Singapore Recession Resistant Stocks To Buy
COMFORTDELGRO CORPORATION LTD
SGX:C52
DAIRY FARM INT'L HOLDINGS LTD
SGX:D01
NETLINK NBN TRUST
SGX:CJLU
SHENG SIONG GROUP LTD
SGX:OV8
SIA ENGINEERING CO LTD
SGX:S59
SINGTEL
SGX:Z74
SINGAPORE TECH ENGINEERING LTD
SGX:S63
Stock Strategy Singapore - Buckle Up For A Rough Ride
#3 ~ Domestic and recession-resistant stocks to ride a cautious 3Q18
- With a cautious tone set for 3Q that could stretch through the entire 2H18, on the back of rising interest rates, a strengthening USD and the rise of the trade war issues, we stay defensive and avoid stocks affected by the trade war, preferring domestic consumption plays.
- Against this backdrop, we sieve for stocks that are less cyclical in nature, and meet most of the criteria:-
- a consistent and satisfactory level of dividend payouts;
- net cash position,
- decent growth of at least 5% going forward, and
- domestic consumption plays.
- Stocks that fit these criteria are mainly consumer stocks – Dairy Farm, Sheng Siong; Transport & related – ComfortDelgro and SIA Engineering; Defence – ST Engineering; and Telecommunication & related stocks – Singtel and Netlink Trust.
ComfortDelgro
- With competition in taxi/ private hire cars industry ceding, we believe downside risks are limited, coupled with its public transport exposure which is relatively resilient through economic cycles. We have upgraded our recommendation for ComfortDelGro to BUY from HOLD, and a revised Target Price of S$2.59, on the back of:
- bottoming out in taxi fleet contraction in Singapore with potential increase;
- earnings upside revision from further acquisitions.
- Looking into 2Q18, while we still expect the group to post y-o-y declines in profits, we expect them to be of a smaller magnitude vis-à-vis that seen in 1Q18, suggesting improvement in operations. We project operations to improve sequentially in 2H18, reversing back into growth profile in FY19F.
- With its strong balance sheet and operating cashflow, dividend yield is projected at 4.6% for FY18F.
- COMFORTDELGRO CORPORATION LTD (SGX:C52) ComfortDelGro (SGX:C52) Share Price ComfortDelGro (SGX:C52) Target Price ComfortDelGro (SGX:C52) Analyst Reports ComfortDelGro (SGX:C52) Corporate Actions ComfortDelGro (SGX:C52) Announcements ComfortDelGro (SGX:C52) Latest News ComfortDelGro (SGX:C52) Blog Articles
Dairy Farm
- We turn more positive on Dairy Farm International’s recent deal with Robinson’s Retail Holdings Inc. (RRHI) to spin off Rustan Supercenter Inc. for an 18% stake in RRHI. We assess that the deal will add US$0.23 to our Target Price, raising it to US$9.77.
- We see the 18% stake in RRHI translating into an immediate net value for Dairy Farm International as Rustan is still incurring losses, and hence swapping a loss- making business into shares of RRHI would present upside to both earnings and Target Price.
- Current share price ex-Yonghui and RRHI values Dairy Farm International’s core business at just 18x forward PE, below the regional peers’ average and its 9-year historical average forward PE of 24x.
- DAIRY FARM INT'L HOLDINGS LTD (SGX:D01) Dairy Farm (SGX:D01) Share Price Dairy Farm (SGX:D01) Target Price Dairy Farm (SGX:D01) Analyst Reports Dairy Farm (SGX:D01) Corporate Actions Dairy Farm (SGX:D01) Announcements Dairy Farm (SGX:D01) Latest News Dairy Farm (SGX:D01) Blog Articles
NetLink Trust
- We believe that NetLink NBN Trust's (NLT) FY19F yield of c.6.4% remains highly attractive given the low volatility in its share price and we argue that it should trade at FY19F yield of 4.9% (versus 6.4% now) reflecting lower earnings volatility and ample debt headroom for future growth. NLT’s business environment is less volatile as 92% of its businesses are regulated.
- Projected FY19F total debt-to-EBITDA ratio of 2.7x is much lower than the 5.3x average for Business Trusts in Singapore/Hong Kong, implying room for higher growth by optimising its capital structure.
