Singapore Market Strategy - Maybank Research 2022-06-03: Fishing In Troubled Waters

HRNETGROUP LIMITED (SGX:CHZ) AZTECH GLOBAL LTD. (SGX:8AZ) CDL HOSPITALITY TRUSTS (SGX:J85)

Singapore Market Strategy - Fishing In Troubled Waters

Inflation, interest rates and recession shocks could undercut global growth and markets are reacting with significant uncertainty. Calling a bottom is impossible, but we think Singapore offers defensive positioning to ride out potential storms.
We screen for companies with strong net cash balance sheets that offer rising dividends and increasing share buybacks.

Some of our conviction picks display all these factors including ComfortDelGro (SGX:C52), SingTel (SGX:Z74), Venture Corp (SGX:V03) along with key buys including AEM (SGX:AWX), Wilmar International (SGX:F34), HRnetGroup (SGX:CHZ) and Aztech (SGX:8AZ).

Emergent trends of COVID re-openings globally is lifting growth. However, crosswinds from the Russia-Ukraine war, China’s COVID Zero strategy and global monetary tightening is threatening to derail this.
MIBG’s Macro Team points to three major shocks that could undercut recovery and increase uncertainty. These include
1. rising inflation shocks thanks to higher commodity prices, supply bottlenecks
2. interest rate shocks
3. recession shocks particularly from an overzealous Fed battling inflation.
These are already lowering earnings visibility and increasing market fear, which may get worse before getting better.

In this backdrop, Singapore has held up well, outperforming the SPX by 16% year-to-date. Strong balance sheets, potential for M&A and a highly vaccinated population are likely driving this defensiveness.
We screen the Singapore stock market to shortlist stocks that offer the most defensiveness under 3 factors:
1. net cash balance sheets, which should limit the impact of rising interest rates,
2. rising dividend expectations, and
3. increasing levels of share buybacks - a potential signal on focus on shareholder returns and management confidence.
We also screen for companies where insiders are buying more now vs last year.

43% of Singapore’s active listings have net cash balance sheets, with a sizable proportion of small and mid caps with cash exceeding their market caps. Notable SGX listed corporates where cash is at least 10% of market cap include:
We also note strong consensus 3-year dividend growth CAGR expectations for
Separately, we see rising share buybacks that have year-to-date purchased more than a third of what was bought in 2021 from
Significant insider buying activity is observed across sectors particularly:
Overall, this data notably overlaps with MIBG’s key conviction picks including
For completeness, our other top picks which balance between defense and structural growth including:

Thilan Wickramasinghe Maybank Research | Li Jialin Maybank Research | https://www.maybank-ke.com.sg/ 2022-06-03

SGX Stock Analyst Report BUY MAINTAIN BUY 1.070 SAME 1.070

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