Singapore Market Focus - DBS Research 2019-12-12: 2020 Stock Picks

Singapore 2020 Stock Picks - DBS Research | SGinvestors.io

AEM HOLDINGS LTD (SGX:AWX) ASCENDAS INDIA TRUST (SGX:CY6U) ASCENDAS REAL ESTATE INV TRUST (SGX:A17U) CDL HOSPITALITY TRUSTS (SGX:J85) GENTING SINGAPORE LIMITED (SGX:G13) MAPLETREE LOGISTICS TRUST (SGX:M44U) SIA ENGINEERING CO LTD (SGX:S59) SINGAPORE TECH ENGINEERING LTD (SGX:S63) THAI BEVERAGE PUBLIC CO LTD (SGX:Y92) WILMAR INTERNATIONAL LIMITED (SGX:F34)

Singapore Market Focus - 2020 Stock Picks

DBS' 2020 Stock Picks

Company	Mkt Cap (US$)	Target Price	Recommendation
AEM HOLDINGS (SGX:AWX)	375	S$2.38	BUY
ASCENDAS INDIA TRUST (SGX:CY6U)	1,206	S$1.65	BUY
ASCENDAS REIT (SGX:A17U)	6,897	S$3.33	BUY
CDL HOSPITALITY TRUSTS (SGX:J85)	1,445	S$1.80	BUY
GENTING SINGAPORE (SGX:G13)	8,122	S$1.20	BUY
MAPLETREE LOGISTICS TRUST (SGX:M44U)	4,636	S$1.90	BUY
SIA ENGINEERING (SGX:S59)	2,326	S$3.30	BUY
ST ENGINEERING (SGX:S63)	9,183	S$4.64	BUY
THAI BEVERAGE (SGX:Y92)	16,454	S$1.04	BUY
WILMAR INTERNATIONAL (SGX:F34)	19,217	S$4.60	BUY

AEM HOLDINGS (SGX:AWX) (BUY; Target Price: S$2.38)

Beneficiary of rising new technologies. AEM Holdings, as a solutions provider for the back-end testing of the semiconductor manufacturing process for its key customer, Intel is a key proxy to ride on the cycle recovery. Intel is increasing its capex and production capacity, which should drive demand for test handlers, where AEM is believed to be the sole supplier to Intel’s test handlers. New technology (AI, 5G, and data centers) is also expected to drive longer test times, leading to higher demand for test handlers.
Furthermore, AEM is also working towards diversification of revenue through new projects and customers. New initiatives include supplying cable testing solutions for Huawei’s 5G rollout.
See AEM Holdings Share Price; AEM Holdings Target Price; AEM Holdings Analyst Reports; AEM Holdings Dividend History; AEM Holdings Announcements; AEM Holdings Latest News.

ASCENDAS INDIA TRUST (SGX:CY6U) (BUY; Target Price: S$1.65)

We remain excited on Ascendas India Trust as one of the fastest-growing S-REITs who has grown c.15% CAGR in the past few years. We see a myriad of growth opportunities for the REIT. Firstly, its expansion into the modern Indian warehouse sector warrants a premium not only from the boost to Ascendas India Trust’s near-term DPU oulook but more importantly, the ability to accelerate earnings growth in the medium term. Its pipeline of forward purchase projects will also boost its GFA by over 73% in the medium term.
In the longer term, the continued execution of its landbank at ITPB (Bangalore) and The V (Hyderabad) offer opportunities to extract value for unitholders. Furthermore, Ascendas India Trust remains on the forefront as the key vehicle of the group’s (CapitaLand (SGX:C31)) plans to double its exposure in India over the medium term. With the Sponsor’s capital backing, the future remains bright for Ascendas India Trust.
See Ascendas India Trust Share Price; Ascendas India Trust Target Price; Ascendas India Trust Analyst Reports; Ascendas India Trust Dividend History; Ascendas India Trust Announcements; Ascendas India Trust Latest News.

ASCENDAS REIT (SGX:A17U) (BUY; Target Price: S$3.33)

We continue to like Ascendas REIT for their leading status as the largest industrial landlord in Singapore. Mainly focusing in the business parks and hi-specifications segments, these properties cater mainly to the industries within the precision engineering, IT, media and bio-sciences sectors that continue to see strong demand growth. Its acquisitions in UK, Australia and USA offer increased diversification and stability given their longer weighted average lease expiries (WALEs).
Looking ahead, we believe that Ascendas REIT continue to offer an attractive pipeline for growth from its Sponsor, which we believe will be well received by investors. Organic growth momentum is also on the upswing as we project rental reversions to head high on low expiring rent levels.
Ascendas REIT offers an attractive 5.3% yield with upside coming from acquisitions which we have not priced in at current levels.
See Ascendas REIT Share Price; Ascendas REIT Target Price; Ascendas REIT Analyst Reports; Ascendas REIT Dividend History; Ascendas REIT Announcements; Ascendas REIT Latest News.

CDL HOSPITALITY TRUSTS (SGX:J85) (BUY; Target Price: S$1.80)

We believe CDL Hospitality Trusts is a prime beneficiary of a projected sustained turn in the performance of the Singapore hospitality sector. With a robust line-up of returning and inaugural conferences in 2020, we anticipate a higher number of visitors to translate into stronger demand for rooms. With supply growth falling back to only c.1.5% in 2020 and average hotel occupancies at close to 90%, the next leg of growth will be driven by room rates.
In addition, the recent announcement of Liang Court redevelopment which saw CDL Hospitality Trusts trading up its Novotel Clarke Quay with The W, a luxury lifestyle hotel which will enhance its growth runway, in our view.
See CDL Hospitality Trusts Share Price; CDL Hospitality Trusts Target Price; CDL Hospitality Trusts Analyst Reports; CDL Hospitality Trusts Dividend History; CDL Hospitality Trusts Announcements; CDL Hospitality Trusts Latest News.

