Go for lower beta, dividend-paying stocks this year after a disappointing 2018: Phillip

Go for lower beta, dividend-paying stocks this year after a disappointing 2018: Phillip

Michelle Zhu
04/01/19, 11:20 am

SINGAPORE (Jan 4): Phillip Capital is maintaining its Straits Times Index (STI) target of 3,400 in Oct 2019 – which pegs the market at 13.5 times, or around its ten-year average valuation – as the research house advocates a lower-beta equity portfolio for the year, with an emphasis on dividend-paying stocks.

In a Friday report, head of research Paul Chew opines that the Singapore market is currently cheap on a historical basis, as the STI currently trades at 1 SD of its 10-year historical valuations on a forward P/E of 12 times, or P/B of 1 times.

Phillip Capital’s top “buy” picks for 2019 include United Overseas Bank (UOB) for its attractive dividends as well as SGX due to its rapidly-growing derivatives business. These stocks have been given target prices of $32.52 and $9.01, respectively.

Within Singapore REITs (S-REITs), the research house opts for Ascendas REIT (A-REIT) for its stable dividends; CapitaLand Commercial Trust (CCT) considering the attractive demand-supply dynamics for the office market; and Keppel DC REIT (KDC REIT) for the structural growth of its data centres.

All three REITs have been rated “accumulate” with the respective target prices of $2.78, $1.90 and $1.45.

In terms of growth stocks, the research house has selected Geo Energy as it anticipates a coal production recovery in 2019; Sheng Siong for the group’s increasing market share and plans to roll out record new stores; and China Sunsine on expectations of healthy earnings growth as supply is constrained by China’s strict environmental regulations.

China Sunsine and Geo Energy are rated “buy” at target prices of $1.68 and 24.5 cents, respectively,  while Sheng Siong has as “accumulate” rating at $4.

Going forward, Chew expects a key driver to returns to be a reversal of portfolio outflows back to Asia and Singapore, with a roll-over of US data on the back of US growth on steep fiscal stimulus from the Trump tax cut.

While the head of research is anticipating more turmoil in US politics and continued loan growth despite quantitative tightening, the “final puzzle”, in his opinion, lies in the impending outcome of trade negotiations between China and the US.

“We expect a negotiated truce. We are assuming Trump is not dogmatic but deal-driven. He has reversed many hard stances before, from Iran sanctions to war with North Korea. As we approach 2020 US elections, the last thing needed is a disruption to the economy or financial markets, either from a further implosion of global trade or higher consumer product prices,” says Chew.  

“Another interested party to resolve the dispute with China will be the largest donor to the Republican party and Trump 2016 campaign. He has casinos in Macau,” he adds, presumably referring to Las Vegas Sands founder and CEO, Sheldon Adelson.

As at 11:12am, shares in UOB, SGX, Geo Energy, Sheng Siong and China Sunsine are trading at $24.24, $7.18, 17 cents, $1.07 and $1.19, respectively.

A-REIT, CCT and KDC REIT are trading at the respective unit prices of $2.59, $1.79 and $1.37.

US sanctions on Huawei could backfire

SINGAPORE (May 27): It was only to have been expected. After nearly a year of pressure that failed to stop Huawei Technologies Co’s expansion -- especially in the rollout of the next generation 5G wireless network globally -- in its tracks, US President Donald Trump signed an executive order effectively barring American firms from doing business with the Chinese telecommunications equipment company. The inclusion of Huawei on the US Department of Commerce’s Bureau of Industry and Security’s (BIS) Entity List means that companies would need to apply for a waiver to supply goods with 25....

Annica chairman Ong quits just as $33 mil goes missing at his law firm JLC

SINGAPORE (May 27): Jeffrey Ong, managing partner of law firm JLC Advisors, may have given instructions to pay out a sum of $33.2 million held in escrow by his firm for a client, Allied Technologies. According to Allied’s statement filed with Singapore Exchange on May 23, the payment may have been “unauthorised”, citing a letter it received from JLC on May 22. Allied’s statement did not specify who the payment was made to. Ong also abruptly resigned as non-executive chairman of Annica Holdings on May 20. In a May 22 filing with SGX, Annica CEO Sandra Liz Hon Ai Ling said Ong resigne....

SGX RegCo sees targeted approach in enforcement, more powerful market discipline

SINGAPORE (May 27): Tan Boon Gin, CEO of stock exchange regulator Singapore Exchange Regulation, says the market can expect a stronger regulatory presence. “You will see a series of enforcement cases coming up quite soon,” he tells The Edge Singapore. Tan’s assertion comes amid significant changes in the market as sentiment remains lacklustre and investors’ expectations change. The local stock market has gone through significant upheaval, not least because of the penny stock crash in 2013 that wiped out some $8 billion in value from the market. The event dented investor sentiment, a....