Singapore Monthly Strategy - DBS Research 2017-06-05: Shifting Sands

Singapore Monthly Strategy - DBS Vickers 2017-06-05: Shifting Sands Singapore Stock Picks Market Strategy Market Sentiment Sector Picks G13.SI SINGAPORE TECH ENGINEERING LTD S63.SI SEMBCORP INDUSTRIES LTD U96.SI CDL HOSPITALITY TRUSTS J85.SI FAR EAST HOSPITALITY TRUST Q5T.SI

Singapore Monthly Strategy - Shifting Sands

  • STI 3250 near term cap – Trim UOB, OCBC, Keppel Corp, SIA Eng, GLP, YZJ.
  • Interest switches to consumer discretionary and industrials – Genting, ST Eng, SembCorp Industries.
  • Hospitality REITs gather interest – CDL Hospitality Trust and Far East Hospitality Trust.
  • Sentiment is positive for property developers – City Dev and UOL.

Sentiment is positive for property developers. 

  • The rapid succession of three en-bloc sales that were closed over the past 1-2 weeks points Singapore developers’ bullish outlook towards land-banking good quality sites as they price in a recovery in 2018. 
  • Our property analyst thinks the Singapore government will respond by 
    1. raising the number of available land sites in the 2H17 government public land tender programme and/or 
    2. raising the number of confirmed sites in the pipeline. 
  • City Dev and UOL are key beneficiaries of a rise in home prices given their existing unsold stock and potentially better margins for recently land-banked projects.

Trim large caps that have outperformed YTD with limited or no upside to TP 

Interest switches to consumer discretionary and industrials 

  • We see the likelihood of a shift in sector relative performance as the economic recovery theme progresses.
  • Interest in bank and property stocks that are late economic contraction leaders should shift to other consumer discretionary stocks and industrial sectors. 
  • Among the STI component stocks in these two sectors, our picks are Genting Singapore, ST Engineering and SembCorp Industries.

Hospitality REITs gathers interest as sector approaches cyclical low 

  • We maintain our positive view on Singapore’s hospitality REITs. Our REIT analyst says the end of the two-year downturn in the Singapore hospitality is in sight with only seven months till the start of 2018. Going into the next year, new supply that has been an overhang should materially decline (1% growth versus 5-6% over the past two years). Demand should receive a boost from 2018 being a biannual conference year. 
  • We are also sensing increasing optimism from various hoteliers that we are approaching a near-term cyclical low. 
  • Our top two picks in the sector are CDL Hospitality Trust and Far East Hospitality Trust.

Yeo Kee Yan CMT DBS Vickers | Janice Chua DBS Vickers | http://www.dbsvickers.com/ 2017-06-05
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