Singapore Market Focus - DBS Research 2017-09-06: Strategy ~ Yield Stocks Still In Focus

Singapore Market Strategy - DBS Vickers 2017-09-06: A Missile Over September Singapore Stock Recommendation Yield Stocks RIVERSTONE HOLDINGS LIMITED AP4.SI SUNTEC REAL ESTATE INV TRUST T82U.SI BREADTALK GROUP LIMITED 5DA.SI HONG LEONG FINANCE LIMITED S41.SI

Singapore Market Strategy - A Missile Over September

  • Yield stocks in focus –
    • SREITs: Keppel REIT, Ascendas REIT, Frasers Logistics Trust, CDL Hospitality Trusts, Far East Hospitality Trust & Mapletree Greater China Commercial Trust. 
    • Non-SREITs: Breadtalk, Hong Leong Finance & Frasers Centrepoint Ltd.
  • Top slice UOB, Suntec REIT & Riverstone.

Strategy - Yield stocks still in focus 

  • The situation in North Korea escalated over the past week after the country fired an intermediate range missile that travelled 2,700km over Japan and detonated a hydrogen bomb designed to be mounted on its ICBM. 
  • Meanwhile, yields on the US and MAS 10-year bond continued to stay suppressed as expectations for the next FED rate hike get pushed back to 2Q18. Yield stocks should continue to find favour amid heightened geopolitical tensions in North Asia and tamer FED rate hike expectations. 
  • Within the SREITs space, we believe that the office/business parks and hospitality sub-sectors will be underpinned by a fall-off in supply. Our SREITs team’s picks are Keppel REIT for office, Ascendas REIT, Frasers Logistics & Industrial Trust and for industrial and CDL HT and Far East HT for hospitality and MAGIC for retail.
  • Non-SREITs stocks under our coverage that satisfy the criteria of
    1. BUY recommendation,
    2. yield of at least 3%, and
    3. double-digit FY17F EPS growth,
  • are Breadtalk, Hong Leong Finance and Frasers Centrepoint Ltd.

Top slice UOB, Suntec REIT and Riverstone 

  • With August market uncertainty anticipated to extend into September, we look to top slice stocks that meet the following criteria, thus making them more vulnerable to profit taking – 
    1. HOLD or FULLY VALUED recommendation
    2. less than 5% upside to TP
    3. and yet managed to outperform the STI YTD.
  • The three stocks that meet these criteria are UOB, Suntec REIT and Riverstone.
    1. New NPLs for UOB ticked up in 2Q17 and we had also nudged down our loan growth assumption to 5% from 6% following a weak YTD loan growth. 
    2. For Suntec REIT, we believe the expected turnaround in Suntec’s operations is not without execution risks despite the impressive gains made by its new CEO. Furthermore, a large portion of the “good news” has been priced in as Suntec’s current yield is close to -1 SD yield of 5.3%. 
    3. Finally, for Riverstone, we think that it will take time for a meaningful increase in its cleanroom mix given the longer gestation period.

Yeo Kee Yan CMT DBS Vickers | Janice Chua DBS Vickers | http://www.dbsvickers.com/ 2017-09-06
DBS Vickers SGX Stock Analyst Report HOLD Maintain HOLD 1.09 Same 1.09
HOLD Maintain HOLD 1.950 Same 1.950
BUY Maintain BUY 2.040 Same 2.040
BUY Maintain BUY 3.200 Same 3.200