Stock gains seen to be highest.
Here's more from Maybank Kim Eng:
Liquidity theme well-accepted. In our recent marketing trip to the US and Canada, the 23 clients we met were receptive to our “slip off the defensive fence” strategy in which we promoted risk-on sectors such as offshore & marine, shipping and commodities. One client even commented that this was exactly what he was doing. There was much interest in the offshore & marine sector, but more so in smaller names over the bigger caps. Regionally, preference was still for Indonesia, Philippines and Thailand but at least one client has pulled out of Indonesia on currency concerns. We argued for a higher allocation for Singapore as it is trading only at long-term mean compared to above-mean for the other markets and also has better odds for positive upside surprises given lowered corporate earnings expectations.
Risk-on for off-shore. We received strong interest in Offshore & Marine. Interest however was on the smaller caps Ezion and Swiber. Clients believed stock gains would be better supported by their stronger growth profile following a record 2012 despite our belief that strong order momentum would carry into 2013. For the big-cap rigbuilders, concerns were centered around capacity constraints, margins and Chinese competition but we highlighted the potential for positive margin surprises given lack of yard capacity and our belief that the Chinese do not pose a threat in the short-term given reputation risk to oil majors.
Timely response to property cooling measures. As the latest round of property cooling measures were announced just before we left, clients were obviously interested. Fortunately, the measures were in agreement with our preference for high-end developers over the mass-market developers. We believed there would not be a rout to property stocks and while the correction was initially savage, the impact has been shallow for most stocks except CDL, on which we are negative as it has the most exposure to Singapore residential mass-market.
Privatisation stories had some interest. Event-based clients liked our potential privatisation plays Hotel Properties and United Engineers, especially when we illustrated the benefits for HPL to redevelop the sleepy Paterson Road side of Orchard Road where it owns major assets, or United Engineers’ potential for redevelopment of its flagship property, UE Square. Not many clients have heard of these two stocks, not surprising given that there are only two brokers covering United Engineers and HPL is only covered by us.
Not much interest in defensives, except one. Overall, clients agreed with us that S-REITs and telcos would not repeat 2012’s outstanding stock gains. However, Venture’s unique mix of a defensive 7% yield and the potential earnings recovery in 2013 gave it a unique appeal in “being paid while you wait” for the recovery. Not surprisingly, it has been off the radar of many clients given its earnings underperformance but at least five were interested and promised to do more work on this old and venerable manufacturing name.
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