Stock Strategy Singapore - OCBC Investment 2018-07-18: Great Summer To Cherry Pick 

Singapore Strategy - OCBC Investment Research 2018-07-18: Great Summer To Cherry Pick  Singapore Stock Picks CAPITALAND LIMITED SGX:C31 DBS GROUP HOLDINGS LTD SGX:D05 FRASERS CENTREPOINT TRUST SGX:J69U FRASERS LOGISTICS & IND TRUST SGX:BUOU KEPPEL CORPORATION LIMITED SGX:BN4 MAPLETREE NORTH ASIA COMM TR SGX:RW0U SATS LTD. SGX:S58 SINGAPORE TECH ENGINEERING LTD SGX:S63 SINGTEL SGX:Z74 UNITED OVERSEAS BANK LTD SGX:U11 UOL GROUP LIMITED SGX:U14

Singapore Strategy - Great Summer To Cherry Pick 

  • STI fell 12% in 3 months.
  • Value is starting to emerge.
  • Cherry pick to position for long term. 



From hero to zero…

  • The Straits Times Index went from this year’s high of 3615 in May 2018 to a recent low of 3192 post the latest property cooling measures, a plunge of 423 points or 12%. This happened over a short period of 3 months.
  • The last time the Singapore market saw a > 10% decline in a 3-month period was in Jan 2016 due to China’s stock market crash and the drop in the Yuan. The devaluation of the Yuan in Aug 2015 also dragged equities down with a double-digit decline for the STI.
  • From up 6.2% this year at the high, the STI is now down some 5% for the year.


Pockets of sunshine

  • Banks could benefit from a potential hike in lending rate, which could possibly result in better net interest income growth and better margin. Despite the cooling measures, we have a tactical overweight on the sector and current price levels also translate into dividend yields of 3.8% to 4.6%.
  • Competition will be tough, and this is particularly acute for the telecommunications sector. The entry of a new player, TPG Telecom, is likely to mean price wars ahead as telcos act to defend the departure of their subscribers.
  • Companies with regional businesses also have to contend with weaker regional currencies, which is beneficial if these are manufacturing bases but is negative if these are their key exports markets.


Buyers have choices! 

  • Here, we are referring to both local and foreign buyers. The recent cooling measures have the twin effect of cooling demand as well as keeping away foreign investors. The combination of a hike in Additional Buyer’s Stamp Duty (ABSD) and the drop in Loan-to-Value (LTV) is a destructive move that will cause buyers to stay away from the market. See
  • As a recap, the last round of onerous cooling measures in 2013 took more than 4 years for green shoots to start sprouting. This round, with even more onerous measures, it means that potential buyers will have to come up with even more cash. While the LTV ratio is a factor to consider, its impact is less significant as it means a buyer has to fork out a higher percentage of cash upfront and to take up a lower amount of loans. However, ABSD is not refundable and has added heavily to the cost of owning a property. 
  • While locals (first time buyers, new families, etc.) will still buy properties, foreign investors and developers are likely to stay away for a while


STI is trading at -1SD for P/B – historically a good level to re-enter the market

  • The ongoing threat of markets are still dependent on exporting to China. A trade war could mean that goods become more expensive and less competitive.
  • Volatility, as measured by the VIX index, remains low despite the potential threat of a full-blown trade war. 


Headwinds remain, but growth is still healthy 

  • While headwinds remain, we do not think that global economic growth is headed for a major slowdown. Based on consensus estimate, economic growth rate is still healthy. 
  • PMI numbers are still fairly positive and capex is still holding up.


The dream stock? 

  • Last year, we saw several mega trends/themes and this included cryptocurrency, blockchain, electric vehicle, lithium batteries, artificial intelligence (AI), e-commerce, mobile payment, etc. Unicorns and disruptors were touted as the next big thing. 
  • For this year we expect more corporates to jump on to the bandwagon. 
  • Since it is impossible to have an ideal stock offering all the key mega trends and still provide stability, good cash flow, dividend, etc., a more realistic approach in the current uncertain time is to focus on stock picks.
  • The STI accumulate stocks for longer term investors.
  • With the recent sell-down due to trade tensions, we are opting to be more prudent and have included several defensive stocks with good dividend yields into the list.


