Top 5 Singapore stocks to watch in July 2020
Analysts have picked out these five Singapore Exchange (SGX)-listed shares as ones to watch. Here are their insights.
Below are the top five Singapore-listed equities for investors and traders to take note of for the month of July 2020, based on the latest recommendations provided by Singapore bank DBS’ equity research team.
CapitaLand Mall Trust
Share price target: S$4.50 per share
Estimated upside from current price: 57.9%
Retail-centric real estate investment trust (REIT) CapitaLand Mall Trust, which has a market capitalisation of over S$7 billion, is one of DBS researcher’s top equity picks for the month of July 2020.
Currently trading at S$1.97 a share, CapitaLand Mall Trust shares have fallen some 7% in the last two weeks, based on IG data.
Thanks to this latest drop, analysts have placed the REIT – which owns a portfolio of retail, lodging, office and residential properties – into their dividend category.
They liked the stock due to a sustained low interest rate environment, as well as news of a sharp 75.5% rebound in Singapore’s May 2020 new home sales to 486 units despite the so-called ‘Circuit Breaker’ lockdown period, which they believe will underpin residential developer stocks.
They added that potential catalysts for further share price growth include a pick-up in new home sales in the subsequent months with showrooms now reopened.
Last week, the company said in an update that Covid-19’s impact on its financial performance and operations for the current financial year cannot be ascertained’, due to the 'fluid and evolving nature' of the situation 'which brings with it a high level of uncertainty'.
The firm also added that it expects normalisation of the retail sector to pre-Covid levels ‘to take some time and potentially extending beyond Phase Three’.
Tuan Sing Holdings
Share price target: S$0.39 per share
Estimated upside from current price: 36.8%
Tuan Sing Holdings is a Singapore-based investment holding company with interests mainly in property development, property development and hotel ownership. According to its website, Tuan Sing also owns an 80.2% stake in SP Corporation.
Currently trading at S$0.285 per share, Tuan Sing shares have rallied 14% since 15 June, based on IG data. The penny stock has a total market capitalisation of S$278 million.
DBS brokers have recommended the adding of 38,000 Tuan Sing shares at S$0.235 towards investor’s ‘growth’ portfolio category. Growth stocks have a longer investment term of up to 12 months, and investors are typically tolerant of fluctuations with capital growth their primary aim.
Analysts like the company because of several factors. Firstly, they believe a possible divestment of Gul Technologies – a non-core asset which Tuan Sing holds a 44.5% stake in – could bring in an estimated S$270 million in revenue.
An expected rebound in the performance of the company’s core investment properties post-coronavirus, as well as the fact that the stock is currently trading at a five-year low price/book value ratio of 0.25x (-2 standard deviation), make the stock one of ‘deep value’.
Potential risks include a second wave of Covid-19 infections, foreign exchange fluctuations as well as regulatory changes.
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ComfortDelGro Corporation
Share price target: S$1.68 per share
Estimated upside from current price: 12.8%
Shares of transport operator ComfortDelGro, whose businesses include bus, taxi, rail, car rental and leasing across seven countries, are trading at S$1.49 each as of Monday 29 June 2020.
This translates to a price-to-earnings ratio of 12.61, below a five-year P/E ratio average of 16.78.
Although DBS researchers say the outlook for the company remains challenging, they are still eyeing a potential recovery. As such, they have upgraded their position on the stock to a ‘buy’, with price target raised to S$1.68.
The analysts believe that the odds of ComfortDelGro’s share price appreciating over the next six to 12 months outweighs downside risks.
They based this on several key events and developments – namely Singapore’s earlier-than-expected move into Phase 2 of the lockdown easing; taxi rental waivers now likely to be reduced; the government’s enhanced Jobs Support Scheme; and buying opportunity after the stock is removed from MSCI Singapore index.
They also believe that a potential recovery is only likely to take place from the second half of the 2020 financial year or starting from FY2021.
For now, analysts expect ComfortDelGro to report a very weak operating performance for 2Q20 but ‘urge investors to look beyond that’ as the company has a strong financial position. They posit that this should enable the group to emerge from the pandemic in a stronger state.
However, do look out for risks in the form of prolonged irrational competition from private-hire car apps and disruptive technologies, as well as changes in regulations on operations and government budget cuts.
City Developments
Share price target: S$13 per share
Estimated upside from current price: 55.3%
A pioneer of Singapore’s real estate sector, property and hotel conglomerate City Developments opened Monday 29 June 2020 at S$8.39 per share.
This means that the stock gained roughly 9.2% across the month of June 2020, according to the last traded price on IG.
City Developments was removed from DBS’ equity picks on 09 June. Following that, stock price fell nearly 10%, which prompted analysts to re-rate the stock as a ‘buy’ a week later.
Similar to CapitaLand Mall Trust, analysts remain optimistic about the stock, thanks to lower property loan interest rates driven by the negative economic impact of Covid-19, improved sales figures in May 2020 despite the stay-home order, as well as an expected uptick in new home sales with Singapore now easing its lockdown and showroom activities having resumed on a limited scale.
Then, on 25 June, DBS provided an update, advising investors to reduce their exposure to City Developments by 800 shares at $8.59 to 1,200 shares, as they ‘observed the current stock price correction in cyclicals as well as peers UOL and CapitaLand’.
Nevertheless, analysts noted in the same update that City Developments’ share price ‘has outperformed as we had expected, likely due to cautious optimism about a pick-up in showroom activities following the Circuit Breaker Phase 2 easing and ahead of the stock going ex-dividend on 03 July’.
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Frasers Centrepoint Trust
Share price target: S$2.65
Estimated upside from current price: 12.8%
Developer-sponsored retail REIT Frasers Centrepoint Trust, which owns S$3.22 billion worth of assets as well as a portfolio of suburban shopping malls across Singapore, is also among DBS’ newest equity picks.
Currently trading at S$2.35 per share, Frasers Centrepoint Trust shares are down by as much as 10.6% from June 2020’s high of S$2.63 achieved on 09 June, based on IG data.
DBS have reiterated a ‘buy’ rating on the Frasers stock, alongside a share price target of S$2.65 per share, on the belief that the real estate investment trust will be a beneficiary of Singapore’s ‘phase 2’ easing of the stay-home order.
Frasers, which has been placed under DBS’ ‘dividend’ category, currently trades at a dividend yield of 5.6% for FY2021. The company had proposed a Q2 2020 dividend payout of S$0.0161 per share – 48.7% lower than the S$0.03137 paid out in Q2 of 2019.
With malls having resumed business, analysts believe the sector is due to return to operational normalcy. They added that rebound is ‘likely to be swift’ for the company as its suburban malls Northpoint, Causeway Point and Waterway Point contribute roughly 75% of the trust’s revenues.
Potential risks in the longer term include interest rate hikes, which could amplify the increase in the REIT’s cost of debt, as the group has a relatively high exposure to floating rates.
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