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
1) home quarantine for positive Covid cases (effective since 7 Dec 2022),
2) incoming travelers’ total quarantine days reduced by half to 3-5 days, or full self-isolation regardless of number of days (currently a total of 8 days, with 5 days of quarantine at central facility plus 3 days of self-isolation).

 

Ranked by most upside

Reasons

CLI (CapitaLand Investment)

Deals finalisation

YZJFH (Yangzijiang Financial)

Reopening could lead to recovery/ resumption of NPL (non-performing loans)

ISDN

c.70% of revenue from China.

NANO (Nanofilm)

Resumption of iPhone production by Foxconn.

CLAS (CapitaLand Ascott Trust)

 

More domestic or inbound travel could spur demand for serviced residences

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

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).

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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).

Ranked by most upside

Reasons

GENS (Genting Singapore)

Significant contributor to visitor footfalls in RWS (Resorts World Sentosa)

CD REIT (CDL Hospitality Trusts)

More IVA should boost demand for hotel rooms

FEHT (Far East Hospitality Trust)

More IVA should boost demand for hotel rooms

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

KEP (Keppel Corp)

Club deal land sale, executing asset light strategy

GRAB

Tourism recovery can improve number of airport rides which are of higher AoV for Grab

TDCX

China's border reopening can lead to further tourism & hospitality sector recovery (2nd largest client vertical for TDCX) aiding further topline growth

SPOST (SingPost)

China's border reopening can aid further normalisation in its International Post and Parcel segment conveyance costs

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.


Share Prices

Counter NameLastChange
AEM Holdings3.4200.010
Avi-Tech Electronics0.265-
Best World2.3800.120
Broadway Ind0.108-
China Sunsine0.465-
DISA0.002-0.001
Food Empire0.7450.005
Fortress Minerals0.395-0.005
Geo Energy Res0.320-
Golden Energy0.815-
GSS Energy0.047-
InnoTek0.515-
ISDN Holdings0.585-
ISOTeam0.0950.005
IX Biopharma0.120-0.003
Jiutian Chemical0.080-
KSH Holdings0.340-
Leader Env0.075-0.001
Medtecs Intl0.142-0.004
Meta Health0.022-
Nordic Group0.465-
Oxley Holdings0.141-0.003
REX International0.215-
Riverstone0.635-0.010
Sinostar PEC0.180-
Southern Alliance Mining0.600-0.005
Straco Corp.0.460-0.005
Sunpower Group0.3800.005
The Trendlines0.098-0.001
Totm Technologies0.103-0.001
UG Healthcare0.175-0.001
Uni-Asia Group0.9400.020
Wilmar Intl3.950-0.050
Yangzijiang Shipbldg1.240-0.050

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