Over the weekend, Trump threatened to blow up trade war unless a breakthrough on trade talks were reached by the end the week. The uncertainties arising from the trade relations between the world’s two largest economies reminded investors to be cautious as we move into 2H19.
Investors Takeaway: 2 Stocks To Strengthen Your Portfolio’s Defence By DBS
In view of a potential trade blow out, it is important that investors continue enhance their portfolio defensiveness. In light of which, DBS is finding value in the telecom sector and here are two stocks that we think can add to investors’ portfolio defensiveness.
- Singtel: All Signs Point To A Sound Value Investment
After two successive years of earnings decline, DBS believes that Singtel is now in a good position to start reaping rewards from its regional associates in FY20. DBS notes that the earnings growth from regional associates will be led by Bharti, whose share price has surged more than 10 percent over since the start of 2019.
Meanwhile, as investors await Singtel’s earnings recovery, investors will get rewarded with an assured dividend per share of $0.175 (5.7 percent yield) to compensate for the wait. In terms of valuation, Singtel is trading at a 32 percent holding company discount compared to its historical 12 percent discount. The way DBS sees it, investors are getting Singtel’s Bharti stake of $11 billion at zero value.
BUY, TP $3.55; Current share price $3.14
- Netlink NBN Trust: Your Go-To Stock For High Yield
According to DBS, the market is now on a search for high yield with the Fed turning more dovish. This contrasts with previous concerns on higher than expected 10-year bond yields.
Netlink NBN Trust is currently trading at approximately 6.3 percent FY20F yield compared to the average yield of 6.0 percent offered by large-cap industrial S-REITs. DBS notes that given the regulated nature of its business and no lack of debt headroom to fund acquisitions, Netlink NBN Trust should be trading at a lower yield. This means that there is room for Netlink NBN Trust’s share price to take off.
Moreover, one unique advantage of the over REITs and Business Trusts is that a potential rise in the cost of capital might lead to higher regulated returns from 2022 onwards, translating into higher distributions.
BUY, TP $0.87; Current share price $0.825