Stocks with exposure to the recovery of the tourism sector, such as Genting Singapore, ComfortDelGro and CapitaLand Ascott REIT, have flown in the face of earnings upgrades with their share prices dipping instead of gaining.
With a slew of event-driven catalysts taking place over the next 6 to 9 months, which would obviously benefit these stocks, CGS-CIMB analysts believe the recent dips marks attractive entry points for investors to ride this uptrend.
Besides the slew of concerts and major conventions, CGS-CIMB believes Chinese visitors have reclaimed their position as the top source visitor market for Singapore in July, further supporting this sector's recovery.
In addition, CGS-CIMB is positive on the capital goods sector. On the back of strong earnings and growing contract wins, the brokerage raised FY2023 and FY2024 earnings projections for companies in this sector by 2.7% to 5.6% q-o-q.
"We think investors would continue to prize defensive earnings in an environment of uncertainty and believe companies with strong order books and potential to enjoy some margin expansion would likely be favoured.
"While capital goods stocks had outperformed the broader market year to date, we would rotate into laggards such as Yangzijiang Shipbuilding, ST Engineering and CSE Global and buy into companies with inflection points such as FY2024 earnings recovery, such as Seatrium.
CGS-CIMB says it remains "constructive" on REITs but with rates staying higher for longer, chances are that counters that are highly leveraged or sensitive to movements in rates, such as commodities, "could remain range bound."
For now, CGS-CIMB is keeping its STI target at 3,350 points, which is based on -1 s.d off the forward core P/E of 10.5x. "A key risk to our view includes interest rates staying higher and longer than expected that could further derail corporate earnings," says CGS-CIMB.
Other top picks by CGS-CIMB include, CapitaLand Ascendas REIT, Thai Beverage, UOB, China Aviation Oil, Centurion Corp and UMS Holdings.
