Singapore Market Focus - DBS Research 2021-04-05: STI Expected To Trade Sideways; Top Slice Vs Bargain Hunt

Singapore Market Focus - DBS Research | SGinvestors.io COMFORTDELGRO CORPORATION LTD (SGX:C52) DAIRY FARM INT'L HOLDINGS LTD (SGX:D01) SINGTEL (SGX:Z74)

Singapore Market Focus - Top Slice Vs Bargain Hunt

  • Back to Code Orange. STI expected to trade sideways - warrants a tactical switch.
  • Top slice stocks with < 10% upside to target price and pandemic recovery plays that have recovered close to/above their pre-COVID levels ahead of earnings.
  • 3 SG laggard stocks to bargain hunt.
  • Yield pullback is ‘REITs positive’.



Back to “start of pandemic”

  • The stock market is forward looking. While the real economy looks forward to a return to pre-pandemic activity levels by end-2021 to early 2022, many stocks have already recovered to their respective “start of pandemic” levels.
  • Some have even risen far beyond. The STI’s March high of 3,200 coincides with the February 2020 levels when the Singapore government raised the coronavirus outbreak alert to Code Orange.
  • (See also recent SGX market update: STI Currently Leading World Benchmarks in 2021 year-to-date.)


Making a tactical switch

  • Our view is that the benchmark STI should swing sideways in the coming months with support at 2966-3056 and resistance at 3200-3300. This should continue until investors start to focus on post-pandemic growth rather than COVID-19 recovery.
  • With the STI currently closer to resistance than support, we believe it is time to turn tactical at this juncture:


SG laggard stocks to bargain hunt

  • We look at stocks under our coverage with recovery potential that trade > 15% below their February 2020 price levels and with a BUY recommendation. Our picks are ComfortDelGro (SGX:C52), Dairy Farm (SGX:D01) and SingTel (SGX:Z74).
    • ComfortDelGro (SGX:C52) will benefit from the Singapore government’s decision further ease social distancing measures that include raising the work-in-office cap to 75% from 5 April.
    • Dairy Farm (SGX:D01)’s transformation plan to get its earnings back on the growth track is well underway. We project 18% EPS CAGR over FY20-22F. Its current share price valuation is attractive at ~-1.5 standard deviation of its historical mean P/E.
    • SingTel (SGX:Z74)’s potential catalysts are the resumption of earnings growth, sharp rise in Bharti’s share price and divestments of non-core assets. We project FY21F/22F dividend per share (DPS) of S$0.109 / S$0.115 based on a payout ratio of 100%/90%. Any pullback of SingTel's share price in May could provide an opportunity to accumulate, as June and July are seasonally positive months for the stock.


SG stocks to top slice

  • We identify stocks to top slice using the following criteria:
    1. < 10% upside to target price,
    2. pandemic recovery plays that have recovered close to/above their pre-COVID levels.
  • Some pandemic recovery beneficiaries have done exceptionally well recently, as countries prepare to resume international travel via travel bubbles and the use of vaccine certifications and passports. While we are positive on the recovery, we think that the market has priced in too much optimism for a recovery that will take time.
  • We see limited near-term upside for US 10-Year Treasury yield with the technical resistance at 1.87%. Further near-term upside potential for both bank stocks appears limited. ; Singapore Airlines Share Price; ); ;Genting Singapore (SGX:G13); ;

Rise in yields not a concern for now

  • The FTSE ST REITs Index fell 8.2% from its peak year-to-date as the US 10-year yield rose 58bps to 1.59%, but subsequently reversed course as the 10-year yield approached 1.75%. We believe that this is attributable to two main reasons:
    1. Market participants may be anticipating a consolidation in the US 10-year yield soon given the sharp and unabated 84bps rally.
    2. Key 50% upward retracement at 1.87% is a potential resistance and may trigger a pullback to as low as around 1.5%.
  • Market participants may be positioning ahead of this anticipated 10-year yield pullback that is potentially “REIT positive”.
  • Our picks are

See report attached below for complete analysis.






Kee Yan YEO CMT DBS Group Research | Wei Le CHUNG DBS Research | Janice CHUA DBS Research | https://www.dbsvickers.com/ 2021-04-05
SGX Stock Analyst Report BUY MAINTAIN BUY 1.990 SAME 1.990
BUY MAINTAIN BUY 5.020 SAME 5.020
BUY MAINTAIN BUY 2.750 SAME 2.750



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