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STRATEGY – SINGAPORE Laggards Have Their Day In The Sun
Positive news on the vaccine front has led to a global switch out of growth to value stocks, and some Singapore-listed value stocks have benefitted. With investors chasing laggards, a number of stocks now appear to be in overbought territory, with the top five culprits being SMM, SIAEC, SATS, CDLHT and ARA HTrust. While sentiment may continue to grind some of these stocks higher, we advocate investors to stick to blue chips with strong financials and dividend-paying ability.
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Frasers Centrepoint Trust (FCT SP) Essential Ingredients For Sustainable Growth
The acquisition of a 63.1% stake in ARF will contribute to distributable income for 11 months in FY21, while generating savings from tax transparency and lower interest expense. FCT could also benefit from higher index weightage in the FTSE EPRA/ NAREIT Global Developed Index and potential inclusion in the reserve list of the FSSTI. The potential acquisition of Northpoint City South Wing has evolved to be the next catalyst. FCT provides attractive distribution yield of 5.8% for FY21. Maintain BUY. Target price: S$3.15.
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MAYBANK KIM ENG |
CGS CIMB |
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Singapore Banks Too Fast, Too Furious
Recent run up is unsustainable. Take profit The SG banks have re-rated 17% since end-October. They have benefitted from the recovery trade catalyzed by newsflow of successful COVID-19 vaccine trials. We believe this is overdone and amplified by liquidity. Uncertainty that existed in October still remain: NPLs are set to rise as moratoriums ease while borders remain closed, NIMs continue to be under pressure and dividend caps are unlikely to be lifted in 2021E. Back in June, we saw a similar rally as regional lockdowns were eased. But this was short lived as the expected ‘V’ shape recovery did not materialize. Downgrade DBS, OCBC and UOB to SELL. We prefer SGX.
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Singapore Airlines The path to recovery is not a straight line
■ The postponement of the SIN-HKG travel bubble is disappointing but is likely part of a series of stops and starts on the arduous road to recovery. ■ Patient investors with a 1-year horizon should be able to reap the rewards of upcoming Covid-19 vaccinations; we recommend to buy on any dips. ■ Reiterate Add and TP of S$4.57, based on a target P/BV multiple of 0.94x (mean since 2011) against the end-FY22F adjusted BVPS.
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Check out our compilation of Target Prices
