Singapore Market Focus - DBS Research 2020-03-31: Easter Bunny Gets Stay-Home Notice

Singapore Market Focus - DBS Research | SGinvestors.io SINGAPORE EXCHANGE LIMITED (SGX:S68) STARHUB LTD (SGX:CC3) CAPITALAND RETAIL CHINA TRUST (SGX:AU8U)

Singapore Market Focus - Easter Bunny Gets Stay-Home Notice




Recession fears.

  • Virus and global recession fears return after last week’s sharp market rebound, triggered by extreme valuation after the selldown, concerted global fiscal stimulus and the FED cutting rates to zero.
  • The COVID-19 situation continues to worsen in US (23% global GDP) and the top 5 economies of Europe (15.2% GDP). Trump has pushed back his plan to reopen business by 12 April, to end-April. It remains to be seen if this is even possible with the number of US infected cases at 142k and rising at a c.18k daily rate.
  • In ASEAN, Indonesia (35% of ASEAN GDP) is the main concern as its high 8.7% fatality rate hints of undetected infections within the country.


Déjà vu October 2008.

  • The concerted global fiscal stimulus and aggressive rate cuts in March is reminiscent of the coordinated global central banks’ actions back in October 2008. This temporarily halted the global market plunge, which than swung into a broad sideways trend that lasted three months before sinking to a new low in 1Q09, when GDP contraction was at its deepest point.
  • We expect a similar development with STI likely range bound from 2,300 to 2,600 in the month ahead. STI is trading at about -2SD forward PE after factoring in labour cost savings from the government’s supplementary budget.
  • The Straits Times Index STI bottomed at -3.75SD during GFC, and a similar valuation extreme could see it falling to c.2,050 over time before bottoming.


Three COVID-19 themes.

  • With the panic/margin selling halted at least for now, we see three themes standing out amid the unfolding pandemic:

COVID-19 survivors

  • These are the companies that are likely to survive the current crisis and a recession if the pandemic extends beyond the summer months into 3Q. We prefer companies with low gearing, good cashflow and earnings visibility. SGX (SGX:S68), Ascendas REIT (SGX:A17U), Wilmar (SGX:F34) and Mapletree Industrial Trust (SGX:ME8U) are our picks.
  • SGX is seen as a hedge against market volatility as it stands to benefit from spikes in market flows for derivatives and equities.
  • Ascendas REIT is buoyed by quality assets and long rental WALE while Wilmar’s well-diversified product line and strong consumer presence in China is irreplaceable.
  • Mapletree Industrial Trust’s recent foray into data centres has raised its earnings quality and growth outlook.

COVID-19 resilient companies


COVID-19 recovery in China



Four stocks to top slice.

  • Outlook for aviation and travel/tourism sectors remains bleak despite support measures from the Enhanced Jobs Support Scheme. While there will be cost savings for companies with operations in Singapore, the impact to top line and cashflow from COVID-19 remains a key concern. This is especially true for companies with overseas operations.
  • Retail malls will also be affected by the ever-tightening measures to restrict footfall.
  • The stocks to top slice are CDL Hospitality Trusts (SGX:J85), Ascott Residence Trust (SGX:HMN), CapitaLand Mall Trust (SGX:C38U) and SATS (SGX:S58).
  • See attached PDF report for complete analysis.





Kee Yan YEO CMT DBS Group Research | Janice CHUA DBS Research | https://www.dbsvickers.com/ 2020-03-31
SGX Stock Analyst Report BUY MAINTAIN BUY 9.600 SAME 9.600
BUY MAINTAIN BUY 1.400 SAME 1.400
BUY MAINTAIN BUY 1.750 SAME 1.750



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