Singapore Strategy - RHB Invest 2016-01-28: Charting Through Rough Seas ~ Where To Anchor

Singapore Strategy - RHB Invest 2016-01-28: Charting Through Rough Seas ~ Where To Anchor FU YU CORPORATION LTD F13.SI  VALUETRONICS HOLDINGS LIMITED BN2.SI  VENTURE CORPORATION LIMITED V03.SI  CROESUS RETAIL TRUST S6NU.SI  M1 LIMITED B2F.SI 

Singapore Strategy - Charting Through Rough Seas ~ Where To Anchor 

  • Our Singapore Strategy 2016 report anticipates a turbulent 1H16 before a modest rebound in 2H16. 
  • With downward earnings revisions in the ongoing results season and the sharp correction in China equities, the Straits Times Index has returned -11.7% YTD. 
  • Increasingly, clients have been scouting for ‘safe havens’ to park their AUM. 
  • We advocate a safe and defensive stance during this turbulent period and single out companies with high-dividend yields and at least near three years of listing history to ride out the bumpy journey ahead. 

 Fraught with uncertainties, stay defensive. 

  • Singapore’s growth prospects are increasingly looking uncertain (with the recent worst manufacturing decline in 14 years), and we do not rule out chances of further earnings downgrades in the coming quarters. 
  • With catalysts lacking in the domestic markets, we expect the share prices of Singapore companies to continue to be swayed by external events, spanning from the volatility in the Chinese equity markets, oil price fluctuations and timing of further US rate hikes. 

 Go for high yield play and going concern certainty. 

  • In this climate, we advocate a defensive strategy for capital preservation, time-tested through economic cycles. 
  • Our Picks seek out companies with high dividend yields (> 6%) to buffer against macroeconomic uncertainties. 
  • We also place an emphasis on sustainability by screening out companies with slightly less than three years of listings’ history, assuming that a longer-standing management team has a higher certainty of going concern. 

 Selective on S-REITs/Biz-Trusts. 

  • Notwithstanding that the 35 S-REITs are trading at an average FY16 DPU yield of 7.3%, we remain cautious. 
  • Market overhang continues to lie with further hikes in interest rates and a possible recalibration of prior quantitative easing (QE)-inflated property prices. 
  • We are already seeing industrial REITs reporting revaluation losses for some of their properties in the ongoing results season. We expect office assets to follow. 
  • The upcoming Monetary Authority of Singapore’s (MAS) Monetary Policy Statement in April may also throw in further surprises with the weakening of the SGD vis-à-vis USD, given Singapore’s muted growth prospects. This may drag down the NAVs of SG-based properties further. 
  • In this space, we are highly selective and only like Ascendas, Croesus, Frasers Centrepoint, Fraser Commercial and Starhill Global REIT, which are supported by resilient valuations. 

 Our Top Defensive Picks are listed in the table below. 

  • These are companies that fit our high yield + going concern criterion. 




Ong Kian Lin RHB Invest | Singapore Research RHB Invest | http://www.rhbinvest.com.sg/ 2016-01-28
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.29 Same 0.29
BUY Maintain BUY 0.57 Same 0.57
BUY Maintain BUY 9.20 Same 9.20
BUY Maintain BUY 0.93 Same 0.93
BUY Maintain BUY 3.20 Same 3.20


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