UOB Kay Hian

Date of Report: Tuesday, 27 May 2025

Singapore Market Poised for Growth: Stocks to Buy Amid Tariff Abatement and Liquidity Boost

Market Strategy Overview

Singapore’s market outlook is showing signs of improvement, driven by the US stepping back from tariff threats and upcoming liquidity support from the Monetary Authority of Singapore (MAS). The S\$5 billion Equity Market Development Programme (EQDP) is expected to particularly benefit non-index mid-cap stocks. Given these factors, UOB Kay Hian has revised its 2025 target for the Straits Times Index (STI) to 4,054. [[1]]

Top Stock Picks

The report highlights several stocks poised for growth, divided into large-cap and mid-cap selections. [[1]]

Large-Cap Picks

• CapitaLand Ascott (CLAS): BUY, Target Price S\$1.38
• CICT: BUY, Target Price S\$2.37
• First Resources (FR): BUY, Target Price S\$1.65
• Keppel (KEP): BUY, Target Price S\$9.25
• OCBC: BUY, Target Price S\$19.30
• SATS: BUY, Target Price S\$3.22
• Sea Ltd (US\$): BUY, Target Price US\$181.64
• Sembcorp Ind (SCI): BUY, Target Price S\$8.00
• SingTel (ST): BUY, Target Price S\$4.58
• Yangzijiang S’bldg (YZJSGD): BUY, Target Price S\$3.29 [[1]]

Mid-Cap Picks

• Centurion (CENT): BUY, Target Price S\$1.48
• ChinaSunsine (CSSC): BUY, Target Price S\$0.63
• ComfortDelGro (CD): BUY, Target Price S\$1.71
• CSE Global (CSE): BUY, Target Price S\$0.61
• Food Empire (FEH): BUY, Target Price S\$1.98
• Frencken (FRKN): BUY, Target Price S\$1.40
• Hong Leong Asia (HLA): BUY, Target Price S\$1.46
• Oiltek (OTEK): BUY, Target Price S\$0.48
• PropNex (PROP): BUY, Target Price S\$1.30
• Sheng Siong (SSG): BUY, Target Price S\$1.97
• SIA Engineering (SIE): BUY, Target Price S\$2.70
• Valuetronics (VALUE): BUY, Target Price S\$0.78 [[1]]

Constructive Market View

The shift to a more bullish outlook is based on the US de-escalating trade tensions with China and the anticipated liquidity injection from MAS in the second half of 2025. The STI has already outperformed most regional peers year-to-date, driven by its high concentration of blue-chip defensive stocks. These stocks are characterized by strong cash flow generation and high dividends, enabling them to weather market turbulence effectively. [[1]]

Mid-Cap Stocks in Focus

The upcoming disbursement of S\$5 billion to selected fund managers in 2H25 is expected to spotlight small- to mid-cap companies. These companies often feature quality management, robust earnings growth, strong business models, and domestically-focused revenue streams. A significant number of these companies hold net cash positions, ranging from 6% to 73% of their market capitalization. [[1]]-[[2]]

Equity Market Development Programme (EQDP) Details

The S\$5 billion EQDP aims to enhance market liquidity and support Singapore’s fund management ecosystem. The funds will be sourced from the MAS’s investment portfolio and the Financial Sector Development Fund. Final proposals are due to MAS on Friday, May 30, with the shortlist of fund managers expected in 3Q25. Deployment of funds is likely to begin in 4Q25. The focus will be on Singapore’s non-index stocks, with preference given to actively managed strategies. REITs are not expected to be favored. [[2]]

Revised STI Target

The STI target has been raised to 4,054 by the end of 2025, up from the previous target of 3,720. This new target, derived from a combination of top-down and bottom-up methodologies, implies an upside of approximately 5% from current levels. The target is based on a forecast of 1.2% earnings growth for index stocks and implies a PE multiple of 13.4x, considered reasonable given the quality of defensive names in the Singapore market. [[2]]

Rationale Behind EQDP Implementation

The Singapore stock market has faced challenges over the past decade, including lower daily trading volumes and a decrease in listed stocks due to delistings and privatisations outpacing IPOs. Many Singaporean companies have opted to list on other exchanges such as Nasdaq and Bursa Malaysia. The EQDP aims to bolster the local market, enhance valuations of non-index stocks, and encourage more IPOs on the SGX in the future. [[2]]

Challenges and Considerations

A potential hurdle is the absence of a role for market makers in the EQDP, which are crucial for maintaining liquidity and efficiency. It is vital for authorities to ensure that the S\$5 billion is not a one-off initiative and that ongoing support is provided as the market grows. [[2]]

STI Valuation Analysis

The STI’s valuations are currently attractive, trading at a 2025F PE of 12.2x and P/B of 1.3x, with a yield of over 5.5%. These multiples represent significant discounts to the STI’s long-term averages and are inexpensive compared to regional peers. [[2]]

Small/Mid-Cap Stock Highlights

Key investment highlights for selected small/mid-cap stocks include: [[2]]

• Centurion: Benefits from inelastic demand and construction spending tailwinds.
• ChinaSunsine: A global leader in rubber accelerators with a substantial net cash position.
• ComfortDelGro: Offers a defensive business model with strong overseas growth and an attractive yield.
• CSE Global: Exhibits healthy forecast revenue growth and a strong order book.
• Food Empire: Shows effective cost control, expansion in Vietnam, and growth in Central Asia.
• Frencken: Demonstrates stable to higher revenue forecasts across segments and a better semiconductor outlook.
• Hong Leong Asia: Stands to gain from increased construction demand in Singapore and Malaysia, with a strong profit growth outlook.
• Oiltek: Features an asset-light business model with high ROE and exposure to sustainable aviation fuel.
• PropNex: Benefits from a favorable property market outlook in 2025 and potential special dividends.
• Sheng Siong: Exhibits volume growth through new store openings and strong management.
• SIA Engineering: Shows strong MRO demand, limited tariff war impact, and a solid net cash position.
• Valuetronics: Is positioned to capitalize on the AI boom with potential growth in Vietnam and a high net cash position. [[2]]

