Singapore Stock Alpha Picks (July 2018) - UOB Kay Hian 2018-07-04: Weathering A Difficult Period

Singapore Stock Alpha Picks (July 2018) - UOB Kay Hian 2018-07-04: Weathering A Difficult Period Singapore Stock Alpha Picks Stocks To Watch in 2018 CSE GLOBAL LTD SGX:544 SUNNINGDALE TECH LTD SGX:BHQ DBS GROUP HOLDINGS LTD SGX:D05 OVERSEA-CHINESE BANKING CORP SGX:O39 SINGTEL SGX:Z74 CDL HOSPITALITY TRUSTS SGX:J85 CITY DEVELOPMENTS LIMITED SGX:C09 WING TAI HLDGS LTD SGX:W05

Singapore Stock Alpha Picks (July 2018) - Weathering A Difficult Period

  • Our picks had to endure a tough June, with the FSSTI falling 4.7% m-o-m. However, we largely stick with our picks, with a tilt towards large caps or stocks with reasonable dividend yield.



WHAT’S NEW


Grappling with external challenges.

  • June continued to be weak, following on from a pull-back in May, with the FSSTI declining 4.7% m-o-m in June 2018. As a result, our alpha picks endured declines of 2.0-9.2% m-o-m as external concerns such as a faster-than-expected rate hike in the US and the US/China trade war remain an overhang on global equity markets.
  • Within our portfolio, CityDev and Wing Tai were the most resilient, declining by 2.0-2.5% m-o-m compared to the higher decline in broader markets.


ACTION


Staying the course; sticking with the fundamentals.

  • Our recent addition Sunningdale, declined 9.2% m-o-m but it looks oversold. In view of this, a firm US dollar and expected recovery in 2Q18, we reiterate our BUY call on Sunningdale.
  • CSE saw profit-taking in June (-6.5% m-o-m) but is still offering positive returns of 4.9% since being added to our alpha picks. CSE remains our preferred proxy to the firm oil prices as we remove Keppel Corp due to the lack of near-term catalysts for the latter.
  • As for the large caps such as the banks, we are cognisant that the higher rates and the uncertain external noise may dampen the growth outlook and we have reflected this in our target prices for DBS and OCBC. Despite the moderation in target prices, upside for DBS and OCBC remains compelling.





OCBC – BUY (Jonathan Koh)


Share Price Catalyst

  • Event: Rising interest rates could help underpin NIMs.
  • Impending IPO/stake sales in Great Eastern Life Malaysia.
  • Timeline: 6-9 months.


DBS – BUY (Jonathan Koh)


Share Price Catalyst

  • Event: Further rate hikes leading to higher NIMs.
  • Timeline: 3-6 months.


City Development – BUY (Andrew Chow/Loke Pei Hao)


Share Price Catalyst

  • Event: Upward re-rating of RNAV by consensus on rising asset prices. Positive datapoints on residential property prices and new launches.
  • Timeline: Positive newsflow on Amber Park launch and projects within its vicinity in 2018.


CD REIT – BUY (Andrew Chow/Loke Pei Hao)


Share Price Catalyst

  • Event: Positive data points on visitor arrivals, average length of stay (ALOS), average daily room rate (ADR), RevPAR and supply pipeline.
  • Timeline: 3-6 months.


Singtel – BUY (Jonathan Koh)


Share Price Catalyst

  • Event: Funds flow into laggards and defensive stocks, including Singtel which offers a good dividend yield (DPS commitment of 17.5 S cents/share for 2 years).
  • Timeline: 3-6 months.


Wing Tai – BUY (Andrew Chow/Loke Pei Hao)


Share Price Catalyst

  • Event: Potential for Wing Tai to buy more landbank given its S$1.6b acquisition headroom. A pick-up in sales for the Garden Residences (JV with Keppel Land).
  • Timeline: 6-9 months.


Sunningdale – BUY (Yeo Hai Wei)


Share Price Catalyst

  • Event: Recovery in 2QFY18 earnings and gains from disposal of its non-core asset.
  • Timeline: 3-6 months


CSE Global – BUY (Yeo Hai Wei)


Share Price Catalyst

  • Event: New contract wins and continued recovery in earnings.







Singapore Research UOB Kay Hian | https://research.uobkayhian.com/ 2018-07-04
SGX Stock Analyst Report BUY Maintain BUY 0.610 Same 0.610
BUY Maintain BUY 2.000 Same 2.000
BUY Maintain BUY 30.150 Same 30.150
BUY Maintain BUY 14.280 Same 14.280
BUY Maintain BUY 4.220 Same 4.220
SGX Stock Analyst Report BUY Maintain BUY 1.950 Same 1.950
BUY Maintain BUY 14.030 Same 14.030
BUY Maintain BUY 2.780 Same 2.780


* Alpha Picks denotes a timeframe of 1-3 months and not UOBKH’s usual 12-month investment horizon for stock recommendation.


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