Excerpts from CGS-CIMB report

Analyst: Lim Siew Khee

Singapore Strategy
Market may catch a flu if China sneezes
■ We think FSSTI could see 6-12% downside risk from current levels if the global pandemic of novel coronavirus worsens and death toll accelerates.

■ Stocks that could withstand downside: Singtel, Starhub, SPH, STE, VMS, CIT, UOL, WIL, FCT, CD, SGX, Riverstone.

■ Travel-related and those with large China exposure vulnerable: SIA, SATS, DFI, FEHT, CDLHT, Starhill Global, SPH REIT, DFI, CAPL, SASS, MLT, KEP.


Defensive = less bad
We believe the potential winners from the coronavirus outbreak would be telcos (Singtel, Starhub) as earnings are resilient irrespective of the outbreak.

Domestically-driven names such as Sheng Siong, Comfort Delgro and SPH could be relatively immune.

Suburban malls such as FCT may be more defensive than peers.

Commodities/planters (Wilmar and First Resources) are less affected on the back of favourable demand/ supply dynamics. We would bargain hunt on names that have done well recently and have diversified business models and customers such as STE, VMS, CIT and UOL.

Potential beneficiaries
strip9.14Riverstone derives c.70% of its revenue from healthcare gloves. NextInsight file photo.The continued negative newsflow from the pandemic through Chinese New Year could be a catalyst for glove manufacturers such as Riverstone Holdings.

The company derives c.70% of its revenue from healthcare gloves. Currently, our base case scenario assumes mid-teen volume growth for its healthcare gloves in FY20F, driven by enhanced awareness about hygiene and healthcare standards without any major disease outbreak.

Raffles Medical could be a medium-term beneficiary in terms of higher patient footfall redirected from public hospitals and more vaccinations.

During SARS, we observed a positive share price reaction for Raffles Medical Group, as it was appointed by the immigration and checkpoint authorities to conduct screening for fever and other symptoms at the air, land and sea border checkpoints.

We also note that the official opening of Raffles Hospital in March 2002 could have been another share price driver.

Most vulnerable
The most vulnerable sectors are aviation, gaming, hospitality, consumer discretionary and those with China exposure.

For SIA, we expect a SARS-like impact on its passenger traffic and financial performance if the coronavirus outbreak sweeps across Asia. Hospitality names such as FEHT could see the largest impact given its 41% of variable income exposure to Singapore.

CDLHT has 32% variable income exposure in Singapore. Consumer discretionary proxies such as city shopping malls and outlet malls are also at risk, including Starhill Global and SPH REIT.

Companies with significant China exposure may be impacted, including DFI with 90% of its 1H19 EBIT from North Asia. CAPL secured 41% of its 3Q19 operating EBIT from China.

SASS also has 100% of its portfolio in China but no outlet in Wuhan. MLT has 24 properties in China out of its 144 total, making up 9% of AUM and 11% of its 1HFY3/20 gross revenue. Keppel Land derived c.66% of its 9M19 home sales from China.



Full report here. 


Share Prices

Counter NameLastChange
AEM Holdings4.340-0.100
Avi-Tech Electronics0.300-
Broadway Ind0.161-0.001
China Sunsine0.460-0.005
DISA0.004-
Food Empire0.5450.010
Fortress Minerals0.350-
Geo Energy Res0.4400.005
Golden Energy0.5300.015
GSS Energy0.057-0.002
InnoTek0.4400.005
ISDN Holdings0.515-0.005
ISOTeam0.090-
IX Biopharma0.168-0.001
Jiutian Chemical0.0960.002
KSH Holdings0.355-
Leader Env0.0620.002
Medtecs Intl0.187-
Meta Health0.031-
Moya Asia0.064-0.001
Nordic Group0.415-0.010
Oxley Holdings0.1860.001
REX International0.2450.005
Riverstone0.8300.030
Sinostar PEC0.220-
Southern Alliance Mining0.645-0.005
Straco Corp.0.390-
Sunpower Group0.380-
The Trendlines0.094-
Totm Technologies0.1280.001
UG Healthcare0.210-
Uni-Asia Group1.0800.010
Wilmar Intl4.1500.060
Yangzijiang Shipbldg0.9500.015

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