Singapore Equity Picks


The Straits Times Index (STI) has declined 2.9% since our 16 September update on trade war uncertainties and weaker-than-expected US ISM manufacturing/services figures that stoked worries of a recessi...
Group Research15 Nov 2019
  • Reduces exposure of CDL HT from Dividend category
  • Remove ST Engineering from Blue Chips and Dividend category
Photo credit: AFP Photo


15 Nov 2019

Add City Developments 1,300 shares @ $10.52 to Blue Chips category

We return City Developments to our stock picks following its recent price pullback. Recall we had removed the stock at $10.79 on 31 Oct following its recent price gain. The stock has since pulled back and is trading closer to its technical support at $10.33. Barring the risk of more property measures if home prices rise sharply, the outlook for Singapore residential property market next year is sanguine. According to an Urban Land Institute and PricewaterhouseCoopers LLP report published earlier this week, Singapore is now ranked No. 1 for real estate investment prospects in terms of price increases in 2020.

13 Nov 2019

Add Koufu 4,800 shares @ S$0.75 to Dividend category

We capitalise on the recent stock price pullback to add a further 4,800 Koufu shares. Koufu recently reported 3Q results that were in line. Net profit rose 19% y-o-y to S$7.1m led by opening of new outlets and better margins due to improved operational leverage. Regional store expansion underway with 2 new food courts in Macau and 4 more tea outlets (currently 25). Technical support for Koufu shares is at $0.74 which limits downside.

11 Nov 2019

Reduce exposure of CDL HT by 3,000 shares @ $1.60 to 7,000 shares

While we remain positive on the outlook of Singapore hospitality REITs, we lower our exposure to SREITs in our equity picks due to the recent rebound in US 10-year bond yield to 1.94%. DBS Economics Research expects the 10-year yield to rise further to 2.2% next year. The reduction in CDL HT is a ‘square off’ of part of the shares that was added on 30 August at $1.59. CDL HT shares now account for 6.5% (from 9.3%) of the value of our equity picks portfolio. The exposure of the three SREITs in our portfolio currently makes up 21% of the total value.

Remove ST Engineering from Blue Chips and Dividend

We remove the stock following its price increase since inclusion. ST Engineering shares have risen by 5.1% to outperform STI by 1.1%. ST Engineering report 3Q19 core net profit of S$153.3m (+13.9% y-o-y, +11% q-o-q) that was slightly below the street’s expectations. 9M19 earnings of S$422.6m forming 73.5% of consensus’ full year estimate.

08 Nov 2019

Remove UOL from Blue Chips category

We remove the stock as we pare our equity picks exposure given the recent strong run-up in the stock market. We observe short-term technical resistance for the stock at $8.10 to $8.20. At $7.99, the stock is a mere 1.3% below the resistance. UOL shares have returned 3.6% since its inclusion less than 2 weeks ago to outperform STI by 1.1%.

04 Nov 2019

Add SIA Engineering 4,500 shares @ $2.65 to Dividend category

Early cyclical outperformers - banks, properties and technology - have outperformed in recent weeks on optimism of a modest economic recovery going forward. We have increased our exposure to the industrials sector, which is an early-mid cycle outperformer. The sector should be the next in line to stir to life if economic recovery hopes continue. SIA Engineering’s 2QFY20 net profit was above the street’s expectations at S$46.0m (+21% y-o-y, +11% q-o-q). Higher core operating profits mitigated softer earnings from its associates and JVs. Core EBIT margin remained resilient in 2Q20, improving to 7.7%, the highest level in the past 10 quarters. The stock trades at a yield of 4.9% for FY20F.

01 Nov 2019

Remove City Developments from Blue Chips category

City Dev’s share price has done well since inclusion on 14 August. The stock gained 19.3% (CD) to outperform the STI by 16.7%. As the stock now offers a limited 1.9% upside to our fundamental TP, we remove it from our picks.

31 Oct 2019

Remove Ascott Residence Trust (ART) from Dividend category

We take profit on ART (7,800 shares) following its strong performance since inclusion on 22 August. The stock gained 8.5% to outperform STI by 5.8ppts.

Add UOL 1,300 shares to Blue Chips category

UOL is well positioned to unlock the value of its commercial and hospitality assets. The stock is currently trading at 0.66x FY19F P/NAV, which is below its historical average multiple in the last property cycle (FY13-17) of 0.7x. Our fundamental TP of S$8.53 is based on a 35% discount to RNAV.

