“We believe the heightened government land sale and en bloc redevelopment craze will spur the private construction sector in 2018. Overweight on property and manufacturing sectors,” says analyst Lim Siew Khee in a Friday report.
Led by a sharp acceleration in manufacturing growth, the Singaporean economy expanded 4.6% y-o-y in 3Q17, up from 2Q17’s 2.9% pace and stronger than market expectations of 3.8%. This is the strongest annual growth since 1Q14’s growth of 4.9% y-o-y.
The manufacturing sector – which contributes 20% of the economy – expanded 23.1% q-o-q annualised or 15.5% y-o-y as all key clusters, led by tech manufacturing, contributed to 3Q growth.
CIMB’s private bank economist is maintaining his GDP of 3.5% for 2017 and 3.6% for 2018. It seems that despite the stronger-than-expected 2017 GDP growth, the MAS, like other central banks, are mindful of persistent downside risks to growth and inflation.
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For an open and export-dependent economy such as Singapore, Lim says it is encouraging to note the recent upgrade to global growth by the IMF. It nudged up its forecasts for global economic growth to 3.6% and 3.7% for 2017 and 2018, respectively, or a 0.1 percentage point upgrade for each year.
For Keppel, Lim says the negative revision cycle is over and there could be continued improvement in sentiment, driven by Singapore property and Offshore & Marine.
“More than 60% of our sum-of-parts is dominated by Keppel Land ($4.69) and Tianjin Eco City ($0.62),” says Lim.
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For Venture, Lim expects stronger 2H17 earnings to be driven by test & measurement, medical and networking customers. There is also the potential for higher dividend from the sale of Fischer Tech.
“Our target price is based on 17.3 times FY19 earnings or 0.5 s.d. above historical 10-year average of 15.2x,” says the analyst.
As at Oct 16, shares in Keppel and Venture are up 6 cents to $7.13 and $18.45 respectively.
