Excerpts from DBS report

3 takeaways from FY23 results season

1. Prefer industrials and technology for earnings visibility.


We seek out opportunities in stocks with earnings resilience amid negative earnings revisions in the wider market.

Average FY24F/25F earnings growth of above 10% is also attractive as we enter a prolonged period of muted earnings growth, with STI earnings growth forecast at around 3%.

Double-digit average earnings growth for Yangzijiang and ST Engineering is underpinned by their robust orderbooks.

SBS Transit railSBS Transit is a 75%-owned subsidiary of ComfortDelGro. Photo: Company

We take comfort in our analysts’ recent positive earnings revisions for Keppel and ComfortDelGro on their improving and steady earnings bases.

Earnings recovery for selected technology stocks UMS Holdings and Venture Corp should pan out under an improving industry outlook, with a potential boost from the ongoing AI boom.

 2. Stick to REITs as the Fed pivot continues to play out.

 

We see the recent pullback in SREITs as an opportunity to add, as our thesis that

1) SREITs would outperform during a Fed’s pivot and
2) the Fed would start lowering rates this year,

remains intact.

We see our REIT analysts’ preference for “value” through retail > office > hotels and industrials validated by the latest results season, as
1) retail, office, and hotels sub-sectors saw more hits than misses and
2) these three sectors are expected to post positive outlooks and reversions.

Our analysts also think that the worst of interest cost increases is likely over, with overall financial positions (e.g., capital values, interest coverage ratio) resilient.

Our preferred picks include retail (FCT, LREIT), office (CICT), hospitality (CLAS), and industrials (FLT, MLT, and DCREIT).

 3. 5 stocks to avoid

 
Our criterions are
(1) uncertain outlook or no catalysts,
(2) earnings cut,
(3) hold/fully valued recommendation, and
(4) limited or no upside to TP.

The stocks to avoid are AEM, SIA, UOB, PropNex, and APAC Realty.

While some of these stocks may be supported by the upcoming ‘ex-dividend’ in April, we believe any positive price movements are temporary, with a correction once the ex-dividend date passes

Full report here.

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