Credit Suisse deems Singapore markets as 'attractive', with top picks being UOB, CDG, SATS, Sembcorp and Sea

Photo: Bloomberg

Following the 1QFY2021 reporting season, which saw net earnings upgrades of between 2.6% to 4.1%, Credit Suisse says it continues to see the Singapore market as “attractive”.

This is based on the market’s price-to-earnings ratio (P/E) ratio at a 8.1% discount to the rest of Asia ex-Japan.

The upgrade in earnings continue to be led by Singapore banks which beat expectations on credit cost and non-interest income.

Earnings cuts, on the other hand, were led by Singapore Airlines (SIA) and Genting Singapore. The cuts at City Developments Limited (CDL) and CapitaLand were likely driven by slower-than-expected recovery in the hospitality sector.

As a result of the positive earnings momentum, the bank has upped their growth estimates for company earnings to 3.2% to 5.8% year-to-date (y-t-d).

Several companies such as Sembcorp Industries and Singapore Telecommunications (Singtel) have also announced their plans to restructure during the 1QFY2021. Sembcorp Industries shared their targets for the FY2025 which includes raising the proportion of net profits from sustainable solutions to 70% from 40%, while Singtel announced various strategic initiatives to unlock value in its business.

Despite the speed bump in May, where the government introduced Phase 2 (Heightened Alert) measures, Credit Suisse has advised investors to position themselves in reopening and restructuring plays.

The bank’s top picks, according to its May 31 report, are UOB, ComfortDelGro (CDG), SATS, Sembcorp Industries and Sea Limited.

“Market earnings per share (EPS) is projected to grow [by] 52% and 14% y-o-y in FY2021 and FY2022 [respectively], and we believe that a reduction in estimates due to the tighter measures is likely to be contained and result in higher growth for FY2022,” says the bank in its report.

As at 4.56pm, shares in UOB, CDG, SATS and Sembcorp are trading at $26.11, $1.68, $4 and $2.19 respectively, while shares in NYSE-listed Sea Limited closed at US$257.54 on June 1.