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Phillip 4Q22 Singapore Strategy
Hibernating for winter
SINGAPORE | STRATEGY 4 October 2022
Review: The STI was up a modest 0.9% in 3Q22. Only a third of the component stocks managed to eke out gains. Banks were the outperformers (Figure 1), and so were selected cyclicals(Figure 2). REITs bore the brunt of the sell-down (Figure 3). They face multiple challenges. Higher interest rates and flat property cap rates translate to negative carry from acquisitions, stifling inorganic growth. We also expect refinancing costs to spike not just from higher rates but costlier hedging to keep interest rates fixed. The ability to maintain DPUs will be a challenge.
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APAC Realty Ltd
Hitting a speed bump
■ We think property cooling measures could impact near-term market activity.
■ We lower our yoy residential volume transactions assumptions for APAC.
■ Maintain Add rating with a lower TP of S$0.77.
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Propnex Ltd
Near-term headwinds
■ We think property cooling measures could impact near-term market activity.
■ We lower PROP’s FY22-24F earnings to factor in a slower market.
■ Maintain Add rating with a lower TP of S$1.89.
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STRATEGY – SINGAPORE
Alpha Picks: Add ThaiBev And ComfortDelGro; Remove BRC Asia And Frencken
Our Alpha Picks outperformed the STI index in Sep 22, declining by 0.4% on a market cap-weighted basis vs the STI’s 2.8% decline. For Oct 22, we add ComfortDelGro and Thaibev after their recent share price weakness as we expect the economic reopening to continue to drive their demand recovery. We cut losses on BRC Asia, whose business is affected by the temporary stop-work orders, and remove Frencken as we expect weak sentiment towards tech stocks amid the rising interest environment.
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Gaming – Malaysia
Remains A Good Shelter, Value Deliverer
The gaming sector remains both a good shelter amid the current bearish sentiment, and a deliverer of capital gains as earnings recover strongly through 2023. We favour the casino subsector for its sharp earnings recovery, capacity restoration and external opportunities (eg GENM’s bid for a downstate New York concession). Nevertheless, the NFO subsector’s sharp pullback provides an excellent entry point for yield-hungry investors. Maintain OVERWEIGHT.
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Carlsberg Brewery Malaysia (CAB MK)
Smooth Outlook Ahead
We remain sanguine over Carlsberg’s prospects ahead. Despite a robust 2Q22 performance, pockets of further recovery in the modern on-trade channel and Singapore remain. Meanwhile, cost continues to be well managed, and concerns are diminished now with lower commodities prices. In addition, we do not expect any surprises in relation to the brewery sector during the unveiling of Malaysia Budget 2023. Maintain BUY. Target price: RM27.60.
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