Add Far East Hospitality Trust 12,000 shares to Dividend category

We add the stock for its pure Singapore hospitality exposure in anticipation of a boost in tourist arrivals. A strong conference lineup in 2020, traffic diversion within Asia and a drop in supply growth to 1.5% are projected to pave the way for a sustained recovery in hospitality REITs in 2020.

Reduce exposure of CDL HT by 8,000 shares to 10,000 shares

We remain positive on CDL HT but lower our exposure as we maintain our percentage weight of Singapore hospitality REITs in our Equity Picks due to Far East Hospitality Trust’s inclusion today. Asset reconstitution from its Liang Court integrated development exposure is an added catalyst. Novotel Clarke Quay currently contributes c.12% and c.4% to respective REITs’ book value.

29 Oct 2019

Add UOB 400 shares @ $26.09 to Blue Chips category

UOB is our preferred pick for the banks due to its (1) attractive dividend yield of c. 4.7%, (2) smaller exposure to China among the local banks, and (3) a more defensive wealth management franchise. UOB continues to navigate cautiously in a moderating growth environment. We believe UOB’s current valuation of c.1.1x FY20F BV is inexpensive.

22 Oct 2019

Add ST Engineering 3,300 shares @ S$3.92 to Blue Chips and dividend category

We like the stock for its earnings visibility and strong order book that stood at an all-time-high of S$15.6bn as of end-2Q19. Since then, STE has secured contracts worth S$1.8bn in 3Q19 (+20% q-o-q, +57% y-o-y). The stock price has pulled back from a high of S$4.35 in July and we see technical support at S$3.90. The stock now offers FY19-20F dividend yields of 3.9% and 4.1%.

18 Oct 2019

Remove Keppel Corporation from Blue Chips category

The stock’s performance has been lacklustre since its inclusion on 1 July, returning -9.3% (CD) that underperformed STI by -3.4%.We think the stock price could stay trendless at best, following the latest 3Q19 results that saw a c.30% y-o-y net profit decline to S$159m largely due to the absence of major en-bloc sales (vs gains of c.S$110m for the sale of Quoc Loc Phat in 3Q18) that tends to be lumpy. 9M19 profit stands at S$515m (-36% y-o-y), which makes up only ~58% of our and consensus’ expectations.


 

Please note the information below was accurate as of 16 Oct 2019



Stable performance despite an uncertain month

The Straits Times Index (STI) has declined 2.9% since our 16 September update on trade war uncertainties and weaker-than-expected US ISM manufacturing/services figures that stoked worries of a recession.

Our equity picks’ time-weighted rate of return (TWRR) has declined slightly to 38.47% (previously 39.32%) since inception on 22 July 2016, surpassing STI’s 6.08% return over the same period. In a 1-year period, our equity picks’ TWRR improved slightly to 12.53% (previously 12.33%) while the STI rose 2.24%.

Over the course of the past month, we removed MLT (+5.2%) following the stock’s recent run-up. We added YZJ Shipbuilding on the back of its strong orderbook and attractive valuation ahead of its upcoming 3Q results. Koufu was also added for its sound fundamentals and anticipated uplift from a full 12-month contribution of its MBS outlet while turnaround of kiosk operations remains on track.

We maintain our equity picks in this update and will continue to monitor opportunities for additions and deletions.

 


Equity Picks Performance Since Inception


 

 

Performance of Equity Picks

BLUE CHIP: Provides steady growth over a longer time period
DIVIDEND: Provides steady income stream
GROWTH: Provides capital growth over 12 month  

   

 

      Stock Entry Date Entry Price
(S$)

Price
(S$)
14 Oct

Gain/Loss
% incl div
     

Jumbo

03 May 19

0.41

0.375

-7.3

     

Jumbo

12 Jun 19

0.375

0.375

0.0

     

Keppel Corp

01 Jul 19

6.66

5.97

-9.2

     

Sheng Siong

30 Jul 19

1.11

1.16

6.1

     

Manulife US REIT

01 Aug 19

0.89

0.91

4.4

     

Manulife US REIT

23 Aug 19

0.895

0.91

3.2

     

City Developments

14 Aug 19

9.09

9.85

9.0

     

Ascott Residence Tr

22 Aug 19

1.29

1.37

6.2

     

CDL Hosp Trust

30 Aug 19

1.59

1.63

2.5

     

CDL Hosp Trust

10 Sep 19

1.63

1.63

0.0

     

YZJ Shipbuilding

14 Oct 19

0.970

0.975

0.5

     

Koufu

14 Oct 19

0.725

0.725

0.0

 

 

For a detailed breakdown of the different portfolios, click the Download PDF link at the top right of this page.

Click for an overview of recommended stocks.


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