Singapore Market July 2021 Wrap Up - CGS-CIMB Research 2021-07-30: FSSTI closed at 3166.94, Up 1.17% In July

KEPPEL DC REIT (SGX:AJBU)

Singapore Market July 2021 Wrap Up - Singapore In 5

FSSTI closed Jul 21 at 3,166.94 points, up 36.48 points (1.17%).
Strong GDP and NODX data. Quarterly property numbers: Office and Industrial up, Retail down.
We keep our end-FY21 FSSTI target at 3,488 points, based on 0.5 standard deviation above 10-year mean 15.3x P/E.

The FSSTI closed Jul at 3,166.94 points, up 36.48 points (1.17%), even as the reprieve from ‘Heightened Alert’ (HA) was short-lived.
2Q21’s GDP expanded 14.3% y-o-y (-2% q-o-q SA), partly due to a low base stemming from the previous year’s Circuit Breaker.
NODX, however, grew 15.9% y-o-y (May: 8.6% y-o-y), easily beating our and consensus estimates, and was driven by Electronics (PCs, Integrated Circuits, and Diodes & transistors), up 25.5% y-o-y; and non-electronics, up 13.2% y-o-y, driven by Specialised Machinery, Petrochemicals and Jewellery.
New private home sales declined 2.2% m-o-m, according to Urban Redevelopment Authority (URA) data, due to a dearth of new project launches and Phase 2 (HA).
2Q21 office rents rose 1.3% q-o-q (1Q21: 3.3% q-o-q), while vacancy rates rose to 12.6% (1Q21: 11.9%). The URA rental index for retail space fell 0.5% q-o-q, (1Q21: -4.4% q-o-q), with vacancy rates unchanged q-o-q at 8.5%. Industrial prices and rentals gained 1.8% q-o-q and 0.6% q-o-q respectively (1Q21: 1.6% and 0.3%), reflecting recovery in the manufacturing sector.

Midway through the 2Q21 results season, there are no major swings either way in the earnings surprise ratio; with half the results coming in-line, and the positive and negative surprises evenly split. Sectors traded range-bound, with Healthcare, REITs, and Financials outperforming, and Industrials, Consumer Goods and Maritime bringing up the rear.
Outperformers in the FSSTI were CapitaLand (SGX:C31) (restructuring approved), SGX (SGX:S68), and Keppel DC REIT (SGX:AJBU) while Dairy Farm International (SGX:D01); which reported poor results, with spillover into parent Jardine Matheson (SGX:J36) (also revaluation losses from Hongkong Land (SGX:H78)), and City Developments (SGX:C09) (impairment of investment) underperformed. See STI constituents share price performance.
In the mid-large cap space, outperformers were
- Golden Energy & Resources (SGX:AUE) (expected earnings improvement),
- PropNex (SGX:OYY) (robust property sentiment),
- Raffles Medical (SGX:BSL) (good results),
Mid-large cap underperformers were
- Olam (SGX:O32) (soft commodity prices) and
- SingPost (SGX:S08) (organisation transition)
Institutional investors continued selling; Tech, Financials, REITs, and Healthcare saw inflows, while there were disposals in Consumer, Industrials, Real Estate and Telcos, extending the net selling run to 8 weeks. Retail flows were slightly positive; there were inflows into Consumer, Industrials and Telcos, and outflows from Tech, REITs, Real Estate and Financials. See

SGX (SGX:S68) to buy FX trading platform MaxxTrader for US$125m. See SGX Announcements.
Offer by CEO to take Fragrance Group (SGX:F31) private at S$0.138 per share. See Fragrance Group Announcements.
Ezion (SGX:5ME) sells subsidiary and tug vessels for US$83.7m. See Ezion Announcements.
Keppel DC REIT (SGX:AJBU) to acquire first data centre in China for RMB635.9m (S$132m). See Keppel DC REIT Announcements.

We upgrade Keppel DC REIT (SGX:AJBU) to an ADD (from Hold). Keppel DC REIT's FY21-23 DPU yield of ~4% looks decent, while acquisitions could accelerate, given an expanded investment mandate. See Keppel DC REIT - CGS-CIMB Research 2021-07-27: Inorganic Growth To Underpin 2H FY21.

After 2 months of decline in May and June, the FSSTI finally ended the losing streak, gaining +1.17% in July.
Notably, the uptrend was firmly held up by the 3,100 support level and the uptrend line. Moreover, following the rebound off the uptrend line this week, the FSSTI has finally broken above the 2-week range on 29 Jul. This signals the resumption of the uptrend. Therefore, we expect the FSSTI to trend higher to target the 3,280 resistance followed by 3,380 points over the coming weeks. See chart in report attached below.
The near-term support remains at 3,060– 3,100 points.

LIM Siew Khee CGS-CIMB Research | Jeremy NG Choon Heng CGS-CIMB Research | https://www.cgs-cimb.com 2021-07-30

SGX Stock Analyst Report ADD MAINTAIN ADD 2.840 SAME 2.840