Singapore Market Apr 2020 Wrap Up - CGS-CIMB Research 2020-04-30: Singapore In 5

SGinvestors.io

AEM HOLDINGS LTD (SGX:AWX)

Singapore Market Apr 2020 Wrap Up - Singapore In 5

• FSSTI ended Apr at 2,622.18 pts (+5.68% m-o-m).
• Prime Minister said that circuit breaker can be eased with progressive restart of economy if the number of new COVID cases comes down.
• Our end-CY20F FSSTI target of 2,050 pts is on 9.5x CY21F market P/E.
• Our technical analyst sees ongoing recovery capped at 2,670-2,700 pts.

COVID-19 impact yet to hit economic numbers

• The FSSTI ended Apr at 2,622.18 pts, up 140.95 pts m-o-m (+5.68%), even as Singapore tightened its social distancing measures and extended them to 1 Jun (from 4 May previously), thanks to a 4.2% boost at the end of the month on the back of positive COVID-19 newsflow.
• Strong IPI (+16.5% y-o-y, +28.3% m-o-m) and NODX (+17.6% y-o-y, +18.3% m-o-m) numbers for Mar 20, due to strong demand in the volatile biomed sector and the reopening of China’s economy, belie the true picture. The forward-looking SIPMM manufacturing PMI numbers are more sobering at 45.4 (Mar 20) versus 48.7 (Feb 20), implying a decrease in business confidence.
• Our economist, who expects diminished demand from manufacturing and tourism, coupled with reduced consumption, has forecast Singapore GDP contracting by 6.8% for the full year.
• 1Q20 property data from the Urban Redevelopment Authority (URA) showed a decline in transaction volume of 12% for private property on fewer launches, and a decrease of 7% for resale public housing. Overall property prices in 1Q20 fell 1.2% versus an increase of 0.5% in 4Q19.

Almost all sectors pull back; earnings season starts

• The 1Q20F earnings season (for those still reporting quarterly) has started:
  • DBS (SGX:D05) profit of S$1.165bn (-23% q-o-q,) was in line with expectations with clear management guidance of provisions. The results were also lifted by strong trading income.
  • Among the REITS, DPU for SPH REIT (SGX:SK6U), Suntec REIT (SGX:T82U), ARA LOGOS Logistics Trust (SGX:K2LU) and CapitaLand Commercial Trust (SGX:C61U) were below our expectations as more earnings were retained as a buffer against uncertainty.
    • ARA LOGOS Logistics Trust - CGS-CIMB Research 2020-04-28: Near-term Uncertainties Due To COVID-19.
    • SPH REIT - CGS-CIMB Research 2020-04-01: Tough Times Ahead.
    • Suntec REIT - CGS-CIMB Research 2020-04-23: Challenging Times.
    • Singapore Retail REITs - CGS-CIMB Research 2020-04-22: Sailing Against The Tide.
• Those with 1Q earnings above our expectations were: SGX (SGX:S68) (increased market volatility), AEM Holdings (SGX:AWX) (sustained orders, higher GPM), and Sheng Siong (SGX:OV8) (increased demand from COVID-19).
  • AEM Holdings - CGS-CIMB Research 2020-04-29: ADD ~ On Track For A Record Year.
• For April, only Industrials were negative; the top-performing sectors were Maritime, Healthcare and Tech.
• Index outperformers were Yangzijiang Shipbuilding (SGX:BS6) (back to full staffing levels), Venture Corp (SGX:V03) (production of medical products), and Thai Beverage (SGX:Y92) (rebound from trough valuations) , while SPH (SGX:T39) (property impairment risk, lower associate income), Jardine Matheson (SGX:J36) and Jardine Strategic (SGX:J37) (profit warning as trading hit) underperformed.
  • See STI Constituents Share Price Performance.
• In the mid-large space, the outperformers were Perennial Real Estate Holdings (SGX:40S) (disposal of asset), Japfa (SGX:UD2) and Thomson Medical (SGX:A50) (insider transaction), while Frasers Centrepoint Trust (SGX:J69U) (reduced DPU) as an underperformer.
• Institutional investors were sellers for most of Apr and selling was broad-based; outflows were particularly heavy in Financial Services, Real Estate and REITs. Retail investors continued to accumulate, buying into Consumer Cyclicals, Financial Services, Industrials, Real Estate and REITs.
  • See SGX Market Fund Flow Overview, SGX Weekly Fund Flow By Sector.

Key corporate news

• Ascendas REIT (SGX:A17U) acquired a 25% equity stake in Galaxis business park for S$102.9m. See Ascendas REIT Announcements.
• Kingboard (148 HK) offered HK$18.07 (US$2.33) to take Elec & Eltek International (SGX:E16) private. See Elec & Eltek International Announcements.
• Singapore banks DBS (SGX:D05), OCBC (SGX:O39), UOB (SGX:U11) have c.US$670m in exposure to oil trader Hin Leong. See Singapore Banks - CGS-CIMB Research 2020-04-25: Can We Avoid Triple-digit Credit Costs?
• Japfa (SGX:UD2) plans to sell a 25% stake in its China dairy subsidiary for US$254m. See Japfa Announcements.
• City Developments (SGX:C09) plans to buy a controlling stake in China-based Sincere Property Group for Rmb4.39bn. See City Developments Announcements.

Technical perspective

• Despite the 20% bounce off the Mar low of 2,208 pts to a high of 2,671 pts on 17 Apr, we believe this is a correction to the overall downtrend. The bearish price action on 21 Apr highlighted the downtrend remains in control, with the bearish close below the 20-day moving average and uptrend line.
• The ongoing recovery would likely remain capped by the 2,670-2,700 pts resistance area, thereby forming a bearish formation, double top rejection.
• In this bearish scenario, the downtrend would resume towards the 2,500 pts support area, followed by 2,300 pts.

• See chart in attached PDF report.

LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2020-04-30

SGX Stock Analyst Report ADD MAINTAIN ADD 3.100 SAME 3.100