Singapore Market Strategy - Every dog has its day
Shared By Stock Fanatic on Wednesday, March 14, 2018 | 14.3.18
● We use Credit Suisse HOLT® to run two screens to identify underperforming stocks where
(i) market-implied Cash-flow return on investment (CFROI) is low relative to history, and
ii) forecast CFROI is expected to improve from historical levels.
Our analysts believe ST Engineering, ComfortDelgro, SGX, ThaiBev and SingPost appear to have clear turnaround drivers and catalysts.
● Street sentiment is generally cautious on these names, while they would bear the bulk of institutional net selling from 2016. On a market-cap weighted basis, these five stocks offer a dividend yield of 4.0%, above MSCI Singapore dividend yield of 3.2%.
● We adjust our model portfolio by adding weight to these five stocks. This is funded by a lower weight in consumer discretionary, property and tech sectors. With our positive view on economic and earnings growth, our two largest overweights remain in banks, and offshore and marine.
With the outperformance of cyclicals since 2017, the valuation gap between cyclicals and defensives has narrowed to 0.22x, vs the tenyear average of 0.72x. There were only two previous periods where the valuation gap has been narrower, which would be in Sep-2006 and April-2011.
In these episodes, defensives have outperformed cyclicals by 15% on average six months after.
Using Credit Suisse HOLT, we run two screens to identify underperforming stocks where
(1) market-implied CFROI is low relative to history, and
(2) forecast CFROI is expected to improve from historical levels.
OUTPERFORM rated stocks that screen well include Singtel, ThaiBev, CD, SingPost, STE, SGX, CMT and MCT. From a bottom up perspective, our analysts believe STE, CD, SGX, ThaiBev and SingPost appear to have clear turnaround drivers and catalysts. (Read Report)
Source : Credit Suisse Asia Pacific Equity Research
Posted on Wednesday, March 14, 2018 |
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Labels: Equity Strategy