Top 5 Singapore stocks to watch in July 2022

1. United Overseas Bank Ltd
2. SATS Ltd
3. SIA Engineering Co Ltd
4. Singapore Telecommunications Ltd
5. Thai Beverage PCL

1. United Overseas Bank (SGX: U11)

United Overseas Bank (UOB) has an average rating coming in close to ‘outperform’ on SGX StockFacts, alongside an average share price target of S$34.40, as of 30 June 2022.

The price target equates to a 30.3% upside potential from UOB’s last traded stock price of S$26.40.

DBS’ equity research team reiterated a ‘buy’ call and price target of S$37 on UOB shares following the bank’s latest earnings report.

RHB analysts, meanwhile, lowered their price target on UOB shares to S$32.70 from S$38.10 alongside a reduced rating of ‘neutral’.

On 28 June 2022, UOB priced S$400 million worth of 4.25% Perpetual Capital Securities with a minimum term period of at least five years.

2. SATS (SGX: S58)

SATS shares have an average rating at around ‘outperform’ and a consensus price target of S$4.27 as of 30 June 2022.

The in-flight and ground handling service provider’s stock is currently trading at S$3.90 a share, which is below the price target by 9.5%.

The latest investment thesis came from UOB’s equity research team, who rated the stock a ‘buy’ alongside a lower price target of S$4.20 a share (from S$4.75 before).

‘Our DCF-based target price for SATS has been adjusted lower as we have hiked the weighted average cost of capital applied on SATS by 50 basis points to 7.5% (previously 7.0%),’ wrote analyst Roy Chen.

While SATS is poised to benefit from the regional air travel recovery, Chen cautioned that its near-term earnings performance could be weighed down by cost pressure from a headcount build-up ahead of the business volume pick-up, as well as inflationary pressure on labour and raw material costs.

3. SIA Engineering (SGX: S59)

SIA Engineering shares have an average rating of ‘outperform’ and consensus price target of S$2.82, based on the latest SGX StockFacts data.

The price target works out to a 14% upside potential from the aircraft engineering company’s last traded stock price of S$2.47.

UOB analyst Roy Chen reiterated a ‘buy’ call on SIA Engineering while lowering price target slightly to S$2.70 (from S$2.90).

Chen said that SIA Engineering is UOB’s top pick for the aviation sector, citing the company’s good visibility regarding business volume recovery, its strong balance sheet and already cheap valuation as key positive factors.

‘Current price of S$2.37 implies an FY25F (normalised year) price-to-earnings (PE) ratio of 14.2 times (10.9 times if excluding net cash), 2.4 standard deviation (SD) below its average of 23.2 times during the pre-pandemic years of FY14-19,’ he noted.

4. Singapore Telecommunications (SGX: Z74)

Singtel shares have a consensus rating of ‘outperform’ and an average price target of S$3.18 (equating to a 25.2% upside from its last traded price of S$2.54), based on the latest SGX StockFacts data.

The latest investment thesis came from DBS’ equity research team, who kept a ‘buy’ call on the stock on 3 June 2022 and raised price target to S$3.20 (from S$3.13).

The analysts liked the stock for its potential 4% dividend yield and ‘decent growth prospects’.

CIMB’s equity research team, meanwhile, reiterated an ‘add’ call and price target of S$3.20 on the stock on 1 June 2022.

Their rating was based on the group’s redevelopment of Comcentre, which is expected to net Singtel proceeds of between S$1.2 billion and S$1.3 billion in 2024.

5. Thai Beverage (SGX: Y92)

The manufacturer of Chang Beer has an average rating of ‘outperform’ and average target price of S$0.85 as of 30 June 2022.

The target price equates to a 30.8% upside potential from ThaiBev’s last closing price of S$0.65.

UOB analysts maintained a ‘buy’ on the stock but lowered target price to S$0.94 a share (from S$1.05) in their latest investor note.

They lowered their FY2022-2024 profit forecasts by 2% to 4%, citing lower consumption volumes ‘dragged by record-high inflation’.

‘However, we still reckon THBEV remains attractively priced at below -1SD of its five-year mean PE, backed by an expected earnings recovery underpinned by favourable tailwinds that are already underway,’ the analysts added.

RHB analysts reiterated a ‘buy’ rating but raised target price to S$0.97 (from S$0.82) in its 17 May research note. They liked the stock ‘as a proxy to capture the consumption recovery’, and also lifted their FY2022-2024 earnings forecast by 5% to 6%.

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