MAPLETREE LOGISTICS TRUST (SGX:M44U) (BUY; Target Price: S$1.90)

We believe that all growth engines are firing and Mapletree Logistics Trust remains firmly on the acquisition growth path to be a leading logistics player in ASEAN. Opportunities will likely come from its Sponsor which has an extensive pipeline of acquisition opportunities.
Well-timed acquisitions and ongoing asset reconstitution strategy is projected to augment a steady DPU growth profile of c.4.0% CAGR over FY21-22F with upside from potential gains from divestments that the manager typically shares when it happens. In addition, organic growth momentum is also picking up with the tightening supply in Mapletree Logistics Trust’s key markets of Hong Kong and Singapore where earnings visibility is strong.
See Mapletree Logistics Trust Share Price; Mapletree Logistics Trust Target Price; Mapletree Logistics Trust Analyst Reports; Mapletree Logistics Trust Dividend History; Mapletree Logistics Trust Announcements; Mapletree Logistics Trust Latest News.

ST ENGINEERING (SGX:S63) (BUY, Target Price: S$4.64).

ST Engineering ended 3Q19 with another record-high orderbook of S$15.9bn, underpinning healthy growth prospects in the near-to-medium term. We continue to like ST Engineering for:
1. strong inorganic growth potential from recent acquisitions, plus
2. near-term organic growth driven by an increase in workload at engine MRO shops, ramp-up of Airbus’s Passenger-to-Freighter programme and margin improvement in the Marine division; and
3. medium-to long-term growth from Smart City and IoT-related products and contracts, as well as robotics and automation solutions in transport, logistics, healthcare and hospitality domains.
Dividend yield is at a decent 3.7% and we expect the stock to remain on investors’ radar amid the uncertain market environment.
See ST Engineering Share Price; ST Engineering Target Price; ST Engineering Analyst Reports; ST Engineering Dividend History; ST Engineering Announcements; ST Engineering Latest News.

SIA ENGINEERING (SGX:S59) (BUY, Target Price: $3.30).

We see several promising earnings drivers like:
1. further expansion in SIA Engineering’s core operating margin, bolstered by cost-cutting initiatives and progress in its transformation programme,
2. increased workload at its engine shops owing to persistent problems with the Trent-1000 engines,
3. recovery in associate/JV profits from the low in 1HFY20 as start-up costs related to new engine capabilities have mostly been accounted for, and
4. a boost in maintenance work volumes due to delays in retiring older aircraft following the protracted global grounding of the B737 MAX aircraft.
While privatisation remains a crucial catalyst for the stock, the current valuation for SIA Engineering is attractive at close to multi-year lows at about 17x forward PE and dividend yield is healthy at 4.3%.
See SIA Engineering Share Price; SIA Engineering Target Price; SIA Engineering Analyst Reports; SIA Engineering Dividend History; SIA Engineering Announcements; SIA Engineering Latest News.

GENTING SINGAPORE (SGX:G13) (BUY, Target Price: S$1.20).

We believe the market has yet to price in a slight pick-up in mass and VIP volumes from 2020, and its Japan optionality, despite the fact that Genting Singapore is one of the frontrunners for the Osaka integrated resort (IR) project.
On a valuation basis, Genting Singapore has lagged global peers by an unjustifiably wide margin - the stock is trading at 7.0x (FY19) EV/EBITDA, which is at c.-1.5sd below its historical average, and considerably below regional peers’ median of 12.8x. Its trough valuation and decent dividend yield of c.3.5% should provide support to its shares and offer an attractive entry point.
Catalyst for stock performance comes from Genting clinching either the Osaka (winner to be selected by 3Q20) or Yokohama (by 4Q20) Integrated Resort project.
See Genting Singapore Share Price; Genting Singapore Target Price; Genting Singapore Analyst Reports; Genting Singapore Dividend History; Genting Singapore Announcements; Genting Singapore Latest News.

THAI BEVERAGE (SGX:Y92) (BUY, Target Price: S$1.04).

We maintain our BUY recommendation with sum-of-the-parts (SOTP) based Target Price of S$1.04, premised on;
1. steady 11% growth in net earnings in FY20F,
2. improved contributions from Sabeco and lower losses from Non-Alcoholic Beverages (NAB),
3. continued deleveraging from its strong and stable cash flow, as well as potential monetisation of assets.
We believe the deleveraging strategy remains among the top priorities of its management. Valuation is reasonable at 19.1x FY20F PE, below its historical 5-year forward average PE of 22x.
See Thai Beverage Share Price; Thai Beverage Target Price; Thai Beverage Analyst Reports; Thai Beverage Dividend History; Thai Beverage Announcements; Thai Beverage Latest News.

WILMAR INTERNATIONAL (SGX:F34) (BUY, Target Price: S$4.60)

Wilmar International is undervalued considering its market leading positions within and outside China for several product segments. The public listing of its China operations YKA will free up more cash for Wilmar International and hence, higher dividend prospect for shareholders.
See Wilmar Share Price; Wilmar Target Price; Wilmar Analyst Reports; Wilmar Dividend History; Wilmar Announcements; Wilmar Latest News.

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2020 Sector Outlook:

Kee Yan YEO CMT DBS Group Research | Janice CHUA DBS Research | https://www.dbsvickers.com/ 2019-12-12

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