DBS raises its STI target and tips six stocks to buy after the earnings season

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DBS raised its target for the Straits Times Index after raising its earnings forecasts and tipped six stocks to buy after the fourth-quarter results season.

The STI year-end “base-case” objective was raised to 3715 from 3688, with an optimistic case of 3816, up from the previous forecast of 3800, DBS said in a note on Monday. It tipped near-term support at 3440-3465.

That was after increasing the 2018 and 2019 earnings forecasts for the index by 1.5 percent and 0.7 percent respectively following the results season, the bank said.

The STI is trading below 13.89 times 12-month forward price-to-earnings, a valuation which is “reasonably attractive given positive earnings revision trend,” DBS said.

Six stocks to buy

It tipped six stocks to buy after the fourth-quarter results season after screening for above-expectation earnings, greater than 5 percent upward earnings revision for either this year or next, raised target prices, a Buy call, and more than 15 percent upside to the target price for small-to-mid caps or more than 8 percent for large caps.

Among the large caps, its picks were ST Engineering, Singapore Airlines and Venture, while among the small caps, it tipped NetLink Trust, Riverstone and UMS.