With US backing down and $5 billion from MAS to be deployed, UOB Kay Hian raises end-2025 target for STI to 4,054 points
With trade tensions easing somewhat, and with the central bank likely to shortlist managers for the $5 billion fund to boost the local bourse, things are looking cheerier for the Singapore market, which is marked by "quality defensive names" with valuations not quite "stretched".
"In light of the US backing down from a full-scale tariff war with China, as well as the injection of liquidity from the MAS in 2H25, we have become more bullish on the Singapore market," suggests a team of UOB Kay Hian analysts led by Adrian Loh.
As such, UOB Kay Hian has raised its year-end Straits Times Index forecast from 3,720 points to 4,054 points, based on 1.2% earnings growth for the index stocks and implies a PE multiple of 13.4x.
Top large caps favoured by UOB Kay Hian include CapitaLand Ascott REIT, CapitaLand Integrated Commercial Trust C38u, First Resources Eb5, Keppel, Oversea-Chinese Banking Corp, SATS, Sea, Sembcorp Industries U96, Singapore Telecommunications Z74 and Yangzijiang Shipbuilding.
Now, what might be of equal interest is that of smaller cap counters. UOB Kay Hian figures that fund managers given their share of the $5 billion mandate will start to deploy in the last quarter of the year.
The list of smaller cap names flagged by UOB Kay Hian includes:
Centurion Corp, for its inelastic demand for its accommodation assets, backed by construction spending tailwinds in Singapore.
ChinaSunsine Market, the global leader in producing rubber accelerator, whose net cash is equivalent to 72% of its market cap.
ComfortDelGro, which operates a defensive business model with strong overseas growth while giving an attractive yield of 6.1%.
CSE Global, whose strong order book of $616 million provides healthy forecast revenue growth to 2027.
Food Empire, which is expanding strongly in its various key markets including Vietnam and Central Asia while keeping good cost control.
Frencken Group, for its stable to higher revenue forecasts in all segments, amid a brighter outlook for the semiconductor market.
Hong Leong Asia, which is riding stronger construction demand across Singapore & Malaysia.
Oiltek International, for its asset-light business model with high ROE, while capturing exposure to sustainable aviation fuel
PropNex, which is seeing a favourable property market outlook this year, with prospects of a special dividend and "strong" upcoming 1HFY2025 earnings.
Sheng Siong Group, which is generating volume growth via six new outlet openings in 2025.
SIA Engineering, which is seeing limited impact from the trade war, benefiting from strong demand and trading at a level with net cash equal to 23% of its market cap.
Valuetronics, with net cash at more than 73% of its market cap while capturing the AI boom.
However, UOB Kay Hian warns that despite the impending moves, there are some issues that got to be addressed. For one, there was an absence of any role for market makers which UOB Kay Hian says is integral in maintaining liquidity and efficiency in a well-functioning stock market.
"Going forward, it will be critical for the authorities to ensure that the $5 billion is not a one-off and that as the market grows, it will be able and willing to continue to lend its support," says UOB Kay Hian.
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