- NETLINK NBN TRUST (SGX:CJLU) NetLink Trust (SGX:CJLU) Share Price NetLink Trust (SGX:CJLU) Target Price NetLink Trust (SGX:CJLU) Analyst Reports NetLink Trust (SGX:CJLU) Corporate Actions NetLink Trust (SGX:CJLU) Announcements NetLink Trust (SGX:CJLU) Latest News NetLink Trust (SGX:CJLU) Blog Articles
Sheng Siong
- We remain positive on Sheng Siong as we see growth led by improving margins. We believe expansion of its distribution centre will continue and the company will sustain gross margins going forward. Margins remain on the uptrend – supported by the increase in direct sourcing, bulk handling, and fresh mix – contributing to earnings growth.
- Stock is trading attractively at 21.9x FY18F PE, compared to its historical average of 23x since listing. Yield is decent at 3.2%.
- SHENG SIONG GROUP LTD (SGX:OV8) Sheng Siong (SGX:OV8) Share Price Sheng Siong (SGX:OV8) Target Price Sheng Siong (SGX:OV8) Analyst Reports Sheng Siong (SGX:OV8) Corporate Actions Sheng Siong (SGX:OV8) Announcements Sheng Siong (SGX:OV8) Latest News Sheng Siong (SGX:OV8) Blog Articles
SIA Engineering
- SIA Engineering’s (SIE) forward PE and P/BV ratios are below - 1SD levels, which we view as a buy-in opportunity, as there are some positive earnings drivers ahead:
- an upswing in the engine MRO cycle is already underway, with workload boosted further by visits from the problematic Trent 1000 engines (whose repair campaign could last up to 2-3 years);
- cabin retrofitting work on Singapore Airlines's (SIA) legacy A380s is expected to come in at the end of 2018;
- the new GE facility which should be operational in 2019 or early 2020 has the potential to be a large contributor to JV/associate income;
- expansion of the line maintenance segment in Japan (with a view towards other countries as well) could help drive the top line.
- SIA ENGINEERING CO LTD (SGX:S59) SIA Engineering (SGX:S59) Share Price SIA Engineering (SGX:S59) Target Price SIA Engineering (SGX:S59) Analyst Reports SIA Engineering (SGX:S59) Corporate Actions SIA Engineering (SGX:S59) Announcements SIA Engineering (SGX:S59) Latest News SIA Engineering (SGX:S59) Blog Articles
Singtel
- We expect Singtel’s earnings to rebound by FY20F, driven by the potential earnings recovery of Bharti (earnings recovery may be delayed to FY21F under our bear-case scenario for Bharti). Excluding market cap of its associates, Singtel’s core business is trading at only 5.5x FY19F EV/EBITDA, at ~15-20% discount to its local peers.
- With 5.7% yield, we see potential risk of -4% vs potential reward of +26%.
- 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
ST Engineering
- ST Engineering’s (STE) recent share price retreat ex-final dividend payout is a good buying opportunity for patient investors. We like STE for a combination of factors:
- award of some of the larger contracts that STE is vying for (e.g. US Postal Service vehicle contract and US Marine Corps contract) are expected to be announced in 2018, providing potential upside catalysts if STE (and partners) are chosen;
- improved visibility from STE’s target to more than double smart city revenues by 2022 and grow other segment revenues at 2-3x the global GDP growth rate;
- Aerospace segment rebound, with margins improving this year on stronger CFM engine MRO demand, and in the longer term, sizeable contribution expected from P2F programmes currently in ramp-up phase;
- expected deliveries of the two problematic ConRo vessels in 2Q/3Q18 which should help shipbuilding turn profitable, though it is slightly later than expected. Meanwhile, dividend yield is around 4.6%, which should provide support to the stock price.
- 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
Read Also:
Stock Strategy Singapore - Buckle Up For A Rough Ride #1 ~ 1H18 Review & 2H18 Outlook
Stock Strategy Singapore - Buckle Up For A Rough Ride #2 ~ Trade On Rebound
Stock Strategy Singapore - #3 Domestic And Recession-Resistant Stocks To Ride A Cautious 3Q18
Janice CHUA
DBS Group Research Research
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Kee Yan YEO CMT
DBS Research
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Lee Keng LING
DBS Research
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https://www.dbsvickers.com/
2018-07-04
SGX Stock
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