Phillip 2Q21 Singapore Strategy - Phillip Securities 2021-04-01: Music Is Still Playing

THAI BEVERAGE PUBLIC CO LTD (SGX:Y92) | SGinvestors.io THAI BEVERAGE PUBLIC CO LTD (SGX:Y92) Q & M DENTAL GROUP (S) LIMITED (SGX:QC7) MANULIFE US REIT (SGX:BTOU) COMFORTDELGRO CORPORATION LTD (SGX:C52) PROPNEX LIMITED (SGX:OYY)

Phillip 2Q21 Singapore Strategy - Music Is Still Playing

1Q21 Market Review:




2Q21 Market Outlook:

  • We remain positive on equity markets. Global economic momentum is picking up and we see signs of reflation everywhere, notably in commodity and housing prices. Global PMI is above pre-pandemic levels, container imports into the US surged 32% in the first two months of this year and several commodities are at around decade-highs such as copper, tin, iron ores, soybeans and palm oil.
  • On the flip side, rising interest rates have created nervousness and periodic selling in the market. There is concern that the Fed will tighten monetary policy earlier than the 2024 projection. We are more sanguine.
    • Firstly, rising interest rates historically coincided with major rallies in equity markets. The real equity bears are recessions.
    • Secondly, despite the recent spike in interest rates, monetary policy remains ultra-accommodative. With the U.S. economy expected to jump 6.5% in 2021, current 10-year yields of 1.7% will hardly hinder economic activities. In past periods when U.S. economic growth topped 5%, interest rates were as high as 6%, or 2.5% in real terms.
    • Finally, we do not expect the Fed to pre-emptively tighten monetary policy, a mistake it made in late 2018. Instead, the Fed has repeatedly communicated that it is far from its goal of maximum employment. Any rise in inflation is expected to be transient due to reopening and base effects.
  • The Fed is telling us, the music will still be playing, so investors should keep dancing.


Stock Recommendations:

  • Singapore’s economic recovery is nascent. Its easing of large group gatherings and workers returning to office are still underway. Externally, global growth should tick up as COVID-19 vaccinations gather pace. Biden’s massive fiscal stimulus in the U.S. is another accelerant for global growth, on top of large base effects following the unprecedented economic fallout in 2Q/3Q last year.
  • Cyclical sectors such as electronics, commodities and banks should be the first beneficiaries of this recovery. We expect a multi-year boom for electronics from demand for autos, 5G, IoT, data analytics, cloud computing, gaming and of course, bitcoin mining. The upsurge in commodities is spurred by China’s re-leveraging and reinvestment cycle.
  • We still favour banks. Banks’ head fake in accelerating loan provisions last year due to the pandemic and loan moratoriums is unravelling. Earnings should spike in FY21e. As the economy recovers, we expect loan growth to return, followed by fee income and later interest rates (or margins). Another bonus for investors would be a normal resumption of dividends if the MAS allows. Singapore banks now have a CET 1 of 14.6%, against their preference of 13%. Special dividends that are double the level of 2019 are possible, in our opinion.
  • While we like most cyclical sectors and recovery prospects, optimism over international travel looks inflated to us. Singapore Airlines (SGX:C6L)'s market cap is at a decade-high, despite considerably more leverage and relatively unchanged global competition.
  • Among the REIT sectors, we favour U.S. offices. Yields are attractive at 8% and confidence in the US$ and employment is returning.
  • Land transportation should recuperate from increased taxi and rail traffic as the workforce returns.
  • We recently initiated coverage of two building-material stocks:
  • We expect a rebound of as much as 31% in contracts for the construction sector in 2021, after the paralysis last year. Both building-material stocks have material market shares and are poised to secure a slice of the construction contracts, regardless of which contractors win. See


Phillip Absolute 10





Phillip Absolute 10 for 2Q21

  • Ascott Residence Trust (SGX:HMN): Diversified by geography and lease structure of hospitality assets. Plans to double long-stay portfolio of PBSA and rental housing to 15% to further mitigate tourism-related volatility. Forecasting FY21e DPU yield of 4.2%.
  • Asian Pay TV Trust (SGX:S7OU): Current dividend yield of around 9% (or S$18mn) well supported by free cash flows of S$50mn. There is an added optionality of selling 5G backhaul fibre services to mobile operators.
  • Manulife US REIT (SGX:BTOU): Long WALE of 5.3 years and 2% p.a. rental escalations on 96% of leases. Offers attractive FY21e DPU yield of 8.3%.
  • Frasers Centrepoint Trust (SGX:J69U): Suburban malls provide recurring, necessity-driven spending, with 54% of retailers in essential-service trades. Forecast stable DPU yields of 4.6% for FY21e.
  • PropNex (SGX:OYY): Property transactions resilient despite the recession and pandemic. Company enjoys an enviable residential market share of 53% and attractive 33% ROE business backed by net-cash balance sheet of S$105mn.
  • Thai Beverage (SGX:Y92): Valuations attractive, at 14x P/E /for a consumer company with a 90% share of Thailand’s spirits market.
  • CapitaLand (SGX:C31): Demerger is an opportunity to re-rate the company on higher valuations for real-estate fee and rental-based income.
  • ComfortDelGro (SGX:C52): Our exposure to the domestic economic recovery. Easing of group and work-place restrictions adds visibility to the recovery. Stock is 30% below pre-pandemic levels.
  • Keppel Corp (SGX:BN4): Trading at a 15% discount to NAV, Keppel is transitioning away from rig-building business to an asset-light business with a respectable 15% target ROE for the entire Group.
  • Q&M Dental (SGX:QC7): Largest dental clinic chain in Singapore expanding dental clinics by a 22% CAGR in 2021 and 2022. Earnings from COVID-19 PCR lab tests and kit sales are expected to be a material contributor in 2021.





Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2021-04-01
SGX Stock Analyst Report ACCUMULATE MAINTAIN ACCUMULATE 0.860 SAME 0.860
BUY MAINTAIN BUY 0.700 SAME 0.700
BUY MAINTAIN BUY 0.840 SAME 0.840
BUY MAINTAIN BUY 1.830 SAME 1.830
BUY MAINTAIN BUY 1.000 SAME 1.000



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