Singapore Market Focus - DBS Research 2019-11-22: To Deal Or Not To Deal?

Singapore Market Focus - DBS Research | SGinvestors.io SHENG SIONG GROUP LTD (SGX:OV8) KOUFU GROUP LIMITED (SGX:VL6) SINGAPORE TECH ENGINEERING LTD (SGX:S63) CDL HOSPITALITY TRUSTS (SGX:J85) MANULIFE US REIT (SGX:BTOU)

Singapore Market Focus - To Deal Or Not To Deal?

  • 3Q19 results season - Negative earnings revisions of -1.5% for FY19F and -1.7% for FY20F.
  • STI pullback support at 3175-3145, upside to 3320 by year-end if Phase 1 deal can be inked this year.
  • Barbell strategy for stock picks.



A less disappointing quarter



Earnings in ‘technical recession’; Further cut in earnings; REITs remain resilient

  • Stocks under our coverage saw negative earnings revisions of -1.5% for FY19F and -1.7% for FY20F. With revisions of -2.2% for FY19F and -1.3% for FY20F in 2Q, the earnings revision trend has slipped into a ‘technical recession’. Going forward, we expect the earnings revision trend to be either less negative or turn slightly positive if a US-China ‘Phase 1’ deal can be signed.
  • Earnings cut for consumer services, O&G, technology and real estate.
  • Banking mixed: Raise FY19F earnings by 2%, cut FY20F earnings by 2% in anticipation of NIM pressure from lower interest rates and competitive pricing pressure (UOB, OCBC (SGX:O39))
  • REITs positive: Maintained FY19 earnings and raised FY20 earnings by 3% on the back of additional acquisitions (MAPLETREE LOGISTICS TRUST (SGX:M44U), MAPLETREE INDUSTRIAL TRUST (SGX:ME8U), KEPPEL DC REIT (SGX:AJBU)), and resilient occupancy rates and positive rental reversions (MANULIFE US REIT (SGX:BTOU)).


STI pullback support at 3175-3145.

  • The current November pullback from 3285 high is within STI’s seasonal trend behaviour. After much positive anticipation, the correction is triggered by concerns that a US-China Phase 1 deal may miss the 15 December US tariff deadline. At 3200, STI trades at 12.3x (-0.75SD) FY20F PE. Technical support is at 3175 and 3145, we think the 3175 level should hold.
  • While the outcome remains unclear, we believe that if a Phase 1 deal is inked this year, there should be upside to 3320 or slightly above by year-end.


Barbell strategy.






Kee Yan YEO CMT DBS Group Research | Janice CHUA DBS Research | https://www.dbsvickers.com/ 2019-11-22
SGX Stock Analyst Report BUY MAINTAIN BUY 1.320 SAME 1.320
BUY MAINTAIN BUY 0.880 SAME 0.880
BUY MAINTAIN BUY 4.640 SAME 4.640
BUY MAINTAIN BUY 1.800 SAME 1.800
BUY MAINTAIN BUY 1.100 SAME 1.100



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