COMFORTDELGRO CORPORATION LTD (SGX:C52)
Navigating Singapore - Keep Calm & Trade On ~ 2018 In 10 Seconds
It was good until May…
- Up until May 18, the Singapore market was still performing range-bound as the market tried to find its footing as it assessed the impact of the tit-for-tat tariff announcements made in Mar 18.
- Corporate earnings were still strong in 4Q17 and 1Q18 with net 3.3% in overall upgrade in earnings for CY18. We believe the index was further supported by the rising oil prices, which surpassed US$75/bbl in May 18.
… and then the property curve ball landed.
- The expected quiet equity market due to the FIFA World Cup was dampened by the unexpected property cooling measure introduced by the Singapore government in Jul.
- After warning of “market exuberance” for a good six months, the government announced a slew of property curbs. These include raising Additional Buyer’s Stamp Duty (ABSD) rates by 5% pts to 12-20% for investment residential property purchases for individuals and tightened Loan-to-Value (LTV) limits by 5% pts to 35-75% for the first or more housing loans. See Measures To Cool The "Euphoria" in Singapore Property Market.
- The aim of these measures was to curb excessive property price increases (and en-bloc fever) which caught the whole market by surprise. This also vapourised the general thesis of replacement demand from en-bloc market for the property developers and plagued banks’ mortgage loan growth beyond 2018.
Bad was not bad enough.
- Multiplier effects of trade tensions started to unfold as emerging market currencies collapsed, followed by the imposition of more tariffs. The earnings cut cycle also started to intensify from the 2Q18 earnings season up to the recent 3Q18. It was almost a bloodbath with earnings cuts across all sectors under our coverage.
- The cracks from trade tensions became more apparent and widened. The already beaten-down/perceived to be defensive SingTel (SGX:Z74) missed expectations across the board, dragged by forex and regional pressure and a lethargic home market.
Other hot topics in Singapore and stocks implication
Mar 18: Uber exits Southeast Asia.
- Uber threw in the towel by agreeing to sell the ride-hailing business in Southeast Asia to Grab. This spurred a 30% increase in ComfortDelgro (SGX:C52) to its YTD peak in May 18 as competition was perceived to be easing.
Apr 18: Phillip Morris ripple.
- Phillip Morris (PM) revealed in its 1Q18 earnings call that its IQOS devices in Japan were selling slower than its ambitious expectations as early adopters have already been converted to this product. Different deduction and guessing methodologies were used in the market to ascertain PM’s contribution to Venture Corporation (SGX:V03)’s revenue. With no clarity given by the company, the share price took a hit following the above news and wiped out its 1Q18 gain of more than 30%.
May 18: Off-screen Starhub.
- Starhub (SGX:CC3) was removed from MSCI Singapore following the announcement that the Discovery brand channels will no longer be part of the screening offerings due to an impasse in negotiations. The share price hit a nine-year low.
Sep 18: M1’s pre-conditional VGO and KTT’s privatisation.
- Keppel Corp (SGX:BN4) and Singapore Press Holdings (SGX:T39) made a pre-conditional Voluntary General Offer (VGO) for all M1 (SGX:B2F) shares at S$2.06/share in cash. M1 is highly likely to be de-listed upon offer closing by Jan 19.
- Concurrently, Keppel Corp also took private Keppel Telecommunications & Transportation (SGX:K11) at S$1.91/share.
LIM Siew Khee
CGS-CIMB Research
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https://research.itradecimb.com/
2018-11-29
SGX Stock
Analyst Report
2.740
SAME
2.740
CGS-CIMB Research 2019 Singapore Strategy: Keep Calm & Trade On
Navigating Singapore ~ 2018 In 10 Seconds
Navigating Singapore ~ Looking To 2019
Navigating Singapore ~ 2019 Sector Allocation & Market Valuation
Navigating Singapore ~ Analysts Top Picks 2019
CGS-CIMB Research 2019 Singapore Sector Outlook
Banks - OVERWEIGHT
Capital Goods - OVERWEIGHT
Commodities - NEUTRAL
Consumer / Gaming - OVERWEIGHT
Healthcare Sector & Others ~ UNDERWEIGHT
Property Sector - OVERWEIGHT From Neutral
SREITs - OVERWEIGHT
Tech/Manufacturing Sector - NEUTRAL
Telcos - UNDERWEIGHT
Transport Sector - NEUTRAL
