Excerpts from CGS- CIMB report
| • We look out for key control parameters to gauge China’s stance on Covid policies. Significant parameters which could excite the market include
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Ranked by most upside |
Reasons |
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CLI (CapitaLand Investment) |
Deals finalisation |
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YZJFH (Yangzijiang Financial) |
Reopening could lead to recovery/ resumption of NPL (non-performing loans) |
|
ISDN |
c.70% of revenue from China. |
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NANO (Nanofilm) |
Resumption of iPhone production by Foxconn. |
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CLAS (CapitaLand Ascott Trust)
|
More domestic or inbound travel could spur demand for serviced residences |
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Sasseur REIT |
Ability to travel between districts without negative tests should boost outlet sales, in the medium term; if Chinese travel out may see a slowdown in sales domestically, although SASSR targets at the T2 cities mainly |
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DFI (Duty Free International) |
Easing restrictions domestically can aid its associate Yonghui. Beyond that, HK-Mainland China border reopening can lead to recovery of DFI's H&B segment |
• We broadly categorize potential beneficiaries of the China reopening angle into two baskets – our first basket includes stocks which could benefit from domestic reopening (CLI, YZJFH, ISDN, NANO, CLAS, SASSR and DFI), while second basket of stocks are stocks which would stand to benefit when China relaxes border restrictions (GENS, CDREIT, FEHT, MPACT, KEP, GRAB, TDCX, SPOST).
• We believe the first basket of stocks will see the strongest re-rating potential near-term with the prospect of China’s policy shift on Covid-19.
However, path to normalcy could take some time, with potential bumps along the way, as we think China still needs some time to
1) further boost its healthcare capacity and
2) improve vaccination rate amongst the elderly.
Beyond the initial optimism, we see risks from higher daily tally of infections causing near-term operational disruptions (production, supply chain) and wariness of general public to resume normalcy (consumption, mobility).
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Ranked by most upside |
Reasons |
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GENS (Genting Singapore) |
Significant contributor to visitor footfalls in RWS (Resorts World Sentosa) |
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CD REIT (CDL Hospitality Trusts) |
More IVA should boost demand for hotel rooms |
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FEHT (Far East Hospitality Trust) |
More IVA should boost demand for hotel rooms |
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MPACT (Mapletree Pan Asia Commercial Trust) |
More IVA in SG could boost footfalls and sales at VivoCity, while reopening of China could spur domestic economy and improve demand for office space |
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KEP (Keppel Corp) |
Club deal land sale, executing asset light strategy |
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GRAB |
Tourism recovery can improve number of airport rides which are of higher AoV for Grab |
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TDCX |
China's border reopening can lead to further tourism & hospitality sector recovery (2nd largest client vertical for TDCX) aiding further topline growth |
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SPOST (SingPost) |
China's border reopening can aid further normalisation in its International Post and Parcel segment conveyance costs |
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RFMD (Raffles Medical Group) |
Could participate in China's Covid-19 efforts and returning patients could shorten breakeven period for gestating hospitals |
• Our second basket include ASEAN tourism plays that have already seen initial recovery since early-2022 as ASEAN countries reopened borders.
Further recovery is taking place with the reopening of North Asian economies (such as Japan and Korea); and we expect the reopening of Chinese borders in late-1H23F to provide the next phase of earnings uplift.
