As the FY2021 earnings season draws to a close in the current results season, DBS Group Research analysts Kee Yan Yeo, Wei Le Chung and Janice Chua believe it is now an opportune time for investors to position into companies that are anticipated to deliver earnings recovery or acceleration over the coming few quarters.
“Our picks for earnings recovery generating over 10% earnings per share growth for FY2022 vs negative growth in FY2021 are Suntec REIT, Ascot Residence Trust (ART), AEM, and Starhub,” say the analysts. “Meanwhile, ThaiBev and Venture Corp should see FY2022 earnings growth picking up further from the previous year.”
Additionally, the Monetary Authority of Singapore’s (MAS) latest off-cycle tightening move is a reminder that inflation remains a key concern, especially in 1HFY2022, according to Yeo, Chung and Chua. “Banks should continue to outperform in an inflationary, rising rates environment,” say the analysts. “Our pick is UOB. City Dev is our developer pick with properties often viewed as an inflation hedge. Value stocks thriving on the value unlocking team tend to outperform in a volatile environment.”
“Our picks are Yangzijiang, ThaiBev and SingTel. We believe SREITs are a “sell-in-anticipation, buy-on-news” trade when rates are rising from near-zero levels and is still low even with three hikes this year,” they add.
“We prefer those that ride on the reopening theme such as Suntec REIT, CICT, and hospitality REIT such as ART.”
With regards to this move by MAS, the analysts think that this is an attempt to cool inflationary pressures that facilitate the hike. “We think retail sales will still register growth even if there is a July GST hike due to the frontloading of purchase in 1H, while an anticipated rise in tourism receipts can offset the 2HFY2022 dip in domestic demand,” they say.
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According to the analysts, retail sales registered an average 3.3% y-o-y growth during years of GST hike, higher than the average 2.7% y-o-y growth from 1990 to 2021.
“We deduce that GST hike has no negative impact on retail sales,” say the analysts. “We believe the same will be true if GST is raised in 2H this year.”
On Singapore’s wider workplace scene, Singapore’s workplace mobility jumped to within 8% of pre-COVID and transit stations improved to within 18% of pre-COVID with the 50% back-to-office guideline starting this year, according to the analysts. “We believe this will rise further when the work-in-office guideline is adjusted higher once the Omicron wave passes,” they add.
“Our picks are ComfortDelgro for ridership recovery, FCT for its assets’ proximity to transit stations and heartland areas, CICT and Suntec REIT for their centrally located malls and office assets as well as a return of tourists and MICE events,” the analysts say.
