Singapore Stock Strategy - UOB Kay Hian 2022-11-14: An Unexpected Singles’ Day Present From China

Singapore Stock Strategy - UOB Kay Hian Research | SGinvestors.io (SGX:)

Singapore Stock Strategy - An Unexpected Singles’ Day Present From China

Light at the end of the tunnel in 2023?

6% EPS growth for Singapore Market in 2023.

  • Compared to six months ago, we have moderated our 2022 growth forecast from 22% y-o-y to 18% y-o-y for our coverage universe of the Singapore market, and for 2023 we have lowered it from 9% y-o-y to 6% y-o-y.
  • The aggregate 6% EPS growth in 2023 is with financials and land transports leading the way. While we continue to expect the aviation sector to see y-o-y earnings decline in 2023, earlier-than-expected expansion of air travel into China could see a re-rating of the sector although actual earnings uplift may take time to eventuate.
  • This takes into account more realistic assumptions regarding the inflationary effects that will likely impact the market and the economy this year and thus we believe that our earnings estimates are not overly optimistic.
  • 2023 valuations for the STI remain inexpensive, with the STI trading at a forecast 2023 P/E and P/B of 12.0x and 1.1x respectively, and paying a yield of 4.5%. We highlight that these multiples are meaningful discounts to the STI’s long-term averages.
  • Potential downside risk in 2023 earnings could arise if:
    1. higher-than-expected commodity prices, especially oil, throttle the nascent economic recovery, and
    2. the US Fed raises interest rates too aggressively to contain inflation and cause a recession as a result – we note that probability forecasts for recession risks have risen significantly in the US and EU which will negatively affect Singapore.

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Adrian LOH UOB Kay Hian Research | Singapore Research Team UOB Kay Hian | https://research.uobkayhian.com/ 2022-11-14