DEUTSCHE: "Themes and stocks for 2015"

In this report, we identify four themes that we think will affect the Singapore market in 2015. We have used these four themes to drive our stock picks as forecast market earnings growth of under 8% in 2015 looks unexciting. 3Q reporting season has been disappointing and 2014E market earnings growth is now at -3.4% compared with -1.8% at the start of the year.
 

We think residential property stocks could rebound 3-6 months ahead of the physical market bottoming. Negative prices are largely priced in and lower asking price should drive volume, narrowing RNAV disc Buy CIT and CAPL.

Theme 2: Rising interest rates positive for DBS, negative for SREIT

Potential rise in NIMs on the back of the Fed’s interest rate hike would boost bank earnings, especially DBS, which has the highest CASA franchise. We suggest switching out of SREITs as spread valuations look fair.  
 

"CD should benefit most from bus reforms as it holds about a 75% market share, and we are of the view that the company has a strong management team," says Deutsche in its report.
NextInsight file photo.Theme 3: Land transport reforms gather pace 
Tender announcements for the next two bus parcels and subsequent awards should give the market more confidence that earnings should benefit from bus reforms. CD is our sector pick because of more attractive valuations. 
 

There is positive correlation with high fit between oil prices and SMM/KEP. Lower oil prices could lead to O&M contracts being called off or delayed. 

We prefer City Dev to MCT for our top five Buy picks portfolio

We remove Mapletree Commercial Trust (MCT) from our top Buy list following 15.9% total return since Apr 2014, and replace it with City Development. 

City Development: 35% discount to RNAV. Potential recovery in transaction volume and overseas expansion are attractive catalysts.
 

ComfortDelgro: 2016 bus reforms to improve SG bus earnings. FCF yield of 6-8% forecast over 2014-16 means our 3-4% div yield looks conservative.
 

DBS Group: Better positioned than peers for interest rate rise on higher CASA %. HK and SG wealth management should drive earnings momentum. 
 

Singapore Telecom: Optus and associates (in India and Indonesia) performing well; dividend yield of just under 5%. 
 

Yangzijiang Shipbuilding: Capturing market share as Chinese shipbuilding industry consolidates. USD4.6bn orderbook keeps yards utilised through 2016.