Singapore Market Strategy: Navigating the Opportunities

Date: December 4, 2024 | Broker: CGS-CIMB Securities

Introduction to Singapore’s Market Strategy

As we venture into 2025, Singapore’s market investors are advised to remain nimble. The market is currently digesting the implications of rising tariffs and trade uncertainties, which have consequential impacts on inflation and interest rates. The Singapore market is showcasing an impressive dividend yield and a high Return on Equity (ROE), which supports a promising high dividend yield trajectory. The Monetary Authority of Singapore (MAS) is reviewing strategies to bolster the equities market, potentially catalyzing value-unlocking activities.

Investment Themes and Market Overview

The Singapore market is trading at 13.6 times its CY25F Price-to-Earnings (P/E) ratio, with a target of 409.3 points for MSCI SIN, anchored on underlying stock target prices translating into a 15 times earnings multiple. Key investment themes include high-yield, high-growth stocks; value-up plays; and insights on interest rates and bond yields.

Big-Cap High Yield, High Growth Plays

With the 3Q24 results revealing promising signs, the Singapore market is poised to deliver a higher total return of approximately 10.9% in 2025. Banks are at the forefront, offering projected dividend yields of 5.0-5.7% in FY25F, making them attractive for yield-seeking investors. Additionally, stocks like Hongkong Land (HKL), ST Engineering (STE), Venture Corporation (VMS), and ComfortDelGro (CD) present both high yields and double-digit earnings growth, signaling lucrative opportunities.

Small-Cap High Yield, High Growth Plays

Among small-cap stocks, BRC Asia, PropNex, and CSE Global emerge as high-dividend yielders with significant earnings growth. CSE Global, for instance, stands out with a projected FY25F dividend yield of 5.9% and a 15.2% earnings growth.

Value-Up Plays and Broader Market Situation

Inspired by Japan and Korea’s market reforms, Singapore is taking strides to enhance its equities market through strategic reviews led by MAS. Stocks trading below book value, such as China Aviation Oil, Hong Leong Asia, and Singapore Post, are under the spotlight, offering potential undervalued opportunities.

Company Deep Dive Analysis

Keppel Corporation (KEP)

Keppel Corporation is focused on asset monetization, aiming to recycle S\$1.8bn-2bn of assets in FY25F. The potential divestment of M1’s enterprise and mobile business could significantly contribute to this target. Keppel’s efforts in capital recycling are expected to trigger positive market responses, making it a top pick for the sector.

Sembcorp Industries (SCI)

Sembcorp Industries is set for core earnings growth driven by strategic contributions from its energy projects. The company is positioned to benefit from a healthier earnings trajectory over the coming quarters, with a valuation that has yet to fully price in its recovery.

ST Engineering (STE)

ST Engineering is anticipated to deliver a robust earnings growth of approximately 15%, driven by its defense and urban solutions projects. The company’s focus on project execution is expected to result in favorable outcomes, reinforcing its position as a defensive growth stock.

United Overseas Bank (UOB)

UOB remains a top pick for its attractive valuations and strategic capital management plans. The bank is contemplating share buybacks or special dividends, supported by a healthy capital buffer. Its integration of Citi’s portfolio is a key catalyst for future growth.

Singapore Post (SPOST)

Following the sale of its crown jewel asset, Freight Management Holdings, Singapore Post is expected to engage in further asset monetization. The company has a potential S\$1.5bn worth of assets ripe for monetization over the next two years, presenting significant opportunities for value unlocking.

Sector Analysis and Top Picks

The Singapore market offers diverse opportunities across various sectors. Overweight sectors include Capital Goods, Commodities, Construction, Gaming, Gloves, Internet, REITS, Technology, and Telco, all poised for impressive growth. In contrast, sectors like Banks, Consumer, Healthcare, Property, and Transport maintain a Neutral stance.

Conclusion

Singapore’s market strategy for 2025 emphasizes staying adaptable amidst global uncertainties. By focusing on high-yield, high-growth stocks, and value-up plays, investors can navigate the market effectively. The strategic insights shared in this report provide a comprehensive guide to capitalizing on Singapore’s market potential in the upcoming year.