Current valuations are attractive; PER of 12.1x and with an attractive dividend yield of 4.3%. Our top 2019 stock picks are CapitaLand, DBS, Frasers Centrepoint Trust, Frasers Logistics & Industrial Trust, Keppel DC REIT, Mapletree North Asia Commercial Trust, NetLink NBN Trust, SATS Ltd, Singapore Airlines, Singapore Technologies Engineering, SingTel, UOB and UOL.
Pricing for pessimis; time to shop!
With the price correction in 2018, current valuations have become attractive. Corporate earnings growth for 2019 is estimated at 7.1%, with PER of 12.1x and with an attractive dividend yield of 4.3%. In terms of PER, the STI is currently trading at close to historical trough levels and also -1 standard deviation below 7-year average. At these valuations, we believe smart money and longer term value investors will be re-entering the market soon. As the global outlook is still uncertain currently, we prefer a stock pick strategy with the only overweight on the banking sector.
• Stay with the defensives
• Selective exposure to certain REITs
• Look for value and high dividend stocks
In Singapore, the STI is well represented by a few key sectors including financials, telecommunications and property. As the core STI companies are fairly established and have largely emerged fairly unscathed from the Asian Financial Crisis and the Global Financial Crisis, we believe that these firms will be well positioned to ride out any potential economic slowdown. Most have healthy balance sheets and are not overly geared. In addition, dividend payouts are consistent and healthy.