COMFORTDELGRO CORPORATION LTD (SGX:C52)
KOUFU GROUP LIMITED (SGX:VL6)
FAR EAST HOSPITALITY TRUST (SGX:Q5T)
ASCOTT RESIDENCE TRUST (SGX:HMN)
CAPITALAND MALL TRUST (SGX:C38U)
Singapore Market Focus - Mending The Broken Circuit
- Risks of rising US/China tensions and resurgence of US COVID infections.
- Steep cut in earnings but STI at reasonable valuation, 2020 year-end target 2,850.
- Circuit Breaker easing benefits retail REITS, retail and transport stocks CapitaLand Mall Trust, Frasers Centrepoint Trust, Mapletree Commercial Trust, Lendlease REIT, ComfortDelGro, Koufu, Thai Beverage and Wilmar.
- One small step forward for travel/aviation – Far East Hospitality Trust, Ascott Residence Trust, CDL Hospitality Trusts, SATS.
Two risks
- Simmering US-China tensions - Further degeneration risks pulling down the RMB to multi-year lows could have a detrimental effect on regional currencies and funds outflow.
- Possible resurgence in US COVID infections – restrictions were eased when daily new infections were above 20,000, the highest for any country. Any resurgence could show as early as end-June.
One potential catalyst
- Rotational shift out of COVID beneficiaries into selective cyclical stocks as countries unlock restrictions. For Singapore, we expect retail REITs, F&B and public transportation stocks to benefit from Circuit Breaker easing. In US, banks were among the top S&P500 performers since mid-May while COVID beneficiaries underperformed.
- Being weighted towards cyclicals, STI will benefit if the US sector rotation from COVID beneficiaries into cyclical laggards catches on here.
Steep cuts in earnings
- STI’s FY20F EPS growth is further cut to -20.9% as the 1Q results season ends. The drag came from UOB (SGX:U11), OCBC (SGX:O39), Genting Singapore (SGX:G13), ESR REIT (SGX:J91U), SingPost (SGX:S08), ComfortDelGro (SGX:C52), ST Engineering (SGX:S63), Sembcorp Industries (SGX:U96), Dairy Farm (SGX:D01) and Venture Corp (SGX:V03).
- Positive earnings revision came from small caps iFast (SGX:AIY), UMS Holdings (SGX:558), AEM Holdings (SGX:AWX) and Riverstone (SGX:AP4). FY21F EPS growth is +16.5% helped by a low-base effect.
Reasonably Priced
- STI currently trades at 12x (-1SD) 12-mth fwd PE. Valuation is reasonably priced considering the already aggressive earnings cut in recent months and the gradual easing of circuit breaker measures ahead. We expect support at 2,400 and maintains our 2,850 year-end target.
Circuit Breaker easing beneficiaries
- Phase 2 of Circuit Breaker easing in Singapore could be announced as soon as mid-June. We maintain our positive stance for retail REITs CapitaLand Mall Trust (SGX:C38U), Frasers Centrepoint Trust (SGX:J69U), Mapletree Commercial Trust (SGX:N2IU), Lendlease REIT (SGX:JYEU), public transportation ComfortDelGro (SGX:C52) and F&B Koufu (SGX:VL6). The worst is over for ComfortDelGro (SGX:C52) after 2 rounds of earnings cuts on taxi rental rebates.
- Overseas, other beneficiaries from removal of lockdowns are Thai Beverage (SGX:Y92) and Wilmar (SGX:F34).
One small step forward for travel/aviation
- Agreement between Singapore and China to allow essential travel between them from early June is a small but important first step towards the reopening of air travel that should lift the the hospitality and aviation sector. Our preferred pick is Far East Hospitality Trust (SGX:Q5T) followed by Ascott Residence Trust (SGX:HMN) and CDL Hospitality Trusts (SGX:J85).
- With plans to gradually allow transit travelers through Changi Airport going forward, SATS (SGX:S58) is the other beneficiary which could see a rebound post MSCI rebalancing.
Top slice COVID beneficiaries
- Sheng Siong (SGX:OV8) and NetLink Trust (SGX:CJLU).
- Sheng Siong (SGX:OV8)’s blue skies’ scenario during the Circuit Breaker as a beneficiary of the big demand surge is unlikely to be repeated.
- For NetLink Trust (SGX:CJLU), we note there is no upside to our fundamental Target Price of $1.02.
- Our call to top slice SGX (SGX:S68) and SATS (SGX:S58) last month was profitable.
- See attached PDF report for more details.
Kee Yan YEO CMT
DBS Group Research
|
Janice CHUA
DBS Research
|
https://www.dbsvickers.com/
2020-06-01
SGX Stock
Analyst Report
1.68
SAME
1.68
0.680
SAME
0.680
0.600
SAME
0.600
1.100
SAME
1.100
2.150
SAME
2.150
