Singapore Strategy 2019 - RHB Invest 2019-01-23: Investors Seeking Defensive Stocks

Singapore Strategy 2019 - RHB Investment Research | SGinvestors.io SINGAPORE TECH ENGINEERING LTD (SGX:S63) COMFORTDELGRO CORPORATION LTD (SGX:C52) FU YU CORPORATION LTD (SGX:F13) SILVERLAKE AXIS LTD (SGX:5CP)

Singapore Strategy 2019 - Investors Seeking Defensive Stocks

Banks and REITs are finding favour with investors.

  • During our recent Singapore equity strategy investor meetings in Malaysia and Singapore, we found investors agreeing with our stance of building defensive positions in Singapore.
  • Banks are preferred for their more reasonable valuations and high dividend yields.
  • REITs are also a favourite as investors are expecting a more benign interest rate environment in 2019.



Investors agree that STI’s valuation looks inexpensive.

  • While Indonesia and Philippines were the most preferred ASEAN markets, investors agreed that STI’s forward P/E of 12.3x (at -1SD), +4% index EPS growth, and expectations of gradual appreciation in the SGD against the USD made Singapore an inexpensive market to invest in.


Macro risks from trade war escalation and slowdown in China were key concerns.

  • Downside risk to Singapore’s 2019 GDP growth and STI Index’s EPS growth from worsening trade tensions between the US and China, as well sharp slowdown in China’s economic growth were the key macroeconomic risks that investors were concerned about.


ST Engineering favoured for earnings growth; Queries on ComfortDelGro were on likelihood of an upside earnings surprise.

  • SINGAPORE TECH ENGINEERING LTD (SGX:S63) found favour among investors for its +13% earnings growth. Recent recovery in its Marine orderbook was also viewed positively.
  • Questions on COMFORTDELGRO CORPORATION LTD (SGX:C52) were on the likelihood of a positive earnings surprise given that competition from Gojek has not been as strong as previously expected, and given the possibility of strong earnings contribution from its acquisitions in 2018. We rate ComfortDelGro as NEUTRAL as we expect its Singapore taxi business to remain under pressure at least in 1H19.


We rate banks, REITs and consumer sectors as OVERWEIGHT.

  • Amidst elevated macroeconomic risks, we continue to recommend investors stay selective and focus on stocks that offer stable earnings, strong balance sheets, and sustainable dividends. Consumer and industrial are our defensive sector picks. OVERWEIGHT on banks given strong growth and high yields.
  • We prefer REITs that are beneficiaries of improving economic activity, and/or have strong balance sheets (see our 2019 Singapore Strategy).


Although preference was for large caps, investors were interested in quality Small-Mid caps.



See Also






Shekhar Jaiswal RHB Securities Research | https://www.rhbinvest.com.sg/ 2019-01-23
SGX Stock Analyst Report BUY MAINTAIN BUY 3.970 SAME 3.970
NEUTRAL MAINTAIN NEUTRAL 2.350 SAME 2.350
BUY MAINTAIN BUY 0.230 SAME 0.230
BUY MAINTAIN BUY 0.650 SAME 0.650



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