Singapore Stock 4Q20 Results Review - DBS Research 2021-03-11: Earnings U-Turn

SGinvestors.io

IFAST CORPORATION LTD. (SGX:AIY) COMFORTDELGRO CORPORATION LTD (SGX:C52) GENTING SINGAPORE LIMITED (SGX:G13) CHINA AVIATION OIL(S) CORP LTD (SGX:G92) UMS HOLDINGS LIMITED (SGX:558)

Singapore Stock 4Q20 Results Review - Earnings U-Turn

• First positive earnings revision since 2Q19, +2% for FY21F and +3% for FY22F.
• Boosted by banks and agri products, lowered for shipyards.
• Earnings (excluding property) to recover back to 97% of pre-pandemic level by end-2021.
• Strongest y-o-y earnings recovery in 2Q21, to taper off and stay positive beyond that.

Earnings revised up post 4Q20 results – first after 6 consecutive quarters of earnings cuts.

• Positive earnings revision of 2% for FY21F and 3% for FY22F for stocks under our coverage. This is the first upward earnings revision after 6 consecutive quarters of cuts. The outcome is in line with the anticipated economic recovery as the global vaccination drive unfolds and business activities pick up.
• The STI now trades at 13.8x (+0.5 standard deviation) 12-month forward P/E. The latest upward earnings revision underpins STI 2021 target of 3180 that coincides with 14.08x (+0.75 standard deviation) blended FY21F/FY22F P/E.

Earnings boost from banks.

• Key earnings uplift came from banks with 7.3% in FY21F and 7% in FY22F on better NIM; better non-interest income outlook for UOB (SGX:U11) and higher loans growth expectation for OCBC (SGX:O39).
  • OCBC - DBS Research 2021-02-25: Recovery In The Works.
  • UOB - DBS Research 2021-02-25: Growth Mode Turned On.
• Agri products saw positive earnings revision from higher CPO price trends for First Resources (SGX:EB5) and strong product demand for Wilmar International (SGX:F34).
  • First Resources - DBS Research 2021-02-02: Great Bargain For Prime Performance.
  • Wilmar International - DBS Research 2021-01-21: Deserves Higher Valuation Multiples.
• But yards Keppel Corp (SGX:BN4), Sembcorp Industries (SGX:U96) and Sembcorp Marine (SGX:S51) suffered earnings cuts due to impairment and fair value losses.
  • Keppel Corporation - DBS Research 2021-01-29: (Downgrade To) HOLD For More Clarity On Restructuring.
  • Sembcorp Industries - DBS Research 2021-02-24: Nearing A Perfect Turnaround.
  • Sembcorp Marine - DBS Research 2021-02-25: Show Me The Orders.
• Earnings for Genting Singapore (SGX:G13) and Singapore Airlines (SGX:C6L) were cut in anticipation of slower international travel recovery.

Heading back to pre-COVID levels.

• Earnings for stocks under our coverage are anticipated to recover back to 97% (excluding property) of FY19 (pre-pandemic level) by end 2021 with 44.2% FY21F earnings growth.
• Consumer discretionary sector’s 608% FY21F earnings per share jump is due to a low base, driven by Genting Singapore (SGX:G13) and Koufu (SGX:VL6) on resilient domestic and tourist recovery.
• Healthcare: Sustained 40% FY21F earnings growth on robust demand for Riverstone (SGX:AP4)’s healthcare gloves and IHH Healthcare (SGX:Q0F) driven by Gleneagles HK.
  • Riverstone - DBS Research 2021-02-26: FY20 Earnings Beat Our Expectations On Higher Margins.
  • Riverstone - DBS Research 2021-03-01: Cleanroom Gloves To Provide Sustainable Growth.
• Index heavyweight banks - DBS (SGX:D05), OCBC (SGX:O39) and UOB (SGX:U11) should see a 23.2% growth in earnings per share growth in FY21.
• The REITs’ sector 22% DPU growth is led by
  • retail REITs
    • Frasers Centrepoint Trust (SGX:J69U),
    • Lendlease REIT (SGX:JYEU),
    • CapitaLand Integrated Commercial Trust (SGX:C38U) and
  • hospitality REITs
    • ARA US Hospitality Trust (SGX:XZL),
    • Frasers Hospitality Trust (SGX:ACV),
    • Ascott Residence Trust (SGX:HMN), and
    • CDL Hospitality Trusts (SGX:J85).

Pandemic recovery on track.

• 4Q20 results season underpins our view that earnings are on track to recover as economies reopen and the global vaccination program unfolds. We maintain our positive view on vaccine beneficiaries that includes hospitality REITs
  • Ascott Residence Trust (SGX:HMN),
  • CDL Hospitality Trusts (SGX:J85),
  • Far East Hospitality Trust (SGX:Q5T),
  • ARA US Hospitality Trust (SGX:XZL).
• See report: Singapore Hospitality - DBS Research 2021-03-10: Right Time To Pick Up Fallen Angels; Time For Hospitality S-REITs To Shine.
• Genting Singapore (SGX:G13) and Koufu (SGX:VL6) should also benefit from tourist recovery. The rise in US 10-year yields could consolidate soon, that should see interest returning to REITs and technology stocks while the recent rally in banks may pause soon.
  • Genting Singapore - DBS Research 2021-02-10: Value Play To Ride On Vaccine Tailwind.
  • Koufu Group - DBS Research 2021-02-24: Beneficiary Of Improving Consumption; COVID-19 Recovery Play.
• Among the list of top Singapore growth stocks yielding > 20% growth with upside to our target price are
  • iFAST (SGX:AIY),
  • ComfortDelGro (SGX:C52),
  • Genting Singapore (SGX:G13),
  • China Aviation Oil (SGX:G92),
  • UMS (SGX:558),
  • Lendlease REIT (SGX:JYEU), and
  • Frasers Centrepoint Trust (SGX:J69U).
• See report attached below for complete analysis.

Kee Yan YEO CMT DBS Group Research | Janice CHUA DBS Research | https://www.dbsvickers.com/ 2021-03-11

SGX Stock Analyst Report BUY MAINTAIN BUY 7.640 SAME 7.640

BUY MAINTAIN BUY 1.990 SAME 1.990

BUY MAINTAIN BUY 1.000 SAME 1.000

BUY MAINTAIN BUY 1.380 SAME 1.380

BUY MAINTAIN BUY 1.57 SAME 1.57