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DBS: Equity Strategies For A 3,400 STI
Aspire, Hot Picks | 25 November 2014
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By: Simeon Ang
Articles (125) Profile

Leading local research house, DBS Group Research, released a report on 25 November 2014 highlighting the need for investors to “seek stability in solid yield plays”. This prognosis comes after the Straits Times Index managed to eke out a 4 percent rise from a month ago.

Source: FactSet, STI's chart for the past 1 month

The gain however, according to DBS, was relatively narrow as the main winners from that increase were the banks and the telecommunication stocks.

Despite the largely one-sided gains, DBS feels that the STI should still be able to head to 3,400 points by the year end. That would mean an additional 1.8 percent appreciation from 24 November 2014′s close of 3,340.53.

DBS listed the following as key potential catalysts that may push the STI further than 3,400. These include:

  • Stronger global recovery to offset rate hike expectations (from the US)
  • Increased confidence in projected corporate earnings growth of 8.7 percent

In particular, DBS drew attention to the oil and gas sector which has been battered by falling oil prices. DBS hopes that oil prices might rebound following an OPEC meeting on 27 November 2014. The only way for that to happen is if the participating countries band together to reduce oil supply, thereby inflating prices.

The following counters are DBS’s picks going into the year end and festive season:
Counter name: Yangzijiang
24 November 2014 Close: $1.195
DBS Target Price: $1.62
Potential appreciation: +35.6%
Reason to buy?: With little exposure to the offshore sector, the company is in a net cash position and generates a dividend yield of about 4.4%.

Counter name: SMRT
24 November 2014 Close: $1.63
DBS Target Price: $1.86
Potential appreciation: +14%
Reason to buy?: “Transport companies are key beneficiaries of the lower fuel cost.”

Counter name: CapitaLand
24 November 2014 Close: $3.32
DBS Target Price: $3.82
Potential appreciation: +15.1%
Reason to buy?: The recent interest rate cut by the Peoples Bank of China (PBoC) has been seen as an inflexion point by DBS for China property plays. DBS maintains a Buy on CapitaLand as it notes that the counter has about 40 percent of its assets in China.

Counter name: China Merchants Pacific
24 November 2014 Close: $0.995
DBS Target Price: $1.42
Potential appreciation: +42.7%
Reason to buy?: DBS likes China Merchants Pacific primarily for its high dividend yield of 7 percent as well as an acquisition driven growth rate of about 12 percent.

Other plays highlighted by DBS for “stable growth and yield” include:
Counter name: Oversea-Chinese Banking Corp
24 November 2014 Close: $10.39
DBS Target Price: $12.70
Potential appreciation: +22.2%

Counter name: Sheng Siong Group
24 November 2014 Close: $0.65
DBS Target Price: $0.78
Potential appreciation: +20%

Counter name: Singapore Post
24 November 2014 Close: $1.91
DBS Target Price: $2.12
Potential appreciation: +11%

Counter name: Singapore Telecommunications
24 November 2014 Close: $3.89
DBS Target Price: $4.28
Potential appreciation: +10%

Simeon, an LSE graduate, is currently the editor of Aspire. He specialises on topics surrounding trading psychology, politics and macroeconomics.

Please click here for more information about this author.

Yangzijiang Shipbuilding (Hldgs)  0.970 -0.040 -3.96%   
Business: Co is one of the largest non-state owned shipbuilders in China. [FY18 Turnover] Shipbuilding (58.1%), trading (32.8%), investments (6.7%), others (2.4%).

Insight: Apr-19, 1Q19 revenue jumped 26.8% to Rmb6.3b due t... Read More
CapitaLand  3.530 +0.07 +2.02%   
Business: Co develops, owns, and manages real estate properties. [FY18 Geographical] China (41.2%), S'pore (38.5%), Europe & others (18.6%), Vietnam & Others (1.7%).

Insight: Apr-19, 1Q19 revenue fell 23.8% while net profit d... Read More
Oversea-Chinese Banking Corp  10.690 -0.02 -0.19%   
Business: [FY18 Turnover] Global corporate/investment banking (35%), global consumer/private banking (34.8%), OCBC Wing Hang (11.5%), insurance (11%), global treasury & mkts (7.7%).

Insight: May-19, 1Q19 total income rose 14.7% driven by str... Read More
Sheng Siong Group  1.180 -- --   
Business: Co is a supermarket chain operator.

Insight: Apr-19, 1Q19 revenue rose 10.1% to $251.4m mainly ... Read More
Singapore Post  0.945 -- --   
Business: [FY19 Turnover] Post and Parcel (47.8%), logistics (31%), eCommerce (15.5%), property (5.7%).

Insight: May-19, FY19 revenue rose 2.9% to $1.6b largely du... Read More
Singtel  3.220 +0.03 +0.94%   
Business: Asia's leading communications group. [FY19 Turnover] Mobile Comm (31.1%), Data & Internet (19.2%), Infocomm Technology (17.5%), Sale of Eqmt (16.5%), Digital Biz (7.2%), Fixed Voice (5.2%), Pay-TV (2.1%), Leasing (0.8%), others (0.4%).

Insight: May-19, FY19 operating revenue remained flat at $1... Read More


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