Excerpts from UOBKH report

1H20 Outlook: Taking A Defensive Stance
While the FSSTI performed reasonably well in 2019, it paled in comparison to other developed markets in Asia and globally – even the protest-hit Hang Seng Index bettered the STI by a few percentage points.

Heading into 2020, we advocate an approximate 60:40 defensive/large-cap strategy vs a growth/small-cap strategy.

We forecast 4.3% EPS growth for our UOBKH universe of Singapore-listed stocks, and have a year-end target of 3,370 for the FSSTI (or 4.5% upside from current levels).

UOBpicks120


• An island of calm. With the potential of a more turbulent year in 2020, we advocate an approximate 60:40 defensive/large-cap strategy vs a growth/small-cap strategy.

As a result, four of our eight large-cap picks are REITs and one is a bank. With the interest-rate cycle bottoming out amid subdued economic growth and with inflation likely to remain low, we believe investors will continue to seek dividend yields.

Thus, Singapore’s REITs sector as well as its banks should see meaningful fund inflow.

In our universe of stocks, we forecast 4.3% EPS growth for 2020, led by the telecom, plantation, REIT and property sectors. We note that the telecoms and plantation sectors are forecasted to show yoy earnings growth in 2020, mainly due to the weak profitability in 2019.

Valuations for the FSSTI are not stretched in our view with the STI trading at a forecasted 2020F PE of 12.6x which is at a 15% discount to the 1995-2019 average PE of 14.8x (excluding 1999).

On the P/B front, valuations appear even more inexpensive as the FSSTI’s 2020F P/B of 1.07x is at a 30% discount to its 1995-2019 P/B of 1.53x. However this discount is fair given that our estimated 2020F ROE of 9.8% is below the long-term average of 10.8%.

• Our top large-cap picks are Ascott REIT, DBS, Keppel Corp, Frasers Centrepoint Trust, Netlink NBN Trust, Mapletree Industrial Trust, SATS and ST Engineering while in the small/mid-cap sector, our top picks are CSE Global, Koufu, Penguin International and PropNex.

Potential “turnaround stories” in Singapore for 2020 include Singtel which is coming off a poor 2019 due to weakness in its Indian business, Sembcorp Marine facing better yoy comparables, especially on the new order front vs an extremely weak 2019 for new orders.

We also point out that any improvement in relations between the Hong Kong government and protesters could positively impact Singapore-listed stocks such as Dairy Farm, Jardine Matheson, Jardine Strategic and Hongkong Land.


For 1H20, we OVERWEIGHT banks, gaming, healthcare, plantations and selected S-REIT sectors and MARKET WEIGHT aviation, property developers, shipyards, technology, telecoms and land transportation.


Full report here


Share Prices

Counter NameLastChange
AEM Holdings1.640-
AusGroup0.020-0.001
Avi-Tech Electronics0.325-0.005
Best World Int.1.360-
CEI0.835-
China Sunsine0.3000.005
CNMC GoldMine0.1510.007
CSE Global0.3600.015
Eagle HTrust USD0.137-
Food Empire0.4600.015
Golden Energy0.1400.010
GSS Energy0.0420.001
ISDN Holdings0.155-0.005
ISOTeam0.1250.002
JB Foods0.3850.005
KSH Holdings0.275-0.005
Miyoshi0.025-
Moya Asia0.050-
Nordic Group0.2200.015
Oxley Holdings0.210-0.010
Procurri0.2350.015
REX International0.0900.001
Riverstone0.9050.060
Roxy-Pacific0.330-0.005
Sing Holdings0.3250.010
SingMedical0.2000.003
Straco Corp.0.4900.005
Sunningdale Tech0.8450.010
Sunpower Group0.350-
The Trendlines0.0720.004
Tiong Seng0.1570.012
Uni-Asia Group0.420-
Yangzijiang Shipbldg0.8500.020

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