Average Daily Trading Volume

Average Daily Trading Volume (S\$M) – Jan 24 to Current: [[2]]

• Tiong Woon: 0.4
• Pan United: 0.5
• Valuetronics: 1.8
• Hong Leong Asia: 2.3
• PropNex: 2.3
• Centurion: 6.1
• DigiCore REIT: 8.8
• DFI: 9.7
• UMS: 12.8
• Sheng Siong: 14.5
• Frencken: 18.1
• AEM: 20.5
• ComfortDelGro: 46.5

Free-Float Market Capitalization

• STI: S\$394.4B
• Non-STI: S\$74.2B [[2]]

Valuation Premium/Discount vs Emerging/Developed Market Peers (%)

• Centurion: PE -50, EV/EBITDA -27
• ChinaSunsine: PE -57, EV/EBITDA -86
• ComfortDelGro: PE 15, EV/EBITDA 0
• CSE Global: PE -54, EV/EBITDA -62
• Food Empire: PE -56, EV/EBITDA -6
• Frencken: PE -42, EV/EBITDA -36
• Hong Leong Asia: PE -14, EV/EBITDA 35
• Oiltek: PE -28, EV/EBITDA -10
• PropNex: PE -27, EV/EBITDA -15
• Sheng Siong: PE 9, EV/EBITDA 12
• SIA Engineering: PE -4, EV/EBITDA 183
• Valuetronics: PE -47, EV/EBITDA -70 [[2]]

Peer Comparison

Analysis of comparable companies in Singapore across various sectors: [[4]]

Aviation

• SIA (SIA SP): HOLD, Target Price S\$6.63
• SIA Engineering (SIE SP): BUY, Target Price S\$2.70
• SATS (SATS SP): BUY, Target Price S\$3.22
• ST Engineering (STE SP): HOLD, Target Price S\$7.37

Finance

• DBS (DBS SP): HOLD, Target Price S\$45.45
• OCBC (OCBC SP): BUY, Target Price S\$19.30
• SGX (SGX SP): HOLD, Target Price n.a.
• UOB (UOB SP): HOLD, Target Price S\$45.45

Healthcare

• Raffles Medical (RFMD SP): BUY, Target Price S\$1.06

Land Transport

• ComfortDelGro (CD SP): BUY, Target Price S\$1.71

Plantation

• Bumitama (BAL SP): HOLD, Target Price S\$0.78
• First Resources (FR SP): BUY, Target Price S\$1.65
• Wilmar (WIL SP): BUY, Target Price S\$3.45

Property

• CapitaLandInvest (CLI SP): BUY, Target Price S\$3.42
• CityDev (CIT SP): HOLD, Target Price S\$4.60

Shipyard

• Keppel (KEP SP): BUY, Target Price S\$9.25
• Sembcorp Ind (SCI SP): BUY, Target Price S\$8.00
• Seatrium (STM SP): BUY, Target Price S\$2.96
• YZJ ShipBldg SGD (YZJSGD SP): BUY, Target Price S\$3.29

Technology

• Sea Ltd (SE US): BUY, Target Price US\$181.64
• Venture Corp (VMS SP): HOLD, Target Price S\$12.01

Telecoms

• NetLink NBN Tr (NETLINK SP): BUY, Target Price S\$0.98
• SingTel (ST SP): BUY, Target Price S\$4.58
• StarHub (STH SP): HOLD, Target Price S\$1.26

Others

• DFIRG USD (DFI SP): BUY, Target Price S\$2.80
• Genting SP (GENS SP): BUY, Target Price S\$0.90
• ThaiBev (THBEV SP): HOLD, Target Price S\$0.51
• SingPost (SPOST SP): BUY, Target Price S\$0.66
• Emperador Inc. (EMI SP): SELL, Target Price S\$0.30
• Genting SP (GENS SP): BUY, Target Price S\$1.12
• Riverstone (RSTON SP): HOLD, Target Price S\$0.82
• Sheng Siong (SSG SP): BUY, Target Price S\$1.97

REITs

• CL Ascendas Reit (CLAR SP): BUY, Target Price S\$3.51
• CL Ascott T (CLAS SP): BUY, Target Price S\$1.38
• CL IntCom T (CICT SP): BUY, Target Price S\$2.37
• Far East HTrust (FEHT SP): BUY, Target Price S\$0.71
• Frasers Cpt Tr (FCT SP): BUY, Target Price S\$2.73
• Frasers L&C Tr (FLT SP): BUY, Target Price S\$1.10
• Keppel DC Reit (KDCREIT SP): BUY, Target Price S\$2.55
• Kep REIT (KREIT SP): BUY, Target Price S\$1.06
• Lendlease REIT (LREIT SP): BUY, Target Price S\$0.72
• M’tree PanAsia Tr (MPACT SP): BUY, Target Price S\$1.62
• Mapletree Ind Tr (MINT SP): BUY, Target Price S\$2.73
• Mapletree Log Tr (MLT SP): HOLD, Target Price S\$1.31
• PLife REIT (PREIT SP): BUY, Target Price S\$4.85