Top 5 Singapore stocks to watch in June 2020
Analysts have picked out these five Singapore Exchange (SGX)-listed shares as ones to watch, and we've got all the details.
Below are the top five Singapore-listed equities for investors and traders to take note of for the month of June 2020, based on recommendations provided by Singapore bank DBS’ equity research team.
Target share price: S$9.50 per share
Estimated upside from current price: 23.6%
Property developer and hotel operator UOL Group, which has a market capitalisation of S$5.77 billion, is one of DBS researcher’s top equity picks for the month of June 2020.
Currently trading at S$7.11 a share, UOL shares have rallied over 9% since 22 May, based on IG data.
Analysts say they like UOL – which manages hotel brands like Pan Pacific and Parkroyal – for its attractive valuation at close to 0.6x price to net asset value ratio, which is close to a -2 standard deviation (2 SD) of its 10-year mean.
They added that the phased re-opening of the Singapore economy starting from the second of June would likely be positive for the group’s office and retail properties.
UOL last week confirmed a proposed final tax exempt one-tier dividend of S$0.175 per share for the financial year ended 31 December 2019, subject to shareholders’ approval. This is on par with the dividend pay-outs in the previous two financial years.
DBS’ previous share price target for UOL shares (as of March 2020) was S$9.50 per share – representing a 23.6% upside from the present share price.
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Far East Hospitality Trust
Target share price: S$0.60 per share
Estimated upside from current price: 17.6%
Far East Hospitality Trust is a Singapore hospitality-focused real estate investment trust (REIT) group comprising Far East H-REIT and Far East H-Business Trust. According to its website, Far East H-REIT owns 13 properties, of which nine are hotels and four are serviced residences.
Currently trading at S$0.51 per share, Far East Hospitality Trust shares are up 8.5% since 28 May, based on IG data.
DBS brokers have recommended the adding of 18,000 Far East shares at S$0.495 towards investor’s ‘dividend’ portfolio category, based on early indications that travel could rebound with travel now allowed between Singapore and China.
On Saturday 30 May, Singapore and China agreed to allow essential travel for business and official purposes to and from six Chinese provinces (including Shanghai and Tianjin) starting from early June. DBS believes that this signals the start of a gradual recovery of passenger arrivals into Singapore.
While the return to pre-Covid tourist arrivals is still months away, news flow for the travel sector is likely to get better.
The analysts see limited downside earnings risk with 97% of FY20 full-year projections supported by fixed rent. Despite the expected revenue per available room dip this year, recovery should be swift when travel demand returns, they added.
‘The stock is trading at an attractive valuation at below replacement costs. The stock offers dividend yields of 5.5% for FY20F and 6.7% for FY21F,’ the researchers concluded.
Frasers Centrepoint Trust
Target share price: S$2.65 per share
Estimated upside from current price: 6%
Developer-sponsored retail REIT Frasers Centrepoint Trust, which owns S$3.22 billion worth of assets as well as a portfolio of suburban shopping malls across Singapore, is also on DBS’ latest list of equity picks.
Currently trading at S$2.50 per share, Frasers Centrepoint Trust shares are up over 27% since mid-May, based on IG data.
DBS upgraded the Frasers stock to a ‘buy’ rating and a share price target of S$2.65 per share, on the assumption that the worst of the Covid-19 pandemic is over for Singapore REITS.
Frasers also trades at a dividend yield of 5.6% for FY2021. The company proposed a Q2 2020 dividend payout of S$0.0161 per share – 48.7% lower than the S$0.03137 paid out in Q2 of 2019.
With malls expected to resume business in July 2020 and more retail outlets – estimated at 90% - reopening in phase 2 of the so-called ‘circuit breaker’ measure, analysts believe the sector is due to return to operational normalcy.
They wrote that rebound is ‘likely to be swift’ as Frasers’ suburban malls Northpoint, Causeway Point and Waterway Point contribute roughly 75% of the trust’s revenues.
In addition, they believe that downside risks have been greatly minimised with the latest government grants and assistance for the retail sector unveiled just last week as part of the ‘Fortitude’ budget.
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Target share price: S$1.40 per share
Estimated upside from current price: 5.7%
Yangzijiang Shipbuilding Holdings (Yangzijiang) is one of China’s largest shipbuilders. It counts offshore among its core business, with trade logistics, ship-leasing and real estate as supplementary businesses.
The Singapore Exchange-listed company’s shipbuilding output from 2009 was continuously ranked in the top five of the Chinese shipbuilding industry. In 2018, the group was ranked 449 out of 500 companies in China.
According to DBS researchers, the Yangzijiang stock is supported by a forward core shipbuilding revenue and an order backlog of US$2.9 billion (approximately 1.5% revenue coverage) as of March 2020. Meanwhile, they noted that the company’s investment segment also generates stable recurring income.
As such, they stated that Yangzijiang’s present valuation is ‘undemanding, trading at a 13% discount to its net cash of ~S$1.09 per share’.
‘The stock’s current unjustified low valuation of less than 0.6x P/BV ratio despite superior financials of 8-9% ROE and sustainable DPS of at least 4 cents (~4.2% dividend yield) presents a good opportunity to longer-term investors,’ the analysts wrote, with a recommendation to buy 15,000 shares at an entry price of S$0.945 per share.
On the downside, they cautioned that the company might face potential exposure to industrial names as economies gradually ease their Covid-19 lockdowns in the coming months.
CapitaLand Mall Trust
Target share price: S$2.15 per share
Estimated upside from current price: 3.9%
Retail-centric REIT CapitaLand Mall Trust – the first REIT ever to be listed on the SGX, ended the previous week at S$2.04 per share, up 7.9% from Monday’s starting price of S$1.89.
The stock also gained 13.3% in the month of May 2020. It is trading at S$2.07 as at 17:00 on Monday 01 June 2020, based on IG data.
As mentioned earlier, DBS brokers foresee an upward trajectory for the share prices of Singapore retail REITs like CapitaLand Mall Trust in the coming months, with 90% of tenants planning to resume their operations by the first week of July 2020 – if phase 1 of the ‘circuit breaker’ re-opening goes well.
‘The planned gradual reopening of the retail malls starting from phase 2 (at the end of June 2020) supported by lower community spread numbers in our view, imply a steeper “recovery curve” back towards pre-Covid-19 levels,’ the analysts wrote.
Finally, they estimate that approximately 52% of CapitaLand Mall Trust’s revenue originates from its so-called ‘dominant’ suburban malls – large neighbourhood malls that are well connected to transportation networks.
The stock currently trades at a 6.3% dividend yield for FY2021. DBS recommends 7000 shares to be added at S$1.3 to investor’s portfolio under the ‘dividend’ category.
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