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Sectors & Stocks UOBKH Research Is Bullish On Following 2Q17 Results
As the stocks on UOB Kay Hian (UOBKH) Research’s watch list outperformed both the market consensus and 1Q’s performance, they raised their market earnings-per-share growth and the Straits Times Index (STI) forecast for 2017.
Aviation is one sector that received an earnings upgrade post 2Q17, largely led by Singapore Airlines. If there was one disappointing sector, it would be healthcare, mainly due to Raffles Medical’s rising costs as they build new hospitals in China for its expansion.
UOBKH Research also expressed their optimism for the property sector, specifically the REITs. While the shipyards didn’t disappoint, UOBKH Research’s sentiment is mixed. Nevertheless, the banks and technology/exporters were the apparent winners according to 2Q17 earnings reports.
Here are some selected stocks from sectors that UOBKH Research is bullish on.
Banks – Stellar 2Q17; improved NPL ratios
OCBC surprised analysts as it surpassed forecasts while DBS managed to fall within expectations. UOB was another outperformer, based on other analysts’ forecasts.
In a nutshell, all three banks saw growth in fee income and asset quality, with either unchanged or slight improvements in their Net Profit Loss (NPL) ratios.
With that, UOBKH Research gave “BUY” calls to DBS and OCBC.
DBS Group Holdings Limited (SGX: D05) – BUY; Target price $24.85
Overseas-Chinese Banking Corporation Limited (SGX: O39) – BUY; Target price $13.38
Technology/exporters – Amazing quarter; received forecast upgrades
Every counter under UOBKH Research’s watch list and coverage performed above estimations. They all received earnings and net profit upgrades.
In particular, UOBKH Research gave “BUY” calls to Sunningdale and Memtech.
Sunningdale Tech Limited (SGX:BHQ) – BUY; $2.51
Memtech International Limited (SGX:BOL) – BUY; $1.18
Property – Selected REITs are promising
Results were mixed among the developers, UOBKH Research drew special attention to CapitaLand that fell within estimates while City Development fell below.
Fortunately, most of the REITs were performing according to expectations but there were some outperforming outliers, nonetheless.
UOBKH Research’s key picks were FLT, CCT, FHT and A-REIT.
Frasers Logistics & Industrial Trust (SGX: BUOU) – BUY; Target price $1.20
CapitaLand Commercial Trust (SGX: C61U) – BUY; Target price $1.90
Frasers Hospitality Trust (SGX: ACV)- BUY; Target price $0.80
Ascendas REIT (SGX: A17U) – BUY; Target price $2.97
Shipyards – Not all is gloomy
Among the shipyards, Keppel’s performance in 2Q17 was weak, to say the least. The biggest contributing factor was probably offshore and marine contributions, which dropped below estimates.
Nevertheless, all is not gloomy. SembCorp Industries recorded an increase in earnings from Singapore utilities and gas, easing out its losses in India. Much of the market is watching SembCorp Industries to announce its strategic review in early 2018.
UOBKH Research’s preferred pick is SembCorp Industries.
SembCorp Industries Limited (SGX: U96) – BUY; Target price $3.57
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