THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
AEM HOLDINGS LTD (SGX:AWX)
KEPPEL DC REIT (SGX:AJBU)
Singapore Market Focus - Gradual Recovery Ahead
- 2Q was the inflexion point, gradual recovery ahead.
- COVID resilient stocks holding firm heading to results season.
- Pullback in ‘Phase 2 beneficiaries’ an opportunity.
- Travel/tourism stocks will lag ‘Phase 2 beneficiaries’.
- Yield stocks still in favour.
Election and earnings season in focus
- Singapore’s General Election (GE) will divert some investor attention away from the stock market with polling day on 10 July. There has been no history of a pre-election rally, but there is positive correlation over a 1-mth period after polling day for STI to track the change in the incumbent’s popular vote. This was 69.9% (average 66.3%) in the 2015 GE. Focus to return to earnings after the GE.
2Q inflexion, recovery gradual.
- The resurgence of COVID-19 cases in the US and caution ahead of the 2Q results season ended the sharp market rally in June. We see limited downside to STI post the mid-June pullback. Valuation is reasonable at below 12.6x (-0.5SD) 12-mth fwd PE after YTD cuts of 26% and 18% to FY20F and FY21F earnings respectively. Support levels are at 2550 and 2500.
- Expect a gradual recovery, but worst is likely behind us in 2Q. Attention should return to the phased reopening in coming months.
COVID resilient.
- COVID resilient stocks have outperformed cyclicals in the current market pullback as investors anticipate a more stable or even positive 2Q report card. While these stocks should remain firm in the near-term, we do not rule out a buy-in-anticipation, sell-on-news if results come in-line or below consensus expectations. These stocks would be
- glove maker Riverstone (SGX:AP4),
- semiconductor solutions provider AEM Holdings (SGX:AWX),
- spirits/beer producer Thai Beverage (SGX:Y92),
- supermarket operator Sheng Siong (SGX:OV8) as well as
- data centre REITs Mapletree Industrial Trust (SGX:ME8U) and Keppel DC REIT (SGX:AJBU).
Current pullback in COVID casualties an opportunity
- COVID casualty stocks pulled back over the past 2 weeks amid profit taking ahead of the upcoming 2Q results season.
- While sentiment has been tentative heading to the 2Q results season, we see opportunity in the current pullback amid the Phase 2 reopening of the Singapore economy that should see an uptick in domestic demand underpinning
- retail REITs CapitaLand Mall Trust (SGX:C38U), Frasers Centrepoint Trust (SGX:J69U) and Lendlease REIT (SGX:JYEU),
- transport operator ComfortDelGro (SGX:C52),
- F&B operator Koufu (SGX:VL6).
Travel/Tourism lagging “Phase 2 beneficiaries”.
- While inbound tourism is currently prohibited and outbound tourism greatly discouraged, the reopening of 13 local attractions and the resumption of domestic tours for local customers only is seen as the first step towards the reopening of both inbound and outbound tourism later.
- Downside for hospitality REITs Ascott Residence Trust (SGX:HMN), Far East Hospitality Trust (SGX:Q5T) and CDL Hospitality Trusts (SGX:J85) as well as airport services provider SATS (SGX:S58) should be limited although recovery for now will continue to lag that of “Phase 2 reopening” beneficiaries.
Still seeking yield.
- Yield stocks are likely to remain in favour with interest rates expected to remain depressed till end-2021.
- Non-REIT large cap stocks with a dividend yield of at least 4.5% are
- banks UOB (SGX:U11) and OCBC (SGX:O39);
- telco stocks SingTel (SGX:Z74) and NetLink Trust (SGX:CJLU);
- gaming stocks Genting Singapore (SGX:G13) as well as
- ST Engineering (SGX:S63) and Dairy Farm (SGX:D01).
- S-REIT picks are
Click view full report button below 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/
2020-07-03
SGX Stock
Analyst Report
0.900
SAME
0.900
3.530
SAME
3.530
2.550
SAME
2.550
