July 2019 Wrap Up - CGS-CIMB Research 2019-08-01: Singapore In 5 Mins

SEMBCORP MARINE LTD (SGX:S51)

July 2019 Wrap Up - Singapore In 5 Mins

FSSTI was -0.5% m-o-m after a month-end sell down.
We are in the midst of 2Q19 reporting with more companies missing the mark. DBS (SGX:D05) and Sembcorp Marine (SGX:S51) contrast each other with positive/negative surprises.
Top picks: ComfortDelGro (SGX:C52), Keppel Corp (SGX:BN4), UOL Group (SGX:U14), UOB (SGX:U11), CapitaLand Commercial Trust (SGX:C61U), Mapletree Commercial Trust (SGX:N2IU), Suntec REIT (SGX:T82U), CSE Global (SGX:544), Frencken Group (SGX:E28) and Riverstone (SGX:AP4).
Our fundamental FSSTI target is at 3,275 (12.5x CY20F P/E).

The FSSTI closed at 3,305.12pts, down 0.5% m-o-m, after a month-end sell down.
US GDP and non-farm payrolls came in above consensus forecasts. Trade tensions continue to dominate, with China’s PMI contracting for the third consecutive month at 49.7.
Singapore’s real GDP grew 0.1% y-o-y in 2Q19 (+1.1% y-o-y in 1Q19) but was down 3.4% q-o-q seasonally adjusted annual rate (SAAR) (+3.8% q-o-q SAAR in 1Q19), as all major segments contracted q-o-q SAAR.
IPI declined by 6.9% y-o-y, weighed down by Electronics, Chemicals and Transport Engineering.
Home prices unexpectedly rose by 1.3% for 2Q19. Jun private home sales were up 25.5% y-o-y but down 13.8% m-o-m. Both prices and number of units sold are at their 5th and 6th year highs, respectively.
5M19 tourist arrivals (+1.5% y-o-y) and revenue per available room (RevPAR, flat y-o-y at S$185) missed our forecasts of 3% and 2.5% respectively for the full-year.

Only Consumer Goods and Financials closed in positive territory in Jul. The biggest sector underperformers were Maritime, Telcos and Oil & Gas. There were net fund outflows for the preceding four weeks. See SGX Market Fund Flow Overview.
Top index performers were Wilmar International (SGX:F34) (see below), Dairy Farm (SGX:D01) and SIA (SGX:C6L), while the laggards were Jardine Strategic (SGX:J37), Singapore Press Holdings (SGX:T39) (declining revenue) SATS (profit taking, high valuations).
Mid-large cap gainers were; Wilmar International, Delong Holdings (SGX:BQO) with the revival of a privatisation offer, OUE Commercial REIT (SGX:TS0U) on the prosed merger with OUE Hospitality Trust (SGX:SK7), while Sembcorp Marine declined on poor results.
Institutional investors moved out of Telcos, Consumer Discretionary, Financials, Industrials and REITS, with marginal inflows into Consumer Staples. Retail investors sold Telcos, Consumer Staples, Financials and Real Estate, adding IT and Materials. See SGX Market Fund Flow By Industry Sector.

Midway through the reporting season, we see more companies buffeted by challenging global macro conditions, with the positive-negative earnings surprise ratio standing at 3:8.
DBS led the way with positive surprise, on higher NIM, stronger treasury income and wealth.
Sembcorp Marine missed on operating leverage.
More REITs were downgraded on steep valuations.

ESR-REIT (SGX:J91U) announced the proposed acquisition of 49% of PTC Logistics Hub for S$44.4m and two proposed AEIs for S$45.7m.
CapitaLand (SGX:C31) will sell its entire stakes in three shopping malls in China for Rmb2.96bn (S$589.2 m) to CapitaLand Retail China Trust (SGX:AU8U). It has also completed its acquisition of Ascendas and Singbridge.
Wilmar International’s China subsidiary, Yihai Kerry Arawana, had its application to list on the Shenzhen Stock Exchange approved.

The failure to break > 3,400 psychological resistance in Jul suggests growing weakness. More importantly, the sharp selloff on 31 Jul at the end of the month closed below the 20-day moving average and bottom end of range (3,334) indicate an immediate bearish shift in sentiment.
The last time price closed below the 20-day moving average was on 6 May which accelerated a selloff with STI falling -5% over the next four weeks. Hence, the current sharp selloff could signal a similar bearish trend towards 3,200 support followed by 3,150.
The STI also seemed to be forming an immediate double top formation off the 3,381 resistance area, which suggests more downside.

LIM Siew Khee CGS-CIMB Research | https://research.itradecimb.com/ 2019-08-01

SGX Stock Analyst Report REDUCE MAINTAIN REDUCE 1.160 SAME 1.160