That said, the analysts saw pockets of positive revisions to FY2024 earnings in companies within the industrial and technology sectors.
For the time being, the index is expected to trade rangebound between 3,030 points to 3,300 points, although a recovery may be seen towards the higher end of the range possibly ahead of the index stocks going ex-dividend. The STI is expected to end the year at 3,485 points, which is pegged at 11.3 times FY2025 P/E or -1.5 standard deviations (s.d.).
At present, the analysts see immediate technical support at 3,115 points.
“The STI’s attractive valuations and over 5% dividend yields are factors that offset a muted earnings growth outlook,” says the team in a March 13 report.
Looking ahead, the team prefers companies within the industrial and tech sectors for their earnings visibility. “We seek out opportunities in stocks with average FY2024/FY2025 earnings growth of above 10%,” they write.
With that, they like Yangzijiang Shipbuilding (YZJ), Singapore Technologies Engineering (ST Engineering) for their earnings visibility on robust orderbooks; Keppel and ComfortDelGro (CDG) for their positive earnings revisions on improving earnings bases; and UMS Holdings and Venture Corporation for their improving industry outlook.
The analysts are also recommending investors stick to REITs as the US Fed pivots.
See also: UOBKH raises TP on SIA to $6.22, FY2026 earnings to see lift on fuel cost savings
“We see the recent pullback in Singapore REITs (S-REITs) as an opportunity to add, with our thesis intact,” say Foo and Yeo.
“Our REIT analysts’ preference for ‘value’ through retail > office > hotels and industrials is validated by better-than-expected FY2023 showings and operating outlooks. Our preferred picks include retail (Frasers Centrepoint Trust, Lendlease Global Commercial REIT ), office (CapitaLand Integrated Commercial Trust), hospitality (CapitaLand Ascott Trust), and industrials (Frasers Logistics and Commercial Trust, Mapletree Logistics Trust and Digital Core REIT),” they add.
Stocks to avoid
On the other hand, the analysts are recommending investors avoid AEM, Singapore Airlines (SIA), United Overseas Bank (UOB), PropNex and APAC Realty for the time being due to their uncertain outlook or lack of catalysts. Earnings cuts, hold/fully valued calls, as well as limited or no upside to their target prices are also other reasons to avoid these counters.
As at 10.23am, the STI is trading 2.23 points lower or 0.07% down at 3,170.73 points.
