3 defensive plays to tide investors over a volatile 2019: RHB

3 defensive plays to tide investors over a volatile 2019: RHB

Michelle Zhu
23/01/19, 10:49 am

SINGAPORE (Jan 23): RHB Research has an “overweight” rating on banks for the sector’s strong growth and high yields; the consumer and industrial space as defensive sector picks; as well as REITs that are beneficiaries of improving economic activity, and/or with strong balance sheets.

This comes post recent Singapore equity strategy investor meetings in Malaysia and Singapore, where RHB found that investors generally agreed with its stance of building defensive positions in Singapore.

“Investors agreed that STI’s forward P/E of 12.3x (at -1SD), +4% index EPS growth, and expectations of gradual appreciation in the SGD against the USD made Singapore an inexpensive market to invest in,” says analyst Shekhar Jaiswal in a Wednesday report.

In particular, Jaiswal notes that banks and REITs are finding favour with investors despite concerns over macro risks and China’s ongoing economic slowdown.

ST Engineering, rated “buy” by RHB with a target price of $3.97, is one stock that Jaiswal believes is particularly favoured for its +13% earnings growth and recent recovery in terms of its Marine orderbook.

While the analyst notes that investor queries on ComfortDelGro (CDG) were on the likelihood of a positive earnings surprise, the stock’s “neutral” rating remains as RHB expects the group’s Singapore taxi business to remain under pressure due to competition from Go Jek, at least in 1H19.

Jaiswal also highlights Fu Yu Corp and Silverlake Axis as preferred stock picks in the small- and mid-cap space among investors for the counters’ sustainable high dividends and expectations of strong earnings recovery, respectively.

Both have been rated “buy” with the respective target prices of 23 cents and 65 cents.

“Amidst elevated macroeconomic risks, we continue to recommend investors stay selective and focus on stocks that offer stable earnings, strong balance sheets, and sustainable dividends,” concludes Jaiswal.

As at 10.47am, shares in ST Engineering, CDG, Fu Yu Corp and Silverlake Axis are trading at $3.65, $2.18, 20 cents and 40 cents, respectively. 

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