According to DBS, if a ‘Risk-Off’ environment kicks in, the market will be turning its attention to stocks with high dividend yield and earnings visibility. Among the Singapore-listed stocks, here are the top five stocks with high dividend yield and earnings visibility to own in a ‘Risk-Off’ environment.
Investors Takeaway: 5 Stocks To Own In A ‘Risk-Off’ Environment
⦁ ST Engineering
With a record $14.1 billion orderbook at the end of 1Q19, DBS thinks that ST Engineering has lifted itself out of its tepid earnings slump. Once again, ST Engineering’s earnings growth potential looks exciting. DBS notes that its recent acquisitions in the Aerospace and Electronics divisions puts it on course to achieve close to double digit earnings growth in FY19/20, coupled with dividend yield of 4 percent.
According to DBS, there are multiple factors for investors to like ST Engineering if a ‘Risk-Off’ mentality kicks in. For starters, ST Engineering’s strong growth profile stands out among defensive plays. Its inorganic growth potential from recent acquisitions and organic growth ( driven by workload increase at Aerospace MRO shops from ongoing issues with new generation aircraft and engines) will drive ST Engineering’s growth. The ramp up of Airbus Passenger-to-Freighter programmes will also add to its orderbooks. In the longer term, growth will come from smart city, IoT, robotics, automation solutions in transport, logistics, healthcare and hospitality domains.
BUY, TP $4.50; Current share price $4.12
According to DBS, A-REIT is one of the must-have stocks among S-REITs, especially in a ‘Risk-Off’ environment. Although valuations are at a premium, investors can take confidence in A-REIT’s ability to deliver consistent returns across market cycles and remains a key stock in one’s portfolio.
With the manager looking to execute on growth plans to deepen the REIT’s exposure in its key markets, DBS sees ample of opportunities to deliver earnings surprises from re-letting 12 percent of vacant space and acquisitions which the market has not priced in.
BUY, TP $3.21; Current share price $3.05
⦁ Frasers Centrepoint Trust
Frasers Centrepoint Trust’s recent move to acquire stakes in PGIM’s Asia Retail fund and Waterway Point have transformed the Trust’s growth profile entirely, according to DBS. Following the acquisition, Frasers Centrepoint Trust’s distribution per unit is projected to grow at 2.8 percent CAGR over FY18-21F. This puts Frasers Centrepoint Trust among the fastest-growing REITs.
Moving forward, FY20F distribution per unit could go higher by another 4-5 percent if Frasers Centrepoint Trust enlarges its stake in Waterway Point to 50 percent from its current 33 percent stake. DBS also notes that Frasers Centrepoint Trust could build an additional pipeline of dominant and resilient suburban retail assets, which is hard to come by in Singapore.
BUY, TP $2.85; Current share price $2.60
⦁ Sheng Siong
Sheng Siong opened 10 new stores in 2018 and these new stores will now contribute for the full 12 months this year to drive growth. The three other new stores (Bukit Batok, Anchorvale and Sumang Lane) will contribute from 2Q19. A second store in Kunming, China will also open in 2H19.
According to DBS, Sheng Siong’s decent store network and logistics chain could be a takeover target for online Online players such as Alibaba’s Hema and Amazon (Wholefoods) are taking the online-to-offline route and are operating physical stores.
BUY, TP $1.25; Current share price $1.17
DBS estimates that Koufu’s earnings growth will hit nine percent for FY19F, driven by the turnaround of its foodcourt and kiosk businesses. Potential catalysts will stem from reaping the benefits of economies of scale over the long term and special dividends from sale of its existing central kitchen property before moving into the new integrated facility. Long term investors can expect longer-term drivers like the setting up of an integrated facility aimed at delivering economies of scale, and overseas growth from Macau to kick in.
BUY, TP $0.85; Current share price $0.710