Analysts expect impact of Phase 2 restrictions to be short-lived
Singapore
ANALYSTS expect last week's sell-off in response to Phase 2 (Heightened Alert) measures to be a short-term trend, as long as the restrictions are lifted on schedule.
UOB Kay Hian (UOBKH) said the share price declines on Friday were likely a "knee-jerk reaction", and recommends that investors focus on companies with strong business franchises and those with the majority or all of their earnings from overseas.
Meanwhile, CGS-CIMB expects short-term selling and is in "no hurry to buy". It is keeping its end-2021 Straits Times Index (STI) target at 3,140 points.
On Monday, the STI recovered slightly to close at 3,079.69, up 0.8 per cent or 24.67 points. This was compared with a pull-back last Friday, when the STI fell to an intra-day low of 3,024.66, down 3.2 per cent or 98.6 points. It later closed 2.2 per cent or 68.24 points lower at S$3,055.02.
One top stock pick for both UOBKH and CGS-CIMB is the Singapore Exchange (SGX).
UOBKH believes the renewed curbs may spur heightened retail trading, which enhances volumes and clearing fees for cash equities; CGS-CIMB expects investors to deploy their money in financial markets in lieu of discretionary spending.
UOBKH has a "buy" call on the stock, with a target price of S$12.35; CGS-CIMB has an "add" call and target price of S$11.61.
Shares of SGX closed 0.1 per cent or S$0.01 lower at S$10.10.
Consumer plays have also come into the spotlight, with the latest measures banning dining-in at food and beverage outlets and curbing social gatherings.
Sheng Siong remains a pick for RHB and DBS Group Research. RHB on Monday upgraded the supermarket operator to a "trading buy", with a raised target price of S$1.95 from S$1.70, as tightened restrictions should result in a pick-up in grocery-shopping.
For CGS-CIMB, Sheng Siong is an "essential service proxy" which could enjoy elevated demand given the current dining-out restrictions and work-from-home arrangements. Market sentiment towards the stock could also be stoked by reports of panic buying at its outlets.
DBS is overweight on grocery retailers Sheng Siong and Dairy Farm, and positive on food-court operator Koufu. It has a "buy" call on all three stocks, with target prices of S$1.77, S$5.02 and S$0.77 respectively.
However, DBS is negative on Catalist-listed seafood restaurant operator Jumbo Group, likely be badly hit because of the continued lack of tourists and no dine-ins. It has a "fully valued" call on the stock, with a target price of S$0.21.
Companies specialising in consumer goods like Food Empire, Wilmar International and Thai Beverage are expected to do well.
Food Empire and ThaiBev are key stock picks for UOBKH. Food Empire, the key markets for which are Russia and Vietnam. The two companies had performed well even during the lockdown period. For ThaiBev, UOBKH believes spirits volume will remain resilient due to off-trade sales.
CGS-CIMB considers Wilmar International a defensive stock, as the agribusiness group derives 60-70 per cent of its earnings from food products as well as feed and industrial products segments in China.
Among the real estate investment trusts (Reits), CGS-CIMB likes Keppel DC Reit because it expects demand for data to increase in the medium term.
Separately, UOBKH expects retail Reits to be resilient. These include Frasers Centrepoint Trust (FCT), Lendlease Global Commercial Reit, CapitaLand Integrated Commercial Trust and Suntec Reit.
It recommends "buy" on FCT for its exposure to suburban malls, which are positioned to benefit from the increase in necessity consumption.
UOBKH is also "overweight" on Singapore banks. Its top pick is OCBC, on which it has a "buy" call and target price of S$15.50.
It also has a "buy" call on DBS with a target price of S$35.45.
Its other stock picks include manufacturing companies like Innotek and Frencken. Elsewhere, it also likes Sembcorp Industries, Yangzijiang Shipbuilding, Netlink NBN Trust, iFast Corporation and PropNex.
Singapore Airlines remains as UOBKH's key "sell" call as it does not believe travel will resume until the third quarter of 2021. It also expects weakness from lower rail ridership for ComfortDelGro.
