROUP LIMITED CHZ.SI UNITED OVERSEAS BANK LTD U11.SI SINGAPORE MEDICAL GROUP LTD 5OT.SI VENTURE CORPORATION LIMITED V03.SI OUE HOSPITALITY TRUST SK7.SI MANULIFE US REIT BTOU.SI

Singapore Strategy 2018 - There Is Still Potential To Generate Alpha

  • Macroeconomic indicators are still supportive of growth - this time for different sectors. Our economics team is forecasting Singapore’s GDP to grow by 3% in 2018, slackening from an estimated growth of 3.3% YoY in 2017. 
  • The slowdown in growth is largely attributed to moderating export growth and slowdown in manufacturing. However, domestic demand should rebound modestly, cushioning some weakness in exports and manufacturing. 
  • We expect to witness higher private consumption, gradual recovery in residential property prices and higher tourist arrivals into Singapore during 2018.



USD/SGD - small tailwinds. 

  • USD/SGD is highly correlated to the FTSE Straits Times Index’s (FSSTI) earnings, with appreciation in SGD positively correlated to the higher index EPS. While this positive relationship may not seem intuitive, we believe it can be explained by the lack of export driven companies in the index that would benefit from a weak SGD. 
  • Our forex team is eyeing marginal gains vs USD with a base case end-2018 of SGD1.32 (average: 1.33), stronger than 2017’s average of 1.38, providing some tailwind to index EPS growth.


Stock selection remains the key. 

  • With changing mix in Singapore’s growth constituents, we recommend that investors stay selective.
    1. Consumer: OVERWEIGHT with preference for companies with regional exposure. Juliana rates Dairy Farm and Food Empire as her preferred picks. She has little preference for companies with a Singapore-only exposure as their longer-term growth outlook remains weak.
    2. REITs: OVERWEIGHT with preference for hospitality and industrial. Ascendas REIT (AREIT) and OUE Hospitality Trust (OUEHT) are Top Picks. Vijay’s preference is for REITs that would be direct beneficiaries of improvement in economic activity, and/or have a strong balance sheet and can undertake accretive acquisitions.
    3. Banks: NEUTRAL with an OVERWEIGHT bias. UOB is Top Pick. Seng Choon thinks strong share price performance in 2017 could limit upside in 2018. However, he highlights that the positive impact of the interest rate upcycle on earnings cannot not be taken lightly. UOB’s large exposure to residential mortgage market and strong balance sheet makes a Top Pick.
    4. Property: NEUTRAL with APAC Realty as Top Pick. Vijay expects property prices to rise by 3-7% in 2018. He assesses that recent en-bloc frenzy and intense competition in land sales could limit developer margins and also sees risk of government implementing more supply side measures.
    5. Quality small & mid cap names. Jarick expects Avi-Tech Electronics (AviTech), HRnetGroup, Moya Holdings Asia (Moya) and Singapore Medical Group (SMG) to delivery strong returns in 2018.


Singapore Top Stock Picks For 2018


RHB's Singapore Top Picks For 2018
Company Name Rating Share Price
(8-Dec-17)
Target Price Upside % P/E (x)
Dec-18F
P/B (x)
Dec-18F
Yield %
Dec-18F
Report
APAC REALTY BUY SGD 0.87 SGD 1.20 38.7 11.0 2.2 4.5
ASCENDAS REIT BUY SGD 2.67 SGD 2.90 8.6 13.0 1.2 6.1
AVI-TECH ELECTRONICS BUY SGD 0.44 SGD 0.59 35.6 8.7 1.3 5.8
DAIRY FARM BUY USD 7.90 USD 9.53 20.7 19.2 5.4 3.1
FOOD EMPIRE HOLDINGS BUY SGD 0.64 SGD 1.00 56.9 11.5 1.3 1.5
HRNETGROUP BUY SGD 0.82 SGD 1.14 39.0 17.3 2.5 2.9
MANULIFE US REIT BUY USD 0.91 USD 0.98 8.4 13.8 1.1 6.6
MOYA HOLDINGS ASIA BUY SGD 0.08 SGD 0.17 102.4 8.4 1.4 -
OUE HOSPITALITY TRUST BUY SGD 0.82 SGD 0.88 8.0 18.1 1.1 6.4
SINGAPORE MEDICAL GROUP BUY SGD 0.57 SGD 0.79 39.8 19.1 4.0 -
UNITED OVERSEAS BANK LTD BUY SGD 25.88 SGD 28.88 11.6 11.4 1.1 2.7
VENTURE CORPORATION BUY SGD 20.26 SGD 24.10 19.0 15.1 2.3 3.9



Singapore Research Team RHB Invest | http://www.rhbinvest.com.sg/ 2017-12-19
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 1.200 Same 1.200
BUY Maintain BUY 0.590 Same 0.590
BUY Maintain BUY 0.170 Same 0.170
BUY Maintain BUY 1.000 Same 1.000
BUY Maintain BUY 1.140 Same 1.140
BUY Maintain BUY 28.880 Same 28.880
BUY Maintain BUY 0.790 Same 0.790
BUY Maintain BUY 24.100 Same 24.100
BUY Maintain BUY 0.880 Same 0.880
BUY Maintain BUY 0.980 Same 0.980



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