Top 5 Singapore stocks to watch in August 2020
Analysts have picked out these five Singapore Exchange (SGX)-listed shares as ones to watch. Here are their insights.
Below are the top five recommended Singapore-listed equities for the month of August 2020, based on the latest research provided by DBS’ equity team.
ComfortDelGro Corporation
Share price target: S$1.68
Estimated upside from last traded price: 20.9%
Transport operator ComfortDelGro Corporation, which has land transport operations in Singapore, the UK, Australia, China, Vietnam, and Malaysia, is among DBS’ top equity picks this month.
Brokers have recommended that 8,000 ComfortDelGro shares be added to investment portfolios at S$1.35 each – based on 04 August share prices.
The researchers stated that the stock, which is trading along a c.1.1x price-to-book value that is slightly below its historical average, has already priced in the losses expected in its first half financial results for fiscal 2020 (due to be released on 14 August 2020).
They posited that the June-ending quarter is likely the group’s worst quarter given the ‘circuit breaker shutdown’ in Singapore. As such, they believe that earnings should improve going forward with the current gradual phased reopening of the economy.
‘Bargain hunting and possible short-covering activity should lend support to the stock price around the current level,’ they further noted, concluding that S$1.30 will act as a support, with downsides limited.
ComfortDelGro shares closed at S$1.40 apiece on Wednesday 05 August 2020 on the IG platform.
IG’s market analysis shows that 96% of clients currently hold ‘buy’ (long) positions on ComfortDelGro, indicating an expectation for price to rise.
AEM Holdings
Share price target: S$4.96
Estimated upside from last traded price: 1.7%
Analysts also maintained a ‘buy’ rating on AEM Holdings shares, while raising their target price by a massive 40.5% to S$4.96 a share (up from S$3.53 previously).
‘We are still positive on AEM based on the continued increase in the US semiconductor equipment billings and the longer-term semiconductor recovery,’ analysts wrote.
‘We believe that new technology (5G, electric vehicles, and AI), which continues to drive up demand in testing services, and the higher demand for cloud due to increased working-from-home, will continue to benefit AEM.’
As such, DBS has decided to raise its valuation peg to 13.7x FY21F earnings, which would put earnings on par with the previous peak achieved in 2018.
Other positive factors included the group’s H1 FY2020 revenue and net profit, which came in at 53.8% and 62% of DBS' full year 2020 forecast - in line with DBS’ expectations.
On the flipside, key risks to the bull case include single-customer concentration risks, as well an escalation of geopolitical events, prolonging of the Covid-19 pandemic, and forex risks.
AEM shares closed at S$4.18 apiece on Wednesday 05 August 2020 on the IG platform.
IG’s market analysis shows that 84% of clients currently hold ‘buy’ (long) positions on the asset, indicating an expectation for price to rise.
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Venture Corporation
Share price target: S$20.70
Estimated upside from last traded price: 9.3%
DBS upgraded their call on the Venture Corporation stock to ‘buy’ on 05 August 2020, alongside a higher price target of S$20.70.
Their bullish recommendation is predicated on several factors:
One – the worst could be over for the supply chain (with demand still relatively strong and recovery now underway); two – Venture’s partners, which are leaders in their own domains, have posted strong results; three – Venture is benefitting from the supply chain shift; and last – the company’s strong balance sheet.
All of these points, the analysts wrote, ‘provide a strong foundation for the group to obtain sustainable growth’ and ‘emerge stronger’ from the Covid-19 pandemic.
The brokers also advised investors to focus on the longer-term benefits of the stock, and look beyond its near-term earnings volatility.
Downside risks, however, include dampened client or global growth prospects due to broad global economic slowdown and US Dollar weakness.
Venture shares closed at S$18.80 each on Wednesday 05 August 2020 on the IG platform.
IG’s market analysis shows that 77% of clients currently hold ‘short’ (sell) positions on the Venture stock, indicating an expectation for price to fall in the near term.
Singapore Telecommunications (Singtel)
Share price target: S$3.04
Estimated upside from last traded price: 25.1%
Although Singtel shares are trading at a five-month low, close to March 2020 troughs, it is precisely for this reason that DBS has chosen to include the stock in its ‘buy’ picks.
Analysts lowered their 12-month price target on 04 August 2020 to S$3.04, down from S$3.09 previously. This represents an upside of over 25% from the last traded price.
The researchers explained the rationale in the same note: ‘Singtel’s investment in its associates is worth S$2.57 per share based on their market value, implying that its core business in Singapore and Australia is trading at a negative value of -S$0.09 per share.’
They also expect that Singtel’s dividend yield will be re-rated to 4.5% (from 4.9%) – in line with its 15-year historic average – with the key catalyst being a potential S$1.2 billion divestment of its Australia towers owned by its subsidiary Optus.
As such, they concluded that a projected FY2021 dividend per share (DPS) of S$0.1225 at a 75- 80% pay-out ratio remains ‘sustainable in the long term’.
Another thing to look out for is Singtel’s Q1 FY2020/2021 earnings, which is scheduled for release on Thursday 06 August. DBS expects Singtel’s net profit to drop 8% year-on-year to S$529 million.
Singtel shares closed at S$2.42 apiece on Wednesday 05 August 2020 on the IG platform.
IG’s market analysis shows that 95% of clients currently hold ‘buy’ (long) positions on the asset, indicating an expectation for price to fall in the near term.
You can buy long or short sell any of these five Singapore mainboard-listed equities by using IG's industry-leading CFD trading platform.
Frasers Property
Share price target: S$1.70
Estimated upside from last traded price: 45.3%
Real estate company Frasers Property, which has more than S$20 billion worth of assets in the residential, commercial hospitality and industrial sectors, is another one of DBS’ early picks for the month of August 2020.
Analysts reiterated their ‘buy’ rating on the stock, while lowering price target to S$1.70 (from S$2.05 previously) to factor in higher gearing, dividend cut, and headwinds caused by Covid-19.
Nevertheless, the new price estimate still represents a huge upside of over 45%. Additionally, researchers noted that the Frasers Property’s valuation remains attractive at 0.5x price to net asset value ratio despite its annual dividend yield having fallen to 3%.
Potential catalysts for the stock include asset monetisation, better property sales, and higher free float and liquidity.
On the asset monetisation front, the company recently proposed the sale of two properties to its REIT subsidiaries, Frasers Logistics & Industrial Trust as well as Frasers Commercial Trust. The divestment, if approved, is expected to fetch nearly S$90 million in total.
Risks for the stock include a smaller free float which could lead to lower liquidity, as well as a weaker AUD/SGD exchange rate which could affect investment returns in Australia.
Frasers Property shares closed at S$1.17 each on Wednesday 05 August 2020 on the IG platform. Share price was down 5.6% in the month of July.
How to trade Singapore’s top companies with IG
Are you feeling bullish or bearish on these Singapore Exchange (SGX) stocks? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:
- Create a live or demo IG Trading Account, or log in to your existing account
- Enter <company name (i.e. AEM Holdings Ltd> in the search bar and select the instrument
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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