Singapore Strategy - Five Perfect 10s. What’s Next?: UOB Kay Hian While our end-15 FSSTI target of 3,600 implies a return on 7.5%, we see outperformance in selected themes. Our key picks include CCT, CapitaLand, DBS, First Resources, Keppel Land, OCBC, Sembcorp Industries and SingTel. Mid-cap picks include Bumitama, CD REIT, Ezion, Pacific Radiance, Raffles Medical, Riverstone and Silverlake. Modest end-15 target of 3,600. Our target suggests a modest 7.5% upside for the market as we impute a 10% discount to long-term P/B and PE valuations on belowtrend ROE. If oil prices are sustained at low levels, there could be some upside to GDP. EVery10% fall in oil prices could raise GDP by 10bp. Hopes for earnings to recover in 2015. We believe 2015 should see corporate earnings rise 9.2% yoy after a lacklustre 2014 and 2013. In our view, driving growth in 2015 would be sectors, such as banks, telecommunications and plantation. Global growth, while sub-trend, is expected to be supportive. A year for reflection. 2015 will mark Singapores 50th birthday. We see a year for reflection as Singapore reviews the success of past policies and potentially further tweaking policies on housing and land transport, among other areas. Another interesting aspect is a potential early election in 2015, with possible implications for the property sector Themes for 2015. Investment themes we favour include: a) winners and losers of higher interest rates, b) solid stocks that are oversold, c) ASEAN Economic Community/ASEA Open Skies beneficiaries, and d) regulatory changes. Stocks for action. Large-cap BUYs include CCT, CapitaLand, DBS, First Resources, Keppel Land, OCBC, Sembcorp Industries and SingTel. Mid-cap picks include Bumitama, CD REIT, Ezion, Pacific Radiance, Raffles Medical, Riverstone and Silverlake. Key SELLs include SIAEC and IHH.
Posted on: Mon, 01 Dec 2014 05:38:27 +0000
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