CDL HOSPITALITY TRUSTS (SGX:J85)
MAPLETREE COMMERCIAL TRUST (SGX:N2IU)
SHENG SIONG GROUP LTD (SGX:OV8)
Singapore Market Strategy - Diversion Is Just A Few Clicks Away
- STI supported at 3000-3060, 3170 caps near-term bounce.
- STI component review – Hutchison Port Holdings Trust (SGX:NS8U) likely to exit, while Mapletree Commercial Trust (SGX:N2IU), Mapletree Logistics Trust (SGX:M44U) or Suntec REIT (SGX:T82U) are possible entry candidates.
- FSTRE EPRA NAREIT Developed Asia Index to include Frasers Centrepoint Trust (SGX:J69U), Ascott Residence Trust (SGX:A68U), Keppel DC REIT (SGX:AJBU).
- HK/Japan traveller diversion to benefit CDL Hospitality Trusts (SGX:J85), Far East Hospitality Trust (SGX:Q5T) and OUE Hospitality Trust (SGX:SK7).
Rates heading lower
- The FED is expected to lower FED funds rate by 25bps to 2%, with consensus seeing another cut by year-end to 1.75%. No breakthrough is seen in the upcoming US-China trade talks as both sides are sticking to their stand.
- With tariffs set to go higher on both sides, our currency strategist sees USDCNY and USDSGD heading to 7.20 and 1.42, respectively, by year-end.
Valuation & yield support
- Singapore market currently trades at 11.7x (- 1.25SD) 12-mth forward PE and 1.06x P/B (-1.5SD). The PE and PB valuations relative to their 10-year history are the most attractive among regional bourses. Furthermore, Singapore market offers the highest yield at 3.91%.
- Despite trade uncertainties, we expect a calmer September with support at 3000~3060 for the STI.
Traveller diversion is just a few clicks away
- We think Singapore’s hospitality sector has only just started to feel the benefit of ‘traveller diversion’ away from HK (due to the ongoing protests) and Japan (due to Korean tourists’ boycott) into ASEAN in the short-term.
- According to STR, Singapore’s July hotel occupancy rose 1.9ppts to a record high of 91.9% while RevPAR gained 2.4% to S$246.8. Meanwhile, Hong Kong’s hotel RevPAR plunged 12.9% to HK$970.42. The October Golden Week could see more Chinese travellers diverting to Singapore.
- In addition, the year-end holiday season is just 3 months away. CDL Hospitality Trusts (SGX:J85) is the hospitality REIT leader. Other hospitality REITs to benefit are Far East Hospitality Trust (SGX:Q5T) and OUE Hospitality Trust (SGX:SK7).
- See also report: Singapore Hospitality & Leisure - Where Will HK’s 5.8m Tourists Go?
Index review
- Adjustments to the STI component and FSTRE EPRA Nareit Index semi-annual reviews will be known this week. For the STI, we see Hutchison Port Holdings Trust (SGX:NS8U) as a likely candidate for removal while either Mapletree Commercial Trust (SGX:N2IU), Mapletree Logistics Trust (SGX:M44U) or Suntec REIT (SGX:T82U) could be selected for inclusion.
- Meanwhile, Frasers Centrepoint Trust (SGX:J69U) is a prime candidate for inclusion to the FSTRE EPRA Nareit Developed Asia Index, having met all the qualification criteria. Ascott Residence Trust (SGX:A68U) and Keppel DC REIT (SGX:AJBU) are other possible candidates.
Staying with defensive and yield stocks
- With more tariffs kicking in, a breakthrough is unlikely during the September trade talks and the trade war is likely to prolong, we continue to favour defensive and yield stocks.
- Our picks are
- See attached PDF for complete analysis and recommendations.
Kee Yan YEO
DBS Group Research
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Janice CHUA
DBS Research
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https://www.dbsvickers.com/
2019-09-02
SGX Stock
Analyst Report
1.800
SAME
1.800
2.250
SAME
2.250
1.320
SAME
1.320
