DBS: Singapore’s STI likely stuck in rut

Stock ticker at SGX building on Shenton Way; taken October 2018.Stock ticker at SGX building.

Singapore’s Straits Times Index will likely be stuck in a 3300-3450 range after its year-to-date gains pushed it to trade beyond its average 12-month forward price-to-earnings ratio of 13.19 times, DBS said in a note Friday.

“With price-to-earnings valuation no longer cheap, we think the present rally has limited upside and is vulnerable to a correction unless the earnings recession trend can be halted or reversed,” the DBS note said. It tipped resistance at 3450, and support levels at 3340 and 3300.

The STI ended Friday at 3392.29, edging down 0.03 percent.

DBS said ComfortDelGro, Mapletree Commercial Trust, Ascendas REIT and Wilmar International are four large-capitalization stocks that likely have limited short-term upside after doing well so far this year.

“They now have limited returns to their respective target prices and trade at or above their own historic average valuations,” DBS said.

With more large-cap Singapore REITs — including Mapletree Commercial Trust, Ascendas REIT and Mapletree Logistics Trust — trading at or nearing unattractive yield and valuations, DBS highlighted five other alternative plays to dividend picks.

Frasers Property has the highest dividend yield among developers at 5 percent, while Frasers Commercial Trust has a forward yield of around 6.5 percent, DBS said.

It noted FCOT’s unit price has been depressed over the past 18 months or so as it lost HP as its anchor tenant at Alexandra Technopoint, but recent media reports indicate Google may take up the vacant space, offering a potential re-rating catalyst for the stock.

Keppel-KBS US REIT offers a high 8.3 percent yield, while Netlink Trust trades at a 6.1 percent yield, DBS said.

Singtel offers an assured dividend per share payout of 17.5 Singapore cents, translating into a 5.7 percent yield, the note said.

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