Source: YTD Chart of STI, Capital IQ
The Singapore market has been performing poorly given the strong headwinds the global economy is facing. The Straits Times Index (STI) has fallen 14.4 percent year to date (YTD), which was largely attributed to the slowing growth in China as well as weak local sentiments.
After a battered 2015, analysts from UOB Kay Hian Research (UOBKH) believe that there are hopes for recovery in 2016. However, the market is still expected to face a tough 1H16 with expected recovery in the second quarter.
For 1H16, they expect better performance for companies with capacity-driven growth, secular trend winners, growth at reasonable prices and regulatory changes. Investors are urged to remain defensive, have flexibility in their portfolio and buy selectively.
We have picked out three stocks from the list of 13 that UOBKH recommended investors to buy.
1. City Developments
Source: YTD Chart of City Developments, Google Finance
Chairman of City Developments (CIT) have been urging the government to scale back the curbs on property. The deteriorating housing market due to the poor sentiments towards the economy, falling sales and a surge in supply is putting pressure on property prices. The lifting of curbs will be beneficial for CIT as it will ease its operating environment.
Since last year, CIT has not been buying lands in Singapore as prices were high. Based on its latest quarter financial release, CIT’s low net gearing ratio of 30 percent will give it headroom for purchasing new lands in Singapore.
Analysts from UOBKH gave CIT a “Buy” call with a potential upside of 50.1 percent.
2. Raffles Medical Group
Source: YTD Chart of Raffles Medical Group, Google Finance
Led by rising healthcare cost, strong growth for the sector has been expected from the street. Across various research houses, the sector is a star buy, of which Raffles Medical Group (RFMD) is definitely a representative. Much growth is expected for RFMD with its ambitious expansion plan. The extension of the Singapore hospital should bring strong earnings growth next year. Its long term growth plan includes opening a hospital in Shanghai, China.
Analysts from UOBKH gave RFMD a “Buy” call with a price target of $5.05.
3. Singapore Telecommunications
Source: YTD Chart of Singapore Telecommunications, Google Finance
With the rising uncertainty in the global economy, defensive stocks are preferred. The telecommunication sector is well-known to be defensive and Singapore Telecommunications (ST) is the leader in the sector.
ST’s stable revenue and its projected yield of 5 percent in 2016 provides investors some assurance. As such, ST might just provide investors with the safe haven they are looking for.
Analysts from UOBKH gave a “Buy” call with a potential upside of 19.4 percent and a projected dividend yield of 5 percent for the coming year.