Market View Update
Lull period ahead with inflation concern and World Cup distraction
- What happened: US equity markets fell on inflation concerns (US Apr PPI +6% y/y vs. 4.8% est.) with US 10Y yield rising above 4.5% and Brent trading c.USD110/bbl on Strait of Hormuz deadlock
- Our interest rate strategist sees US 10Y yield headed higher into the 5% to 5% range
- Our observations: There were 3 periods in recent years where US 10Y yield rose above 4.5% (refer to chart)
- S&P500 tends to either correct or continue its correction in the near-term when the US 10Y yield rises above 4.5%
- STI tends to outperform S&P500 during this period, likely as heavyweight banks are resilient in a non-recessionary rising interest rate environment
- Our view: The rally in Singapore equities has been narrowing (i.e. weakening market breadth) over the past month, the trend should continue over the next few weeks (1) if Strait of Hormuz remains closed (2) market activity tends to slow down heading into and during the FIFA World Cup tournament from 11 June to 19 July
- Expected outperformers : Banks (Pick: OCBC), consumer staples (Kimly, Delfi), telco (Netlink, SingTel), shipping (YZJ Maritime)
- Expected Underperformers: Consumer discretionary (GENS), REITs, construction
Singapore Equity Picks
UMS Integration: Reduce by 6,000 shares @ SGD2.84
UMSH shares went 2cts shy of our fundamental TP of SGD3.17 last Friday before succumbing to profit taking, possibly on concern that rising inflation could temper the YTD strong AI-led rally. UMSH shares currently trade at 46X FY26F PE and 37X FY27F PE. We lower exposure accordingly. There remains 15,000 shares in equity picks post reduction. Shares removed returned c.150% (amalgamated).
Stocks to Watch
Frasers Property Ltd
- Sale of Eastern Creek Quarter retail center for AUD400mn to Vicinity Centres
- Pricing at AUD9,800 per square meter (psm) appears firm but reflects scarcity value of well located Sydney outlet assets
- Divestment reaffirm FPL’s focus on value-unlocking strategy to create balance sheet flexibility and headroom
- BUY Call, TP SGD1.50 maintained
Nam Cheong Limited
<Results Analysis> 1Q26 boosted by vessel sale gain
- 1Q26 reported net profit surged 160% y/y to RM79mn on vessel disposal gain
- Stripping the gain out, core chartering net profit down c.23% y/y to RM23.2mn, slightly below, due to higher operating cost in Middle East and share-based staff awards
- Vessel utilisation at 58% in 1Q26 due to monsoon season, set to improve to >70%in 2Q and 3Q; plan to add 5 vessels to fleet in 2026; net gearing declined sharply to 0.17x
- Maintain BUY and TP SGD1.90; well-positioned to benefit from multi-year O&M upcycle
NetLink NBN Trust
Slight miss on FY26 EBITDA, DPU in line while FY27F DPU guidance also inline
- NLT’s FY26 EBITDA of SGD283mn (-1.8% y/y) came in slightly below consensus estimate of SGD293mn, mainly due to higher opex from accounting change
- FY26 DPU rose by 1% y/y to SGD5.42Scts, supported by resilient operating cash flow generation of SGD259mn. Management guided for FY27F DPU to remain stable while leaving room for it to be slightly higher
- Maintain BUY with an unchanged TP of SGD1.08 for its 5.3% dividend yield; trading at a yield spread of 323bps (near 4-year average of 324bps)
Singapore Airlines Ltd
- FY26 beat on temporary tailwinds from Middle East disruption, as yields were bolstered by diversion traffic and higher last-seat demand in March
- FY27 to test yield durability amid full impact of fuel shock, compounded by steep losses at Air India
- Balance sheet strength central to SIA’s competitive positioning, supporting capacity expansion, aircraft capex and elevated dividends
- Maintain HOLD and TP of SGD6.50 on SIA, based on 4.4x EV/EBITDA, slightly below five-year pre-pandemic average
Singapore Technologies Engineering Ltd
1Q26 in-line, with structural tailwinds intact
- 1Q26 revenue rose 11% y/y to SGD3.26bn, or +15% y/y rebased excluding LeeBoy, broadly in-line at 23.8% of street FY26 estimates
- Orderbook reached a new record of SGD34.5bn, up from SGD33.2bn in the previous quarter, with SGD8.0bn guided for delivery over the remainder of 2026
- International defence momentum remains strong, with SGD1.07bn of contracts secured as of Apr-26, close to its SGD1.2bn FY26 target
- Remain positive on outlook as Middle East conflict impact on Commercial Aerospace remains limited, while defence tailwinds stay intact
Thai Beverage PCL
On track to deliver a year of growth
- Demand of spirits and beer have remained resilient due to increased hours allowed for alcohol consumption and increased domestic travel
- Key raw materials like molasses and malt are largely hedged for remainder of the calendar year, with prices likely to increase in 2027
- Maintain FY26F earnings and adjust FY27F earnings downwards by 4%, implying flattish y/y growth
- Maintain BUY with lower TP of SGD0.53 which factored in lower THBSGD and a lower PE peg of 12x, in-line with other global spirits players
Legend
| (+) | (-) |
Earnings | Positive earnings revision | Negative earnings revision |
Recommendation | Upgrade | Downgrade |
TP | Increase | Decrease |
Topic
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