Singapore Stock Recommendation
Stock Pick 2018 H2
UNITED OVERSEAS BANK LTD
SGX:U11
KEPPEL CORPORATION LIMITED
SGX:BN4
CITY DEVELOPMENTS LIMITED
SGX:C09
SATS LTD.
SGX:S58
YANGZIJIANG SHIPBLDG HLDGS LTD
SGX:BS6
APAC REALTY LIMITED
SGX:CLN
CDL HOSPITALITY TRUSTS
SGX:J85
Stock Strategy Singapore - Buckle Up For A Rough Ride
#2 Trade on Rebound
Possible rebound after rapid sell-down to attractive valuations
- While trade war uncertainties continue to boil, we believe that the stock market is oversold in the short term and a tactical bounce is close. At today’s level, the STI has priced in earnings cut of 11% over the next twelve months. We think the equity market should take a pause from the recent selldown on possible short-term bargain hunting and short-covering activities in July.
- June was all about the flexing of US’s trade war arsenal, July could see some degree of trade negotiations that provide relief. The 2Q results season that starts soon should also provide a distraction as focus turns to corporate earnings.
- On a side note, we think the World Cup lull period has just ended as the Round-of-16 has begun. Watching three matches per night has a major impact on sleep deprivation compared to one match per night. In our view, soccer fans are likely to return as short-term bargain hunters as valuation has fallen to an attractive level.
- We offer a list of stocks to trade the rebound based on the following criteria :
- Share price decline of >10% from May selldown,
- attractive valuations,
- large caps with decent liquidity,
- specific catalysts to drive share price.
Stocks to buy on rebound
| Stock |
PE 18F |
PE 19F |
Comments |
UOB
BUY
TP: S$33.20
24% upside |
10.6x |
9.6x |
- Higher dividends are here to stay (full-year dividend of S$1/share) with potential upside to dividends.
- Expect SOR/SIBOR uptrend to translate positively to NIM.
- Stock is currently trading at c. 1.2x P/BV, below its 10-year average of c. 1.3x P/BV offering c. 3.7% dividend yield.
|
Keppel Corporation
BUY
TP: S$10.20
43% upside |
13.0x |
10.6x |
- Keppel’s property segment remains undervalued, notwithstanding Keppel’s huge historical land bank of over 6m sqm held at a low cost; O&M segment is on the cusp of recovery.
- We expect decent 2Q18 profits of S$200- 250m, lifted by potential disposal gains of c.S$70m.
- Decent dividend yield of ~3%.
|
City Development
BUY
TP: S$15.40
41% upside |
12.6x |
11.9x |
- Largest pipeline of residential units to be launched with close to 3,000 residential units in the pipeline.
- Good track record with strong take-up rates of its recent launches such as New Futura (84% sold as at 1Q18) and The Tapestry (73% sold as at 1Q18).
- Key catalysts:
- strong take-up rates achieved for upcoming launches such as South Beach Residences, West Coast Vale and Former Boulevard Hotel site,
- improved RevPAR and rental rates from its investment properties, and
- ithe successful launch of its first private fund under its fund management segment.
- Share price has fallen some 20% from the recent peak, close to the share price before the change in sentiment on Singapore Property. Currently trading at 1x FY18F P/BV vs its historical peak of 1.3x.
|
SATS*
BUY
TP: S$5.64
13% upside
* FY 19 & 20 forecasts |
20.5x |
19.5x |
- Changi’s air and passenger traffic growth of +5% y-o-y YTD, and cargo growth of 4% y-o- y YTD will see continued support for earnings growth in FY19F.
- Long-term growth drivers stem from
- passenger and air traffic growth at Changi Terminal 4;
- automation and staff productivity driving modest cost increase and better margins in the next few years;
- the development of a flight kitchen in Turkey; and
- the opening of Terminal 5.
- Stock currently trades at a dividend yield of3.6%, a YTD high.
|
Yangzijiang
BUY
TP: S$1.82
101% upside |
8.2x |
7.3x |
- Rock-bottom valuation of 0.6x P/BV, which is at a ~30% discount to global peers’ average P/BV of 0.9x, notwithstanding its attractive 5% yield and higher ROE of 8-9% vs peers’ 4-5%.
- Yangzjiang prudently made provisions in 4Q17, taking into account the lower USD at 6.15 Rmb and higher steel cost of Rmb4,800/t. With the strengthening USD to 6.65Rmb, every Rmb0.10 increase is expected to result in Rmb300m writebacks upon delivery of vessels.
- For 2Q18, we expect Yangzijiang to deliver core shipbuilding margins of 17%, similar to 1Q18, bolstered by a stronger USD and deliveries of higher margin mega containerships. This should reignite confidence into the stock.
|
CDL Hospitality
BUY
TP: S$2.00
27% upside |
20.2x |
19.1x |
- Leveraged to multi-year upturn – We remain bullish on CDREIT post its recent correction given its leverage to the expected multi-year upturn in the Singapore hospitality market given limited new supply over the next three years. Evidence of the rebound can be seen by the 4.7% y-o-y increase in revenue per available room (RevPAR) year to date (up to end-April 2018).
- Trading below replacement costs – Based on the current share price, the implied CDREIT’s Singapore portfolio is valued at c.S$650,000 per key which is at the bottom end of recent sale of hotels of between S$650,000 and S$1m per key and replacement costs of at least $700,000 per key.
- Attractive yield – CDREIT offers an attractive 6.5% yield growing at CAGR of 6% per annum over the next three years.
|
APAC Realty
BUY
TP: S$1.22
47% upside |
9.8x |
9.1x |
- Current valuation is attractive at 9.5x forward PE or -1.5SD, which is even lower than the c.10x forward PE when it was listed in Sep'17.
- APAC is one of the purest proxies to ride on the uptrend in the Singapore property market.
- 2H18 earnings are expected to be stronger with more projects slated for launch.
- Low risk fee-based business model enables APAC to ride on the property upcycle and protects it in a down cycle.
- Recent acquisition of an office headquarters allows the group to build recurring rental income.
|
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2018-07-04
SGX Stock
Analyst Report
BUY
Maintain
BUY
33.200
Same
33.200
BUY
Maintain
BUY
10.200
Same
10.200
BUY
Maintain
BUY
15.400
Same
15.400
BUY
Maintain
BUY
5.640
Same
5.640
BUY
Maintain
BUY
1.820
Same
1.820
SGX Stock
Analyst Report
BUY
Maintain
BUY
1.220
Same
1.220
BUY
Maintain
BUY
2.000
Same
2.000
