Singapore Strategy - CGS-CIMB Research 2021-05-31: Faith Arise

Singapore Market May 2021 Wrap Up - CGS-CIMB Research  | SGinvestors.io COMFORTDELGRO CORPORATION LTD (SGX:C52) SINGAPORE PRESS HLDGS LTD (SGX:T39) UOL GROUP LIMITED (SGX:U14) KEPPEL CORPORATION LIMITED (SGX:BN4) SATS LTD. (SGX:S58)

Singapore Strategy - Faith Arise

  • Singapore to relax Phase 2 restrictions after 13 Jun if community cases fall. We believe economic impact of the COVID-19 resurgence will be contained in a shorter period amid speedier vaccinations and ever-ready targeted relief.
  • We still expect FSSTI FY22F EPS growth at 14%, which justifies our 3,488 points target based on +0.5 standard deviation of mean 15.3x P/E.
  • Our picks surround themes of
    • reopening,
    • defensive,
    • growth,
    • restructuring and
    • valuations.
  • Add big caps: ComfortDelGro (SGX:C52), SPH (SGX:T39), UOL Group (SGX:U14), Keppel Corp (SGX:BN4), SATS (SGX:S58).



Living with endemic, gradual reopening

  • If COVID-19 cases continue to fall, Singapore is likely to relax restrictions after 13 Jun from the heightened alert phase 2. Daily in-community COVID-19 cases peaked on 16 May at 38 to ~18 cases per day in the past week.
  • Extensive testing, quicker response in contact tracing and accelerated vaccination should see Singapore containing pockets of resurgence better than in 2020. By Aug, some 75% of Singapore’s population would have received their first vaccine jab and be fully vaccinated by end-2021. We expect to see gradual border re-openings by end-2021.
  • Singapore’s government is ever-ready to extend targeted relief (the latest being S$800m job support scheme for affected sectors), helping to limit downside in the overall economy.


Good 1Q21 but EPS upgrade to take a pause ahead

  • The positive-to-negative earnings surprise ratio remained high at ~2.x (19 above, 9 below, 32 in-line) in the recent business/earnings reporting session. We saw more earnings per share (EPS) upgrades among the stocks we cover – led by banks, commodities and property realtors.
  • Our FY21-22F market EPS forecast inched up by 2.6-2.8%. The blip of Phase 2 in Jun could see EPS upgrades taper in 2Q21F.
  • Notably, banks, which typically drive the market EPS, may be more conservative in their assessment of asset quality amid the resurgence of COVID-19 cases in the region with the risk of loan moratoriums being introduced. However, FSSTI EPS growth still sustained at +42% for FY21F and +14% for FY22F.


No guts no glory

  • After a very short few days of slight correction from profit-taking in mid-May as the government announced the introduction of Phase 2, investors were all ready to jump back into the market. We believe the current optimism is due to comfort drawn from accelerated vaccination programme and ever-ready targeted relief by the government to prevent an economic meltdown.
  • We expect FSSTI to trade up to +0.5 standard deviation of 12-year mean or 15.3x CY22F (3,488) returning to pre-COVID-19 levels of Jan 20.
  • We reiterate OVERWEIGHT on banks, property/selected REITS, capital goods, and add transport and healthcare to the list. Downgrade telco and construction to NEUTRAL.
  • Our top picks hover around the themes of
    • reopening
    • defensive,
    • growth,
    • restructuring and
    • valuations.


Big Cap top picks: Add ComfortDelGro, SPH, UOL, Keppel Corp, SATS






LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2021-05-31
SGX Stock Analyst Report ADD MAINTAIN ADD 1.820 SAME 1.820
ADD MAINTAIN ADD 2.090 SAME 2.090
ADD MAINTAIN ADD 7.910 SAME 7.910
ADD MAINTAIN ADD 6.400 SAME 6.400
ADD MAINTAIN ADD 4.300 SAME 4.300



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