Top 5 Singapore stocks to watch in October 2021

Analysts say these five Singapore stocks are among the ones to watch this month. Here are their insights.

These five Singapore-listed equities are among analysts' most recommended to trade for the month of October 2021, based on their latest ratings, price targets and research.

1. Singtel (SGX: Z74)

2. DBS Group (SGX: D05)

3. CapitaLand Investment (SGX: 9CI)

4. Singapore Airlines (SGX: C6L)

5. City Developments (SGX: C09)

Singtel (SGX: Z74)

Maybank analysts rated Singtel ‘buy’ with a S$2.83 target recently, citing that the telco may ‘potentially split the group into infrastructure and a customer-facing MVNO (mobile virtual network operator) service’.

Singtel has also announced its intention to subscribe to its Indian associate Bharti Airtel’s rights issue at 535 rupees per share for a total consideration of up to 29.4 billion rupees (about US$405 million), across a period of up to three years.

RHB analysts said the subscription may lead to ‘a manageable uptick’ in Singtel’s net debt-to-Ebitda ratio, from 2.1x to 2.2x. RHB maintained its ‘buy’ call on Singtel shares, alongside a S$3 target price.

Likewise, CIMB, reiterating ‘add’ and eyeing S$2.90 per share, highlighted that the payments will have ‘limited impact’ on Singtel’s gearing and thus ‘should not overburden’ the company.

However, the rights subscription could reduce the size of any potential special dividends from asset monetisation, CIMB noted.

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DBS Group (SGX: D05)

Bloomberg Intelligence (BI) analyst Rena Kwok opined that DBS Group's return on equity ‘is well-placed to recover to pre-pandemic levels of 10-12% this year’.

On asset quality, Kwok wrote that the outlook appears promising for the second half of 2021, ‘with no significant signs of deterioration’ despite the regional resurgence in Covid-19 cases and lockdown restrictions.

DBS’ capital buffer - driven by strong internal cash generation - also remains sustainable, in Kwok’s view.

Meanwhile, DBS was one of the top picks by Maybank’s research team, which gave a ‘buy’ idea and S$35.11 share price target.

Maybank described DBS as a proxy to corporate lending demand, particularly in North Asia. Its analysts also favour the lender’s potential for accretive mergers and acquisitions.

CapitaLand Investment (SGX: 9CI)

CapitaLand Investment Limited shares have rallied some 20% since debuting on the Singapore Exchange on 20 September at S$2.95 each.

UOB analyst Adrian Loh said he likes CLI ‘for its scalability through fee-related earnings and growth potential in its funds management business’.

He also established a sum-of-the-parts valuation for the company of S$3.64. This implied a 28.9% upside from CapitaLand’s own 1x P/NAV valuation of CLI of S$2.823 which it used as part of the valuation consideration during the scheme of arrangement to delist.

Looking ahead, Loh believes the new CLI structure will help the group to sharpen its strategic focus.

‘The privatisation of CAPL’s capital-intensive development business will allow it to focus on developing longer gestation projects and incubating new businesses that require more “patient” capital,’ he said in a note last month.

‘In addition, the company believes that listing its investment business will increase scalability through Fee Related Earnings (FRE) and Funds Under Management (FUM) growth.’

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Singapore Airlines (SGX: C6L)

Analysts believe that Singapore Airlines' (SIA) current liquidity will be sufficient to tide the group over the next few years, although its recovery still hinges on global border reopenings, The Business Times (BT) reported.

DBS analysts said that ‘conservatively speaking, the group should have adequate liquidity for another few years at the very least in the worst case scenario, assuming that debt is refinanced when it is due’.

Meanwhile, UOB’s K Ajith is more conservative with his outlook, keeping a ‘hold’ and price target of S$4.85 a share.

He wrote that SIA’s website showed no material increase in ticket prices to key German cities in Munich and Frankfurt compared to pre-pandemic levels for both back end and front end travel, following the opening up of a vaccinated travel lane with the country last month.

‘The relatively low prices suggest that capacity still exceeds demand and this is likely to be the case over the next two quarters. This is in line with SIA’s own guidance for normalisation of pax yields,’ he added.

City Developments (SGX: C09)

City Developments (CDL) was among CIMB analyst Lock Mun Yee’s top property picks last month. She stated that developers’ valuations ‘still look inexpensive’ at a 46% discount to RNAV.

‘With the residential market still enjoying brisk transaction activity, we prefer developers with visible residential pipelines and a strong balance sheet that would enable them to tap into any opportunities during this slower cycle’, she wrote, giving CDL a price target of S$8.97 and rating of ‘add’.

CDL’s recent sale of its troubled China partner Sincere Investment for US$1 to an unrelated party for US$1 in exchange for a 15.4% stake in Shenzhen Tusincere Technology Park is also a good ‘de-risking’ move for the group, said UOB’s Adrian Loh.

‘Based on our estimates, CDL’s loan exposure to Sincere has declined by S$30m-35m to S$82m-87m after receiving the 15.4% stake in STTP as partial payment,’ he wrote.

Loh is eyeing a target price of S$8.50 and ‘buy’ call on the stock.

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