GENTING SINGAPORE LIMITED (SGX:G13)
Singapore Market Focus - Tactical Switch
- STI year-end target cut to 2,850; near-term upside capped at 2670 to 2740.
- Last month’s themes on COVID-19 beneficiaries yielded good returns. Advocating a tactical switch from beneficiaries to casualties this month.
- ‘COVID-19 casualties’ in focus ahead of lockdown easing – Mapletree Commercial Trust (SGX:N2IU), CapitaLand Mall Trust (SGX:C38U), Lendlease REIT (SGX:JYEU), Koufu (SGX:VL6), ComfortDelGro (SGX:C52), Mapletree North Asia Commercial Trust (SGX:RW0U).
- Top slice overbought ‘COVID-19 beneficiaries’ - Sheng Siong (SGX:OV8), NetLink Trust (SGX:CJLU), SGX (SGX:S68).
- Cautious on travel linked stocks: SATS (SGX:S58), Genting Singapore (SGX:G13).
Easing COVID-19 restrictions.
- Focus shifts to easing of intra-country movement restrictions in the US this month despite an extremely high 15-day average daily new infections of about 30,000. Major European economies will also start to ease with daily new infections between 1,000 to 3,000. Numerous countries in Asia are also set to relax restrictions.
- Three risk events
- Second wave of COVID-19 infections with the US posing the highest risk;
- Weak recovery from global recession with a highly uncertain 2H recovery pace given the expiration/reduction of fiscal support measures and possibility of rising bankruptcies, loan defaults, retrenchments and weak business/consumer sentiment.
- China backlash as countries seek investigation into Covid-19’s origin and Trump threatens more tariffs
2020 Year-end STI target cut to 2850.
- Our Singapore economist sees a deep -5.7% y-o-y GDP contraction. Stocks under our coverage are expected to suffer 12% earnings cut for FY20F dragged down by
- banks – UOB (SGX:U11), OCBC (SGX:O39),
- transport related stocks – SATS (SGX:S58), ComfortDelGro (SGX:C52) and
- consumer discretionary – Genting Singapore (SGX:G13).
- We have lowered our STI year-end target to 2850. The current STI rally should be capped at 2670 to 2740 in the near-term with subsequent technical downside risk to 2,300 in the coming months.
“COVID-19 casualties” in focus.
- Prime beneficiaries of Singapore relaxing the Circuit Breaker measures are
- retail REITs - Mapletree Commercial Trust (SGX:N2IU), CapitaLand Mall Trust (SGX:C38U), Lendlease REIT (SGX:JYEU),
- F&B – Koufu (SGX:VL6), and
- public transportation - ComfortDelGro (SGX:C52).
- A further 10% price weakness will be interesting levels to accumulate, pricing in near term risks.
- China could also look to ease essential inter-country travel to Asia Pacific nations that have contained the spread of COVID-19 - Hong Kong, Macau and possibly South Korea come to mind. Beneficiaries would be Mapletree North Asia Commercial Trust (SGX:RW0U) and Koufu (SGX:VL6).
Top slice overbought COVID-19 beneficiaries, cautious on travel-linked stocks.
- Sheng Siong (SGX:OV8), SATS (SGX:S58), NetLink Trust (SGX:CJLU), and SGX (SGX:S68) have outperformed the benchmark STI YTD in excess of 20%. Top slice COVID-19 beneficiaries which are likely to consolidate recent gains as focus rotates to COVID-19 casualties.
- We remain cautious on travel related stocks as inter-country travel restrictions are unlikely to be lifted soon - Genting Singapore (SGX:G13) downgraded. See report: Genting Singapore - DBS Research 2020-05-04: All Bets Are Off.
- Sell SATS (SGX:S58), consensus will need to adjust down earnings forecasts after the company released a profit warning, indicating losses of up to S$70m for 1Q21. See report: SATS - DBS Research 2020-05-05: Anticipate Slow Recovery
See attached PDF report for complete analysis.
Kee Yan YEO CMT
DBS Group Research
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Janice CHUA
DBS Research
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https://www.dbsvickers.com/
2020-05-05
SGX Stock
Analyst Report
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SAME
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