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

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.

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.

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.

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.

We maintain our positive view on the hospitality sector, which is at the starting point of a sustained 3-year upturn. We project a 3% recovery in RevPAR for 2020 across our hospitality REITs; Our picks are CDL HOSPITALITY TRUSTS (SGX:J85), FAR EAST HOSPITALITY TRUST (SGX:Q5T) and ASCOTT RESIDENCE TRUST (SGX:A68U).

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