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).


• 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 Holdings3.2500.010
Avi-Tech Electronics0.4400.005
Best World Int.1.360-
China Sunsine0.355-0.010
CNMC GoldMine0.260-0.005
CSE Global0.460-0.015
Food Empire0.530-
Golden Energy0.168-
GSS Energy0.0670.001
ISDN Holdings0.210-0.005
IX Biopharma0.2650.010
JB Foods0.6000.020
KSH Holdings0.340-
Medtecs Intl0.9350.065
Moya Asia0.0640.002
Nordic Group0.210-0.015
Oxley Holdings0.240-
REX International0.177-
Sing Holdings0.360-
Straco Corp.0.480-0.040
Sunningdale Tech1.0400.030
Sunpower Group0.4850.015
The Trendlines0.109-
Tiong Seng0.160-0.002
Uni-Asia Group0.5450.005
Yangzijiang Shipbldg0.945-

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