Singapore Stock Picks


Singapore Stocks Price ($)
17 Jul 18
Fair Value ($) Upside (%) Rating
1 CAPITALAND LIMITED (SGX:C31)  Capitaland (SGX:C31) Share Price  Capitaland (SGX:C31) Target Price  Capitaland (SGX:C31) Analyst Reports  Capitaland (SGX:C31) Corporate Actions  Capitaland (SGX:C31) Announcements  Capitaland (SGX:C31) Latest News  Capitaland (SGX:C31) Blog Articles 3.07 4.26 39 Buy
2 DBS GROUP HOLDINGS LTD (SGX:D05)  DBS (SGX:D05) Share Price  DBS (SGX:D05) Target Price  DBS (SGX:D05) Analyst Reports  DBS (SGX:D05) Corporate Actions  DBS (SGX:D05) Announcements  DBS (SGX:D05) Latest News  DBS (SGX:D05) Blog Articles 26.01 32.67 26 Buy
3 FRASERS CENTREPOINT TRUST (SGX:J69U)  Frasers Centrepoint Trust (SGX:J69U) Share Price  Frasers Centrepoint Trust (SGX:J69U) Target Price  Frasers Centrepoint Trust (SGX:J69U) Analyst Reports  Frasers Centrepoint Trust (SGX:J69U) Corporate Actions  Frasers Centrepoint Trust (SGX:J69U) Announcements  Frasers Centrepoint Trust (SGX:J69U)Latest News  Frasers Centrepoint Trust (SGX:J69U) Blog Articles 2.21 2.49 13 Buy
4 FRASERS LOGISTICS & IND TRUST (SGX:BUOU)  Frasers Logistics Trust (SGX:BUOU) Share Price  Frasers Logistics Trust (SGX:BUOU) Target Price  Frasers Logistics Trust (SGX:BUOU) Analyst Reports  Frasers Logistics Trust (SGX:BUOU) Corporate Actions  Frasers Logistics Trust (SGX:BUOU) Announcements  Frasers Logistics Trust (SGX:BUOU)Latest News  Frasers Logistics Trust (SGX:BUOU) Blog Articles 1.05 1.21 15 Buy
5 KEPPEL CORPORATION LIMITED (SGX:BN4)  Keppel Corp (SGX:BN4) Share Price  Keppel Corp (SGX:BN4) Target Price  Keppel Corp (SGX:BN4) Analyst Reports  Keppel Corp (SGX:BN4) Corporate Actions  Keppel Corp (SGX:BN4) Announcements  Keppel Corp (SGX:BN4) Latest News  Keppel Corp (SGX:BN4) Blog Articles 6.68 9.40 41 Buy
6 MAPLETREE NORTH ASIA COMM TR (SGX:RW0U)  Mapletree North Asia Commercial Trust (SGX:RW0U) Share Price  Mapletree North Asia Commercial Trust (SGX:RW0U) Target Price  Mapletree North Asia Commercial Trust (SGX:RW0U) Analyst Reports  Mapletree North Asia Commercial Trust (SGX:RW0U) Corporate Actions  Mapletree North Asia Commercial Trust (SGX:RW0U) Announcements  Mapletree North Asia Commercial Trust (SGX:RW0U)Latest News  Mapletree North Asia Commercial Trust (SGX:RW0U) Blog Articles 1.16 1.42 22 Buy
7 SATS LTD. (SGX:S58)  SATS (SGX:S58) Share Price  SATS (SGX:S58) Target Price  SATS (SGX:S58) Analyst Reports  SATS (SGX:S58) Corporate Actions  SATS (SGX:S58) Announcements  SATS (SGX:S58) Latest News  SATS (SGX:S58) Blog Articles 5.08 5.50 8 Buy
8 SINGAPORE TECH ENGINEERING LTD (SGX:S63)  ST Engineering (SGX:S63) Share Price  ST Engineering (SGX:S63) Target Price  ST Engineering (SGX:S63) Analyst Reports  ST Engineering (SGX:S63) Corporate Actions  ST Engineering (SGX:S63) Announcements  ST Engineering (SGX:S63) Latest News  ST Engineering (SGX:S63) Blog Articles 3.39 3.90 15 Buy
9 SINGTEL (SGX:Z74)  SingTel (SGX:Z74) Share Price  SingTel (SGX:Z74) Target Price  SingTel (SGX:Z74) Analyst Reports  SingTel (SGX:Z74) Corporate Actions  SingTel (SGX:Z74) Announcements  SingTel (SGX:Z74) Latest News  SingTel (SGX:Z74) Blog Articles 3.27 4.10 25 Buy
10 UNITED OVERSEAS BANK LTD (SGX:U11)  UOB (SGX:U11) Share Price  UOB (SGX:U11) Target Price  UOB (SGX:U11) Analyst Reports  UOB (SGX:U11) Corporate Actions  UOB (SGX:U11) Announcements  UOB (SGX:U11) Latest News  UOB (SGX:U11) Blog Articles 25.92 31.02 20 Buy
11 UOL GROUP LIMITED (SGX:U14)  UOL Group (SGX:U14) Share Price  UOL Group (SGX:U14) Target Price  UOL Group (SGX:U14) Analyst Reports  UOL Group (SGX:U14) Corporate Actions  UOL Group (SGX:U14) Announcements  UOL Group (SGX:U14) Latest News  UOL Group (SGX:U14) Blog Articles 6.85 8.48 24 Buy




Carmen Lee OCBC Investment Research | https://www.iocbc.com/ 2018-07-18
SGX Stock Analyst Report BUY Maintain BUY 4.260 Same 4.260
BUY Maintain BUY 32.670 Same 32.670
BUY Maintain BUY 2.490 Same 2.490
BUY Maintain BUY 1.210 Same 1.210
BUY Maintain BUY 9.400 Same 9.400
BUY Maintain BUY 1.42 Same 1.42
BUY Maintain BUY 5.500 Same 5.500
BUY Maintain BUY 3.900 Same 3.900
BUY Maintain BUY 4.100 Same 4.100
BUY Maintain BUY 31.020 Same 31.020
BUY Maintain BUY 8.480 Same 8.480



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