With the trade war in full steam, it does not help that Singapore is expected to experience the sharpest economic slowdown in Southeast Asia. Investors need to take extra caution when deciding what goes into their portfolio for 2H19.
According to MBKE, here are five large caps that investors should pick up in these uncertain times.
Investors Takeaway: 5 Large Caps That Your Portfolio Should Consist Of By MBKE
While United Overseas Bank (UOB) is facing slower domestic growth, MBKE believes that the slowdown in domestic growth will be offset by increasing contribution from overseas operation. UOB’s lagging net interest margin should also see an improvement going forward from re-pricing loan yields and better liquidity management.
Another fundamental that MBKE likes about UOB is its solid management record. UOB’s track record of conservative capital and provisioning management puts the group in a solid footing to absorb shocks and navigate a volatile operating environment.
BUY, TP $29.71; Current share price $25.76
- DBS Group Holdings
DBS Group Holdings (DBS) is the other top financial stock that MBKE likes among the STI large caps. According to MBKE, DBS has been making key structural changes post the global financial crisis. This includes a larger focus on interest income and lower dependence on volatile trading income. The structural changes have improved DBS’ earnings quality and visibility.
MBKE also adds that DBS’ strong franchise in low cost deposits in Singapore opens up potential for upside surprise on net interest margins. The heavy IT investments that DBS has been making should also provide a competitive advantage in the medium term for them.
BUY, TP $29.56; Current share price $25.71
- NetLink NBN Trust
For any investor looking for a dividend play, Netlink NBN Trust is a must-have. With over 80 percent of revenues based on a guaranteed return on a regulated asset base off a residential access fibre monopoly and gearing at 15-17 percent, Netlink’s payout of 100 percent cash available for distribution is a relative safe harbor in turbulent times. In addition, Netlink NBN Trust has a short-term earnings growth catalyst fuelled by cable migration to its fibre network.
BUY, TP $0.93; Current share price $0.880
- Mapletree Industrial Trust
According to MBKE, Mapletree Industrial Trust has clear and visible growth drivers in place. The asset enhancement initiative at 30A Kallang Place as well as the recent completion of Sunview 1 BTS data centre are expected to be yield accretive for Mapletree Industrial Trust. Mapletree Industrial Trust’s completion of acquisition of 18 Tai Seng from its sponsor will also start adding to its net property income. Besides its AEI and acquisitions, MBKE also notes that Mapletree Industrial Trust US data centres should see rising contributions in FY20.
Overall, MBKE believes that Mapletree Industrial Trust’s low 34.7 percent gearing and clear acquisition-growth potential could provide upside to MBKE’s 3-year 4.5 percent DPU CAGR forecast.
BUY, TP $2.20; Current share price $2.19
- ST Engineering
Following years of lacklustre performance amidst tough market conditions for three of its four divisions (Aerospace, Land Systems, Marine) and one-off restructuring costs, the outlook for ST Engineering appears to be brightening up. Since 2018, there has been a cyclical recovery in ST Engineering’s Aerospace segment. Plus, ST Engineering has seen multiple growth prospects come into play with new investments in Electronics, Land Systems in areas of robotics and Smart City solutions. In addition, the recent addition of Belgium satellite communications firm Newtec should hold exciting growth prospects for ST Engineering.
BUY, TP $4.25; $4.14