Image
Credit Suisse report issued on 14 Jan overweights telcos and transport.

OOPS, Credit Suisse has an ‘underweight’ rating on Singapore for 2009.

Singapore's real GDP is expected to contract 2.8% in 2009, according to its market strategy report dated Jan 14.

The good news, though is that the broker also foresees the economy bottoming out in 2Q of this year. That's just a couple of months away!

To ride the market upturn, investors should place more emphasis on defensive sectors such as telecom and transport, according to the report.

 
In Asia ex-Japan, Singapore’s economy is the most exposed to the global economic downturn, and Credit Suisse estimates Singapore’s net exports contribute as much as 60%-70% of GDP.

Because of this, financial and business services are likely to suffer the most, followed by transport and wholesale trade sectors as global financial institutions continue to consolidate and world trade contracts.

M1
Image
Singapore's mobile penetration now at 130%

Being dependent on domestic consumption, the telecom sector is less exposed to the global downturn and Credit Suisse prefers M1 due to its attractive valuation and sound balance sheet.

Based on last Friday's closing prce of
S$1.52 per share, M1 offers about 13% of FY09E free cash flow yield and 11% FY09E dividend yield.

M1 is also a key beneficiary of the Next Generation Network (NGN), a key telecom development that enables one network to transport all information and services – including voice, data and video.

Furthermore, M1 owns no legacy from fixed-line networks, which is why the new NGN will not cannibalize any existing cash flow.

The launch of a retail service provider business is set to increase M1’s medium-term earnings CAGR, as well as improve the defensiveness of its existing cellular business by bundling and tying in customers to more than one product, says the broker.

The cellular phone service provider reported last Fri that its 4Q08 net earnings contracted 3% year-to-year to S$36.6 million, which is above consensus estimates of S$35 million.

A 7.2 cent final dividend was declared, bringing FY08 dividend yield up to 8.8%.

SIA
Image
SIA has proven resilient in past recessions.

Should demand improve on the back of a global economic recovery, Credit Suisse believes the airline sector will outperform given its nature as a high beta early cycle play.


For airlines, traffic demand, revenue per passenger mile and oil prices are the key data points to watch out for.

Among Asian airlines, Credit Suisse prefers SIA given its strong profitability record in previous crises like the FY91-92 global recession, the FY99-00 Asian financial crisis, FY02 Sep 11 attack and FY04 SARS.

Its strong balance sheet (net cash of S$2.90 per share as at end of September) will also help it to weather this down cycle.


Recent story:
DMG: Overweight healthcare, REITS, telecoms, land transport

You may also be interested in:


You have no rights to post comments

Counter NameLastChange
AEM Holdings2.760-0.020
Avi-Tech Electronics0.250-0.005
Best World1.790-0.020
Broadway Ind0.0890.005
China Sunsine0.385-0.005
ComfortDelGro1.4100.020
Delfi Limited1.030-0.020
Food Empire1.410-0.040
Fortress Minerals0.260-
Geo Energy Res0.410-0.005
GSS Energy0.029-
Hong Leong Finance2.540-
Hongkong Land (USD)3.3500.090
InnoTek0.425-
ISDN Holdings0.3500.005
ISOTeam0.035-0.001
IX Biopharma0.043-
Jiutian Chemical0.025-0.001
KSH Holdings0.240-
Leader Env0.053-
Medtecs Intl0.141-
Nordic Group0.350-
Oxley Holdings0.092-0.001
REX International0.127-
Riverstone0.740-0.015
Sinostar PEC0.140-
Southern Alliance Mining0.585-
Straco Corp.0.510-0.005
Sunpower Group0.210-
The Trendlines0.086-
Totm Technologies0.027-
Uni-Asia Group0.875-0.025
Wilmar Intl3.2900.050
Yangzijiang Shipbldg1.670-0.020
 

We have 2054 guests and one member online

rss_2 NextInsight - Latest News