AEM HOLDINGS LTD (SGX:AWX)
UMS HOLDINGS LIMITED (SGX:558)
THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)
CHINA AVIATION OIL(S) CORP LTD (SGX:G92)
CAPITALAND MALL TRUST (SGX:C38U)
Singapore Market Focus - Awakening From September Slumber
- 3Q results season picks – AEM, UMS, China Aviation Oil, Thai Beverage, CapitaLand Mall Trust
- Vaccine and reopening air hub – SATS, SIA Engineering, ST Engineering, Far East Hospitality Trust, Ascott Residence Trust and CDL Hospitality Trusts.
- Towards Phase 3 – ComfortDelGro, Keppel REIT, Suntec REIT, Mapletree Commercial Trust, Lendlease REIT, CapitaLand Mall Trust.
Mix of earnings, politics and medicine.
- STI trades at slightly above average PE as the 3Q results season starts. STI 2020 year-end target is lowered to 2750 (from 2850) at 13.8x (+0.5SD) FY21F PE. We maintain that the worst of the earnings cuts has passed. STI likely touched a major low last month at our stated 2440 technical support.
- Biden’s average poll score has widened to a 9-pt lead vs Trump’s. A Biden victory would lift sentiment for Asian and Singapore’s small/open economy as he pledges to end the trade war with EU and reconsider China tariffs.
- The outcome of the first Phase 3 COVID-19 vaccine trials could be this month with more to follow in coming months. One or more positive outcomes followed shortly by approval for public use will be a major boost for the crippled travel sector.
Picks for 3Q upcoming results season
- Attention should turn to the 3Q results and business update season this month. Interest should return to technology and semiconductor stocks following their price correction in the past two months. The electronics PMI strengthened further in 3Q20 into expansionary territory from August and is now above pre-COVID levels. Our picks are AEM (SGX:AWX) and UMS (SGX:558). In September, AEM revised its FY20 revenue guidance upwards to S$480-500m (previously S$460-480m) while UMS will continue to ride on the upcycle in semiconductor.
- We are positive about the outlook of China Aviation Oil (SGX:G92) with the recovery in China’s domestic air travel to near/at pre-COVID levels. According to global travel data firm ForwardKeys, domestic arrivals at Chinese airports reached 86% of last year's levels, while flight bookings hit 98% in the second week of August. The figure should improve further with strong demand from the October Golden Week holiday.
- The 9M business update for Thai Beverage (SGX:Y92) showed resilient revenue and EBITDA performance despite COVID-19 and we see this trend continuing into 4Q. Recent liquor and beer data in Thailand suggest that the worst is over since the lifting of lockdown and alcohol sales ban in mid-June. For Vietnam, September beer sales data also showed stabilisation and recovery from the second COVID-19 infection in August. The recent price lethargy for Thai Beverage looks unjustified, which we see as a buy opportunity ahead of its FY results.
- Among S-REITs, watch CapitaLand Mall Trust (SGX:C38U) given the strong rebound in traffic to c.82% and c.73% of pre-COVID levels for IMM and Plaza Singapura/The Atrium. CapitaLand Mall Trust’s suburban retail malls are dominant given their location near/on-top of transportation nodes that have been prime beneficiaries in recent weeks. These malls contribute c.52% of total revenues.
Vaccine development
- Anticipation of vaccine production and the gradual reopening of air space to include general leisure travel going forward bode well for Singapore’s aviation and hospitality sectors. Our picks are SATS (SGX:S58), SIA Engineering (SGX:S59), ST Engineering (SGX:S63), Far East Hospitality Trust (SGX:Q5T), Ascott Residence Trust (SGX:HMN) and CDL Hospitality Trusts (SGX:J85).
- Until a vaccine becomes widely available, Singapore will look to reopen its air borders without the 14-day stay-home-notice while guarding against inbound COVID-19 risks. This is done by
- unilaterally reopening borders to visitors from countries that have controlled COVID-19, and
- possible repeated testing, close movement tracking and separation from the community for visitors from countries with higher infection rates.
- The outcome for most of the 10 COVID-19 vaccine candidates currently under Phase 3 trials will likely be known in the next few months. The first could come as early as this month, starting with the vaccine developed by BioNTech-Ptizer-FosunPharma. If approved, 1.3bn doses can be produced by end-2021 that will inoculate up to 650m people. Other vaccine candidates from the US and China are also looking to reveal the outcome of their Phase 3 trials during end-2020 to early- 2021. Several vaccine makers are looking to produce 500m to > 1bn doses by end-2021.
- Changi Airport has set up facility to conduct 10,000 (c.20% of Singapore’s average daily visitor arrivals in 2019) daily swab tests, capable of increasing when required.
The path towards New Normal
- Singapore’s phased reopening is progressing very well with less than five daily community cases for more than a month. Currently in Phase 2, the government will be progressively revealing more information about the transition into Phase 3 soon.
- Among the changes –
- Allow MICE events up to 250 attendees,
- more details on increasing the 5-person cap for group gatherings will be released,
- increase in group size limits for key life events such as weddings and religious activities to 100 people,
- 50% of workplace employees can now return to office, and
- Cruise-to-nowhere to start from November.
- Beneficiaries are:
- Suntec Convention Centre’s capacity to hold large MICE events is positive for Suntec REIT (SGX:T82U), and
- Centrally located retail properties CapitaLand Mall Trust (SGX:C38U), Mapletree Commercial Trust (SGX:N2IU) and Lendlease REIT (SGX:JYEU),
- office REIT Keppel REIT (SGX:K71U) and
- public transport ComfortDelGro (SGX:C52) benefitting from more employees returning to work.
- See PDF report attached below for complete analysis.
- See also previous market focus report: Market Focus - DBS Research 2020-10-06: Awaiting The Antidote; 2020 Winners - Which To Keep & Which To Reduce?
Singapore Research
DBS Group Research
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Lee Keng LING
DBS Research
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https://www.dbsvickers.com/
2020-10-13
SGX Stock
Analyst Report
4.960
SAME
4.960
1.370
SAME
1.370
0.900
SAME
0.900
1.20
SAME
1.20
2.400
SAME
2.400
