Top 5 Singapore stocks to watch in September 2020

Analysts have picked out these five Singapore Exchange (SGX)-listed stocks as ones to watch in the month ahead. Here are their insights.

Below are the top five recommended Singapore-listed equities for the month of September 2020, based on the latest ratings, price targets and research provided by top equity analysts.

Singtel (SGX: Z74)

Share price target (average): S$3.06

Estimated upside from last traded price: 32.9%

Despite the present share price weakness, analysts still envision significant upsides for the Singapore Telecommunications (Singtel) stock in the next 12 months.

Singtel currently has a 12-month average share price target of S$3.07, alongside an average rating of ‘buy’ – based on a Bloomberg poll of 17 brokers.

The price target represents an upside of 32.9% from the last traded price of S$2.31 as of Monday 31 August 2020.

DBS analysts had added Singtel to their ‘stocks to watch’ on 27 August 2020 with a price target of S$2.85, predicated on the new Singtel and Great Eastern partnership to launch a range of general insurance products, including coverage for telco bills.

Although RHB analysts on 18 August 2020 downgraded their target price on the stock to S$3.20 per share from S$3.40 citing the company’s worse-than-predicted earnings, they still maintained a ‘buy’ recommendation.

While the analysts also cut their FY2021 to FY2023 full-year core earnings by 12% to 14%, they nevertheless predict that there will be ‘some earnings respite’ in the second quarter of 2021 with ‘mobility restrictions progressively easing’.

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SIA Engineering (SGX: S59)

Share price target: S$2.09

Estimated upside from last traded price: 13.6%

Brokers polled by Bloomberg have given aircraft maintenance, repair and overhaul company SIA Engineering an average share price target of S$2.09.

This represents an upside of roughly 14% from Monday’s closing price of S$1.84 per share.

DBS added the avionics firm to its ‘buy’ list on 28 August 2020, giving the stock a 12-month price target of S$2.40.

Analysts wrote that the extended Jobs Support Scheme (JSS) rolled out by the Singapore government on 17 August 2020, translated into ‘significant’ earnings cushion for SIA Engineering.

Taking into account the extra JSS, the researchers estimated that SIA Engineering should accrue an additional S$60 million in grant income in the 2021 financial year, on top of earlier projections of S$125 million.

If realised, this will help to boost the company’s FY2021 earnings by 61%. FY2022 earnings, however, will not be impacted as much.

The analysts concluded that their price target of S$2.40 for SIA Engineering includes a 15% privatisation premium, and is predicated on its ‘better near-term earnings potential and more secure dividend prospects’.

Thai Beverage (SGX: Y92)

Share price target (average): S$0.79

Estimated upside from last traded price: 29.5%

Another stock with a majority ‘buy’ call, is beer and beverage manufacturer Thai Beverage (Thai Bev).

Thai Bev currently has an average 12-month price target of S$0.79 from 15 analysts surveyed by Bloomberg.

This represents an upside of 29.5% from Monday’s bid price of S$0.61 per share.

The latest research note came from RHB analyst Juliana Cai, who gave the stock a price estimate of S$0.72 on the stock. She named Thai Bev as a ‘top pick’, citing its more stable currency and exposure to the beer and restaurant segments for ‘potential recovery play’.

DBS equity researchers were the most optimistic of the lot, giving the stock a price target of S$0.90.

They stated that the company’s latest business update for the first nine months of fiscal 2020 showed ‘resilient’ revenue and earnings before interest, taxes, depreciation and amortisation (EBITDA) performance despite the Covid-19 pandemic.

As such, their earlier revenue and profit forecast for a 8% and 6% contraction respectively also remain intact.

Wilmar International (SGX: F34)

Share price target (average): S$5.04

Estimated upside from last traded price: 15.6%

Palm oil producer Wilmar International has an average share price target of S$5.04 from 14 analysts polled by Bloomberg.

This equates to an upside of 15.6% from the stock’s last traded price of S$4.37 on Monday.

CIMB analysts maintained their ‘add’ (equivalent to ‘buy’) rating on the stock and a target price of S$5.53 a share, after Wilmar shareholder Archer Daniels Midland (ADM) liquidated 2.68% of its stake in the group through a share sale.

They noted that while the sale ‘could lead to concerns over short-term overhang on Wilmar shares’, they also believe this will allow ADM to ‘unlock’ the value of its investments in Wilmar.

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The analysts also remain positive on Wilmar’s planned initial public offering of its Chinese subsidiary Yihai Kerry on the Shenzhen Stock Exchange ChiNext Board, currently pending final registration approval.

Finally, they reiterated that Wilmar’s favourable earnings prospects for the rest of the financial year, alongside another round of potential special dividend, are key share price catalysts.

Nevertheless, some key risks to the current call include delays in Yihai Kerry’s listing, lower-than-expected processing margins from key business divisions, as well as share placement by major shareholders at a discount to market price.

City Developments (SGX: C09)

Share price target (average): S$10.29

Estimated upside from last traded price: 28.5%

Real estate group City Developments, whose portfolio and network spans 29 countries across residential and commercial, has received an average 12-month share price target of S$10.29 from 15 brokers.

This works out to a 28.5% upside from the stock’s last traded price of S$8.01 on Monday.

DBS analysts recently maintained a ‘buy’ recommendation alongside an estimated share price of S$10.50, stating that its current share price has already priced in most downside risks related to Covid-19.

Nevertheless, the analysts had lowered their FY2020 and FY2021 full-year earnings for City Developments by 2% to 31% to reflect the company’s lower earnings (net profit fell 99% year-on-year) in the first half of 2020.

CIMB, which priced shares at a target of S$10.10, called the property developer one of three ‘preferred picks’ for the real estate sector, citing the fact that primary home sales for the month of July continued to ‘hold up’ - rising 8.2% month-on-month.

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