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Singapore Equity Picks
CapitaLand Ascendas REIT: Add to 8,800 shares @ $2.60 to Dividend
We add large cap REIT bellwether CLAR in response to the slight dip in April US CPI (+3.4% y/y, in line) versus March, lifting hope that the 1Q inflation rebound may be stalling. Fed funds futures are pricing in 2.09 cuts by year-end, the highest since 9 April. While a 1-month pullback doesn’t form a trend, we nevertheless add CLAR as it is one of our preferred REITs and often the first to react to positive changes to rate cut expectations. With the addition, REITs (CLAR, CLAS) now hold a heavier weight on equity picks versus banks (UOB).
Trending Sector
Singapore stocks
Index deletion does not necessarily spell doom and gloom
% change | ||||
| Cut-in | 3-mth after | 6-mth after | 12-mth after |
-10% | -8% | 3% | 6% | |
-10% | 2% | 40% | 33% | |
-15% | 17% | 127% | 177% | |
Jardine Cycle & Carriage Ltd | -3% | 5% | 10% | 6% |
-9% | 11% | 55% | 35% | |
-5% | -1% | -2% | 12% | |
Source: Refinitiv, DBS. Returns calculated are referenced to the first announced date
- MSCI Singapore quarterly review in May saw the removal of 5 stocks (Mapletree Logistics Trust, Seatrium, City Developments, Mapletree Pan Asia Commercial Trust and Jardine Cycle & Carriage)
- The 5 stocks were sold down yesterday and there could be another negative knee-jerk reaction as we head to the 31 May cut-in date
- History shows that following a short period beyond the cut-in date, earnings/valuation outlook are drivers for the performance of these stocks
- 8 stocks (prior to the latest announcement) have been removed from the MSCI Singapore since 2020
- ComfortDelgro, SATS, Venture Corp and Suntec REIT bottomed out 50-90 days post announcement
- Deepest decline post announcement was around 20% for Venture Corp and Comfort Delgro
- SembCorp Industries and Yangzijiang bottomed out at cut-out date
- SembCorp Industries, Yangzijiang and SATS returned >50% gain within a 1-year period post index removal announcement
- Here’s what investors can watch for beyond the 31 May cut-out date for the latest 5 stocks removed
- Mapletree Logistics Trust and Mapletree Pan Asia Commercial Trust – US inflation and interest rate outlook
- City Developments – Interest rate outlook and potential for higher dividends from divestment gains on asset recycling
- Seatrium - Contract wins and operational improvements
Stocks to Watch
ThaiBev – Earnings (-), TP (-)
Early green shoots of beer business recovery
- 1H24 revenue and earnings form 50% and 51% of FY24F estimates, slightly below expectations
- Beer volume saw strong recovery and pricing effect in 2Q
- Revised FY24F/25F revenue and earnings down by 3%/4% and 6%/4% on slower growth and lower profits at Frasers Property Limited (FPL)
- Reiterate BUY with revised TP of SGD0.69
SIA
<Results First Take> 4QFY24 in line with expectations; core net profits likely peaked
- SIA reported 4QFY24 operating profit of SGD565mn (-7.2% q/q, -19.6% y/y), in line with estimates; full-year operating profit and net profit at record levels
- 4QFY24 revenue grew 5.7% y/y to SGD4,768mn, driven by passenger traffic growth (surpassed 2019 levels), though partially offset by softer yields and lower load factors
- Core net profits likely peaked in FY24 due to margin erosion
- We currently have a HOLD call and a TP of S$6.10 on SIA
Changing of the guard
- CEO Mr. Sanjeev Dasgupta to hand over the reins of the company sometime in August 2024
- Nagabhushanam Gauri Shankar, is appointed CEO-Designate is a “old-hand” within the group and involved in the group’s India business for the past decade
- Smooth transition expected with more in-placed growth initiatives offering a pipeline of a further 44% upside to GFA in the medium term
- We currently have a BUY recommendation with TP SGD1.30
<News Analysis> Divestment to pare down debt
- PRIME announced the divestment of One Town Center to Miles Capital for USD82mn, 3.3% below the Dec23 valuation
- The asset has close to full occupancy as at 1Q24 with a WALE of 4.5 years; acquired in 2021 at USD99.5mn
- We believe the divestment comes at an opportune time if used to pare down debt and ensure refinancing is successful, which is key for PRIME now. But expected gearing levels at c.45% (if entire proceeds is used to pare down debt) may still be a little high in the medium should interest rates remain higher for longer
- Maintain FULLY VALUED; TP of USD0.07
Awarded repeat FPSO contract from SBM Offshore
- Awarded repeat contract by Single Buoy Moorings Inc, a SBM Offshore company, for the topsides fabrication and integration of a Floating Production Storage and Offloading (FPSO) vessel
- Work is expected to commence in 3Q24; upon completion, the FPSO will be deployed to serve in the Whiptail Field, Offshore Stabroek Block, Guyana for ExxonMobil Guyana
- FPSO Jaguar – designed to produce 250k barrels of oil per day – reinforces Seatrium’s standing as the world leader in the conversion and integration of FPSOs
Legend
| (+) | (-) |
Earnings | Positive earnings revision | Negative earnings revision |
Recommendation | Upgrade | Downgrade |
TP | Increase | Decrease |
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- DBS Stock Pulse: (1) Aztech cut to Fully Valued on weak outlook (2) Equity picks – Raise exposure to Starhill Global30 Oct 2024
Related Insights
- Global Home and Personal Care: Diversified and Defensive Portfolios Key Amid Delayed Volume Recovery30 Oct 2024
- Equities Weekly | Asia ex-Japan Equities – A Bright Spot Amid Global Uncertainty30 Oct 2024
- DBS Stock Pulse: (1) Aztech cut to Fully Valued on weak outlook (2) Equity picks – Raise exposure to Starhill Global30 Oct 2024