Within the Singapore market, our
main recommendation is to drift out
of yields and hunt for safe growth at
a reasonable price. Although global
growth is slow, fears of a China hard
landing is receding. Any breakup in
Europe seems less imminent and the
US should look beyond its fiscal cliff
after 1Q13. Ahead, investors could
price out doomsday scenarios and
stretch for growth. Singapore could
lag as it is not associated with
growth.
Polarisation of valuations
Defensive stocks have gotten
expensive vs. cyclicals. The FSSTI is
10% below its 4Q10 high but REITs
are at their 4Q10 P/BV highs. Some
consumer stocks have hit even
higher valuations while big laggards
have been commodity and transport
stocks.
Banks are in-between their
2009-10 P/BV levels. Property stocks
vary: CAPL looks cheap, CityDev is
still expensive. Capital Goods was
looking rich till its recent selldown;
we now spot value. We advocate a
shift out of REITs into visible
growth.
Four themes for 2013
The four themes we focus on are:
1)
how to benefit from sustained asset
inflation and an improving China;
2)
stocks with visible earnings that are
not yet richly priced;
3) smaller bets
on unloved cyclicals that could
provide some beta; and
4) why safe
REITs are looking expensive and
yield stocks need to be stapled with
stock-specific catalysts to attract.
Stocks that we love
DBS and CapitaLand will benefit
from asset inflation and a recovering
China, we believe. UOL is the third
NAV play that trades at attractive
discounts to RNAV.
Dairy Farm,
Ezion and Tat Hong are our picks
with earnings visibility and
reasonable valuations. We reach for
growth by going for Wilmar, CWT
and Keppel Corp; they belong to the
unloved cyclical category that can
surprise positively.
Lastly, we steer
out of large-cap REITs (CMT, CCT)
and choose AREIT, ST Engineering
and StarHub as yield picks with
catalysts. (Read Report)
Source : CIMB Research
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