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By Say Cheong //
August 16, 2022

Stocks all over the world staged an impressive rally in July and finally recouped some losses that they have incurred through first half of 2022.

More importantly, we are seeing how Singapore is still growing stronger as it continues to strengthen its currency to control the soaring inflation.

As a Singaporean, I am also touched and feel lucky that I live in Singapore and is able to contribute to the success. On that note, we have found 7 Great Singapore Stocks (GSS) to commemorate this year NDP 2022. Let’s go!

Stock Idea #1 Mapletree Industrial Trust

Maybank Kim Eng has maintained its Add rating on the stock with a target price of $3.00.

The company’s strong fundamentals and growth are driving the positive sentiments of the company.

“MINT’s 1Q23 DPU rose c.4% YoY/flat QoQ, driven by rising US data centre contributions, now at c.51% of AUM. The performance was in line with consensus and slightly above our estimates; we raise DPUs by 1-2% on stronger occupancies and rents, while our DDM-based TP stays at SGD3.00 (COE: 6.6%, LTG: 2.0%).

Growth headwinds from inflationary pressures and rising interest rates are partly offset by retained capital distributions, and a strong balance sheet.

Valuations are undemanding at c.5% yield, backed by improving fundamentals from better occupancies, recovering industrial rents, and higher DPU visibility from its rising data centre tenancies. ”

>> Read more about the company here.

Stock Idea #2 BRC Asia

Phillips Capital has maintained its BUY rating on the company with a target price of $2.26.

Positive results from the company and reversal of onerous contracts are going to be drivers for the company’s future performance.

“Net profit rose 113.4% YoY driven by the continued recovery in the construction sector and the moderation of steel prices. We estimate that volumes grew ~30% YoY in 3Q22, driven by the increase in work activity at construction sites.

According to the Ministry of Trade and Industry (MTI), the local construction sector grew 3.8% in the second quarter, faster than the 1.8% growth in the preceding quarter. This was in part due to the relaxation of border restrictions on the inflow of migrant workers.

Steel rebar prices declined ~6% during the period. We believe the Group benefitted from write-backs in onerous contracts in the latest quarter with steel prices moderating.

Recall that for 1H22, the Group benefitted from a $1.8mn net reversal for onerous contracts as contracts were being fulfilled with steel rebar prices down 13.6% during that same period. The Group generated $69mn in free cash flows in 3QFY22, that was used to lower gearing to 0.61x from 0.83x in 1H22.”

Read more about the company here.

Stock Idea #3 DBS Group Holdings Ltd

Phillips Capital has maintained its Buy rating on the company with a target price of $41.60.

Stable assets quality and loan growths are going to help DBS in its upcoming results.

“2Q22 total allowances were lower YoY and QoQ due to lower SPs of S$69mn for the quarter (S$167mn in 1Q22). Further, credit costs improved by 6bps YoY to 8bps.

The GP write-back of S$23mn for 2Q22 was from credit upgrades and transfers to NPA. GP reserves remained prudent at S$3.74bn, with NPA reserves at 113% and unsecured NPA reserves at 199%. The NPL ratio was maintained at 1.3% as new NPA formation remained low.

Loans grew 7% YoY and 1% QoQ to S$425bn. This was mainly driven by trade and corporate non-trade loans. Housing and WM loan growth was sustained at the previous quarter’s levels. Management lowered its FY22e
loan growth guidance to mid-single digit (from mid to high-single digit).

Deposits grew 9% YoY and 1% QoQ to S$528bn, and current and savings accounts (CASA) accounted for 72% of
customer deposits.”

>> Read more about the company here.

Stock Idea #4 Keppel Corporation

CGS CIMB has maintained its ADD rating on the company with a target price of $9.37.

Impressive results reflects the positive efforts implemented by the management.

“1H22 net profit incl. discontinued operations (O&M) of S$498m was 13% above our expectations, forming 58%/57% of our and Bloomberg consensus’ FY22F.

Key surprises were stronger O&M profit of S$64m and fair value gains of start-ups such as Envision AESC Global, Fifth Wall, Vertex and Wavemaker, resulting in net profit of S$56m for corporate & others. Interim dividend of S$0.15 (1H21: S$0.12, 2H21: S$0.21) represents a 62% payout on 1H22 EPS.

We take this as a sign of confidence and up our FY22F DPS to S$0.31 (historically, final DPS has been higher than interim) in view of KEP’s aggressive asset recycling strategy. This translates to a dividend yield of 4.7%. ”

>> Read more about the company here.

Stock Idea #5 Wilmar International

UOB KAY HIAN has maintained its BUY rating on the stock and with its target price at $5.50.

Strong margin and recovery from beaten down markets are the catalysts for the good valuation.

“Strong margin improvement for food products segment. The profit before tax (PBT) margin for the food products segment had increased significantly from 1.6% in 2H21 to 3.3% in 1H22.

This was mainly contributed by upward price adjustments (mainly in 2Q22) for its consumer pack products to mitigate the impact of continuous increases in commodity prices. On top of that, we reckon that this is also supported by Wilmar’s wise procurement strategy.

Strong recovery from its China operations, YKA. The PBT for Yihai Kerry Arawana (YKA) had improved significantly in 1H22 by 98% hoh. This is supported by both the food ingredient and feed and oil & fats segments’ gross profit margins improving significantly.

We believe that the strong performance of YKA’s feed and oil & fats segments was supported by the recovery of crushing margins and prudent procurement of feedstocks. ”

>> Read more about the company here.

Stock Idea #6 CapitaLand Integrated Commercial

CGS CIMB has maintained its ADD rating on the company with a target price of $2.57.

Higher retail revenue and recovery in office rents are good signs for the company.

CICT reported 1H retail revenue/NPI of S$276m/S$197m, +3.1%/4.5% yoy. Retail occupancy stood at 96.5% at end-1H. Tenant sales improved 15.9% yoy (+26.4% for downtown malls) while shopper traffic rose 12.5% yoy. CICT also benefited from improved tenant performance with gross turnover rent making up 7% of retail revenue

CapitaSpring’s take-up rate improved to 99.5% while Raffles City Singapore office saw take-up rising to 99.4% in 1H. We expect the full impact of contributions from the new properties to be felt from 2Q22F onwards. Looking ahead, we believe CICT remains well-positioned to explore inorganic growth opportunities.”

>> Read more about the company here.

Stock Idea #7 ESR-LOGOS REIT

CGS CIMB has maintained its Add rating on the company with a target price of $0.51.

Robust rental reversions amid an uptick in portfolio occupancy are two main reasons that the company are likely to do well for upcoming quarters.

“Portfolio occupancy ticked up 0.4% pt qoq to 94.1% as at 1H22, led by an improvement in take-up of the Singapore portfolio. In 1H22, ELOG leased/renewed 195k sqm of space and achieved positive rental reversion of 11.4% (2Q: +14.3%), mainly coming from strong performance within the logistics and general industrial properties.

ELOG has 18% of leases expiring in FY22F, of which 70% are in the process of renewal. Given the robust demand
outlook and upbeat rental market, we anticipate the positive reversion trend to continue, although the trajectory may moderate. In view of inflationary pressures on utilities cost, ELOG indicated that it is progressively rolling out higher service charges for selected assets across its portfolio as well as restructured its utilities agreements with tenants to reflect a pass-through cost recovery basis.

With effect from 1 Jul, more than 90% of the portfolio utilities expense have been re-stated and this will likely shield ELOG from theimpact of rising utilities cost going forward.”

>> Read more about the company here.

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