Gold Member
Posts: 24638
Liked By: 14428
Joined: 16 Apr 12
Followers:
6
Tipsters Championship:
Player
has not started
|
2Q results to reflect weak quarter · 2013’s 14% earnings growth on weak footing · 4 themes to beat range bound index Macro uncertainties persist. The Eurozone crisis is far from resolved and could get worse before getting better. The US economy is slowing down. Against such an uncertain macro-economic backdrop, Asian economies have shown great resilience in the past 9 months with Asia-10 GDP actually picking up on a q-o-q basis in 4Q11 and 1Q12. For Singapore, 2Q GDP’s advanced estimates were below expectations, contracting 1.1% q.o.q. Despite this, our economist held on to his 3.5% GDP growth forecast for 2012 while noting that downside risk has emerged. 2Q earnings outlook, weak pillars of growth in 2013. FY13’s earnings growth of 14% is largely driven by rebounds in cyclical sectors where growth is dependent on external economies. With expectations of more downgrades in the upcoming 2Q reporting season, this could derail earnings growth for 2013. Upside could come from banks, airlines if oil price weakens while cuts in earnings could come from Real estate, technology on destocking trend, gaming, supply chain managers, offshore and marine on margins concern and shipping. We believe it’s too early to turn positive on cyclical sectors with global exposure – shipping, supply chain managers, and technology. Recent rebound trades in NOL, Olam and Venture offer opportunities to top slice these names. Raising the bar till capitulation. We have raised the trading range for STI by rolling forward the valuation peg to FY12/13 earnings. We expect the STI to range trade from 2800 (-1 SD blended FY12/13F PE) to 3100 (-0.5 SD blended FY12/13F PE) for 3Q12, with re-rating potential towards the average blended FY12/13F PE level (STI target of 3300) only if macro uncertainties ease. Four themes to beat the index. 1. High conviction growth stocks with highly visible, sustainable earnings growth of at least 10% and minimal risks to earnings downgrades. These are stocks with growth backed by medium term charters (Ezion), or earnings at inflexion point from past investments (Bumitama and CMA), companies with steadily growing businesses – OCBC and SembCorp Industries. Stocks riding on Asian consumption theme are CMA, Capitaland, OCBC, and SembCorp Industries. 2. Beneficiaries of China’s fiscal stimulus– Hyflux, Sound Global and Midas. 3. Steady and sustainable yield plays with growth. Yield plays have outperformed. We are now more selective in picking yield stocks, focusing on those which generate growth(>5%) and offer dividend yield of at least 6%. 4. Unloved fallen angels. We spot deep value stocks (Midas, Tiger, China Fishery and BIG) which have fallen out of favour with upcoming catalysts to spur recovery.
....
|