Top Down Strategy and Large Cap Stock Picks - the DBS Vickers ...

Regional Equity Strategy Q4 2007
Country Assessment
Sector recommendation and stocks for Singapore
SECTOR REMARKS STOCK SELECTION
Industrials/
Basic Materials
Overweight
Telecommunications
Overweight
The conglomerates are characterised by record order books
which provide good earnings visibility. We believe that the
fundamentals and investment sentiment for oil and gas
plays in Singapore will be positive, as long as oil prices stay
above US$40-50/bbl. The next wave of order flow is
expected to come from the semisubmersibles and floating
production units where the FPSO is the preferred solution;
thus positioning our yards well as both Keppel and SMM
have a combined 70% market share of the global FPSO
conversion market. Elsewhere in the industrial space, we
are positive on the building materials suppliers such as
Hong Leong Asia and Pan United Corp. We expect the
construction sector to see an upward momentum due to a
strong property market and mega development projects
which will underscore prices for cement, steel
reinforcement bars, granite and ready-mixed concrete. We
also like companies that are leveraged on the higher
construction activity such as Tat Hong.
Overweight. We upgrade Singapore’s telecom sector to
overweight, as it is a defensive play with attractive dividend
yield. We project 3.3% cash yield for SingTel, 4.7% yield
for StarHub and 7.3% yield for M1 in the current year.
With investors wary of CDO exposure in the financial
sector, the telecom sector provides a safe heaven in the
current turmoil and is a direct beneficiary of the healthy
growth in the domestic economy. SingTel is our top pick
for the sector, due to better business prospects in
Singapore, spectecular growth of associates and multiple
catalysts in place.
Amongst the oil and gas plays,
our top picks in this sector are
SembCorp Industries, Jaya
Holdings, KS Energy, and
Swiber Holdings.
Elsewhere, we like Hong Leong
Asia, Pan United Corp, Tat
Hong and Epure.
SingTel
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