Singapore Monthly Strategy (November 2019) - DBS Research 2019-11-01: Less Cloudy Ahead

Singapore Strategy - DBS Research | SGinvestors.io UNITED OVERSEAS BANK LTD (SGX:U11) CDL HOSPITALITY TRUSTS (SGX:J85) FAR EAST HOSPITALITY TRUST (SGX:Q5T) ASCOTT RESIDENCE TRUST (SGX:A68U)

Singapore Monthly Strategy (November 2019) - Less Cloudy Ahead

  • US-China ‘Phase 1’ deal - It’s the act of signing that matters, not the location.
  • Tepid recovery ahead – Shallow pullback, STI support at 3175.
  • Positive on early cyclicals and hospitality sector.



US-China ‘Phase 1’ Deal.

  • Equity markets were lifted by the hope of a partial trade deal to be signed this month. While the latest cancellation by Chile to host the APEC summit is a near-term setback, this shouldn’t derail optimism because an alternative venue is being sought. It’s the act of signing that matters, not the location. Investors will want to see such a deal signed before 15 December when more US tariffs on Chinese goods are scheduled to kick in.


Tepid recovery ahead.

  • Our economist believes the GDP growth slowdown has bottomed while recovery ahead is weak. We see 2020F growth of 1.4% vs 0.6% in 2019F. While STI’s seasonal trend suggests a possible November pullback, any year-end consolidation is likely to be shallow and an opportunity to ‘add risk’ considering
    1. cooling US-China trade tension,
    2. modest GDP recovery expected next year,
    3. inexpensive valuation at 12.3x (-0.75SD) 12-month forward PE, and
    4. approaching February-May that is seasonally the strongest period of the year.
  • We see technical support at 3175.


Positive on early cyclicals.

  • We maintain our view that early cyclical outperformers such as banks, properties and technology should benefit if trade war worries ease.
  • UNITED OVERSEAS BANK (SGX:U11) is our preferred bank stock for its defensive qualities and attractive dividend yield of c.4.7%.
  • CITY DEVELOPMENTS (SGX:C09) and UOL GROUP (SGX:U14) have benefitted from the strong demand for their luxury-to-high-end properties launched. Interest in sector laggards such as broker APAC REALTY (SGX:CLN) should see an uptick if the momentum for developers continues. Value is seen in SMC developers such as BUKIT SEMBAWANG ESTATES (SGX:B61) given its enormous land bank. The stock is trading at an attractive 0.95x (-1SD) P/BV and c.35.0% discount to our estimated RNAV/share of S$7.55.
  • VENTURE CORPORATION (SGX:V03) is the only large-cap technology stock under our coverage. Unfortunately, it hasn’t been a sector leader due to a cloudy outlook and lack of visibility. Focus has been on the small-cap semiconductor stocks on optimism of a sector turnaround, which was first highlighted by our Singapore economist back in September. Our sole coverage in this space is UMS HOLDINGS (SGX:558). We advocate buying on pullback rather than chasing on strength after the recent price spike.


More visitors ahead.






Kee Yan YEO CMT DBS Group Research | Janice CHUA DBS Research | https://www.dbsvickers.com/ 2019-11-01
SGX Stock Analyst Report BUY MAINTAIN BUY 29.200 SAME 29.200
BUY MAINTAIN BUY 1.800 SAME 1.800
BUY MAINTAIN BUY 0.800 SAME 0.800
BUY MAINTAIN BUY 1.450 SAME 1.450



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