In February, many of the stocks took a hit and went down amidst fear of interest rate hikes and uncertainties over US’s inflation. However, given the backdrop of global economic growth, UOBKH opines that these “recovery plays and reflation picks” will still do well.
Overseas-Chinese Banking Corporation
Overseas-Chinese Banking Corporation (OCBC) has been added to UOBKH’s alpha picks for March 2018, due to the eventual divestment of its 30 percent shareholding in Great Eastern Life Malaysia either through an upcoming IPO or a trade sale. The plan is likely to happen in 2H18 and analysts are expecting the funds from divestment of shareholdings to be a catalyst to “further propel growth”.
DBS Group Holdings
DBS Group Holdings (DBS) has been performing well, exceeding analysts’ expectations “on net interest margin expansion and moderating credit cost” according to UOBKH. DBS’s new dividend policy is expected to be at a 57 percent payout rate for 2018, in conjunction with improvement in its return-on-equity to 11.1 percent by returning surplus capital.
Keppel Corporation’s (Kep Corp) future prospects seem to be improving with the resolution of its scandal of corrupt payments in Brazil. Also, with expectations of a recovering oil and gas sector, Keppel has been selected as the “preferred proxy” to ride on the recovery wave. Furthermore, infrastructure developments and investments are expected to propel the Keppel Land in the next few quarters. Lastly, UOBKH believes that Kep Corp’s recurring profits will be underpinned by rising AUM at Keppel Capital.
As Singapore’s property sector recovers, City Developments will benefit from the rise in residential asset sales given that it holds the “largest residential landbank of more than 2090 attributable units” according to UOBKH. Potentially, City Development can benefit from an upward re-rating of Revised Net Asset Value on rising asset prices. Positive newsflow relating to Amber Park launch and projects within its vicinity could also act as catalysts for its share price.
CDL Hospitality Trusts (CDL HTrust) has recently received an upgrade to its target price to $1.95 (from $1.88). Analysts build-in a higher terminal growth rate of 2.5 percent, following positive results for 4Q17. Given the tight supply growth room for hotel rooms in the pipeline, against the backdrop of rising number of business travelers and Chinese visitors, CDL HTrust is poised to benefit the rise in average daily rate in hotel rooms.
According to UOBKH, Singapore hotels’ ADR have already increased by 1.2 percent in fourth quarter last year. This helped to negate the 0.1 percent fall in hotel occupancy rate and in fact resulted in a 1.1 percent increase in revenue per available room.
Singapore Telecommunications’ (Singtel) Indonesian associate Telkomsel is growing rapidly owing to subscriber growth and higher revenue from voice and data usage. Given its businesses are largely diversified geographically, with overseas business accounting for about 70 percent of its bottom line, Singtel is the most insulated telecom from the fourth and upcoming mobile operator in Singapore.
Wing Tai Holdings
Though Wing Tai Holdings (Wing Tai) took a hard hit in February due to rising market uncertainties, analysts are confident of its net cash position that is expected to help it to increase its presence in key markets in Singapore, Malaysia and Australia.
It also has a significant headroom for debt of $1.6 billion (assuming comfortable net gearing level of 50 percent) which will allow it to acquire more landbanks for developments.
Potentially, Wing Tai could launch its recently acquired Serangoon North Avenue 1 site that and UOBKH believes will happen in 6 to 9 months time.