| • In recent days, oil price has risen to 2023 highs. The stock price of Singapore-listed oil producer, Rex Holdings, was trading at 16.6 cents (+5%) at lunch-time today. It's down 25% year-to-date. • Rex has also just provided a business update (here) which, among other things, said tax receivables of US$63.6 million from the Norwegian tax authorities are expected in November 2023 which will have a positive impact on cash available within the Group.
For other stocks with positive near-term catalysts, see DBS' report below: |
Excerpts from DBS Research report
7 stocks to ride out the next 2 months
We expect the sideways volatility in July and August to continue over the next one to two months, with
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Against this backdrop, we advocate turning to the following stocks to best ride out the anticipated market swings ahead. These are:
| (1) Stocks with an improving 2H outlook |
UMS – UMS’s key customer AMAT’s latest above-expectation guidance and recent contract wins/renewals are drivers that should support an earnings recovery for the stock in 2H23.
UMS is also well positioned to take on additional orders from new/potential customers – on the back of the ongoing recovery in the semiconductor industry – with its new Penang facilities scheduled to commence production in September.
ComfortDelGro – the recovery in public transport and taxi & private hire segments, earnings uplift from the newly introduced platform booking fees, and improvement in the UK and China businesses pave the way for a sequential earnings improvement. 
DBS' target price for ComfortDelGro stock is $1.68.Its net cash position, together with the expectation of a strong 20% FY24F EPS growth, are further positives, as we head into a period laced with higher interest rates and slower earnings growth (FY24F EPS growth – DBS coverage: 5.5%, STI DBS forecast: 3.6%).
Digital Core REIT – the overhang on this REIT should clear as the resolution over the Cyxtera assets/leases emerges.
We see DCREIT trading at an attractive return/risk profile given its favourable debt position – no debt expiry in FY23/24, high ICR ratio of 5.5X, low gearing of 34%, and a moderate 74% of debt with fixed rates – coupled with >9% FY23F/24F yields.
ThaiBev – the removal of the political overhang should bode well for ThaiBev in the coming months. Even with the one-time THB10,000 digital handout by the PTP delayed until 2024, stronger tourism arrivals and steady improvements in private consumption/Consumer Confidence Index should nevertheless underpin demand for ThaiBev products.
Its current valuation (FY23F PE at 12.8x, 1SD below its five-year average) is attractive at this point, considering (i) its improving fundamentals and (ii) sentiment that is expected to turn positive.
| (2) Oversold trade |
UOL – the stock fell 9.2% from peak to trough in August. The optimism for the recovery of its hospitality division could drive an oversold rebound in trade. July and August are the two seasonally strongest months for Singapore tourist arrivals.
July RevPAR for Singapore hotels rose to a record high across all tiers. With its hotel assets sitting at prime locations along the F1 track, the Singapore night race on 17 September looks like it would seal a strong 3Q recovery for UOL’s hospitality division.
KREIT – we draw a comparison from past dividend-in-specie situations (e.g., CDL HT and CLAS). As the timeline for Keppel Corp’s dividend-in-specie of KREIT shares progresses, we see an upside potential towards $0.96 for KREIT, upon heading to the Keppel Corp’s shareholder meeting to approve the distribution.
KREIT is our preferred pick in the office segment. It has exposure to Singapore Grade A offices in prime CBD locations that are well positioned to benefit from a potential recovery in a very tight net-supply market, which is expected to last till 2024. The stock trades at a 6.8% yield and 0.65X P/B.
| (3) Industrials, for their resilience and robust orderbook |
ST Engineering – STE is our preferred pick for the aerospace sector. A strong orderbook underscores STE’s positive longterm growth trajectory. Its order backlog reached a new record level of S$27.7bn (up 20% from end-FY22 levels), on new order wins of S$9.5bn in 1H23.
With the full contribution of the TransCore acquisition coming in from FY24, our analyst sees a 12% earnings CAGR over FY22-24, and better-than-trend organic growth even beyond that, driven by its record orderbook levels.
Full report here.
