Singapore Traders Spectrum Model Portfolio Refer to important disclosures at the end of this report DBS Group Research . Equity 19 May 2017 Portfolio changes 1. Add Thai Beverage to Blue Chip category Overview The benchmark Straits Times Index edged up a tat 0.2% to 3232 since our previous update on 19 May. Signs of moderating growth and a resumption of downward earnings revision in the conclusion of the 1Q17 results season put a lid on the STI. While a year-end objective of 3350 remains possible, we maintain our view for STI 3274 as a near-term cap. The trend is turning sideways from 3185 to 3275. In the event the 3185 fails, weakness to 3130 is seen before the correction ends. Over the course of the past month, we had added Far East Hospitality Trust to the Dividend category and removed POSH from the Growth category. Far East Hospitality Trust gained 2.4% since inclusion on 30 May, outperforming STI’s 1.5% rise over the same period. We removed POSH on the same date in view of its weak performance as it had fallen below our threshold 5% stop-loss with little sign of a price recovery. Our current portfolio picks gained an average 7.9% (cum dividends). Top performer Croesus Retail Trust returned 23.6% since its inclusion on January 11, outperforming STI’s 7.7% gain over the same period. ST Engineering and Frasers Logistics and Industrial Trust performed well with double digit returns. Portfolio changes We add Thai Bev to the Blue Chips category. While 2Q results were affected by the mourning period, we expect earnings to improve in 2H due to stronger associates contribution. Sales of beverages should also pick up again once the impact of the mourning period normalize over time. Portfolio picks performance Current Price Unrealized gain Stock Entry Date Entry Price ($) Dividend paid ($) ($) (%, CD) Genting 12/05/2017 1.080 1.155 0 6.9% Keppel REIT 17/05/2017 1.065 1.145 0 7.5% Far East Hospitality REIT 30/05/2017 0.635 0.650 0 2.4% SembCorp Marine 05/05/2017 1.740 1.595 0 -8.3% ST Engineering 17/11/2016 3.200 3.720 0 19.4% Sheng Siong 20/03/2017 0.945 0.975 0.0185 5.1% Croesus Retail Trust 11/01/2017 0.850 1.015 0.036 23.6% Frasers Logistics & 20/03/2017 0.990 1.065 0.0349 11.1% Industrial Trust ^Singapore O&G 16/02/2017 0.6525 0.660 0.0039 1.8% Average 7.7% ^adjust for 2-for-1 stock split Source: DBS Bank; Bloomberg Finance L.P. Singapore Research Team [email protected] sa: PY Singapore Traders Spectrum Model Portfolio Blue Chips 12-mth Price gain Target Div Company /(loss) % Mkt Ca p (S$) Price upside Rec incl div P/E (x) P/E (x) EPS Growth (%) Yld (%) P/BV (x) (S$m) 15-Jun ($) (%) FY17F FY18F FY17F FY18F FY17F FY16A Blue Chips Genting 13,888.7 1.155 1.35 16.9 BUY 6.9 29.2 23.7 85.2 23.5 2.6 1.9 ST Engineering 11,595.7 3.720 4.12 10.8 BUY 19.4 20.8 20.0 4.6 3.9 4.0 5.3 Thai Beverage 22,473.5 0.895 1.09 21.8 BUY 0.0 19.6 17.9 49.8 9.3 3.1 4.6 Dividend 12-mth Price gain Target Div Company /(loss) % Mkt Ca p (S$) Price upside Rec incl div P/E (x) P/E (x) EPS Growth (%) Yld (%) P/BV (x) (S$m) 15-Jun ($) (%) FY17F FY18F FY17F FY18F FY17F FY16A Dividend Croesus Retail Trust 783.5 1.015 1.15 13.3 BUY 23.6 16.9 17.1 (2.2) (1.3) 7.8 1.1 Sheng Siong 1,465.9 0.975 1.14 17.0 BUY 5.1 21.4 20.3 9.4 5.0 4.2 5.8 Frasers Logistics & Ind'l 1,524.4 1.065 1.10 3.3 BUY 11.1 17.2 16.7 1,070.3 3.0 6.6 1.2 Keppel REIT 3,822.5 1.145 1.23 7.4 BUY 7.5 25.4 25.7 12.2 (0.9) 5.3 0.8 Far East Hospitality 1,178.6 0.650 0.66 1.5 BUY 2.4 18.9 18.2 3.9 3.9 6.1 0.7 Growth 12-mth Price gain Target Div Company /(loss) % Mkt Ca p (S$) Price upside Rec incl div P/E (x) P/E (x) EPS Growth (%) Yld (%) P/BV (x) (S$m) 15-Jun ($) (%) FY17F FY18F FY17F FY18F FY17F FY16A Growth Sembcorp Marine* 3,333.1 1.595 1.93 21.0 BUY (8.3) 31.9 22.1 32.7 44.0 1.6 1.3 Singapore O&G 314.7 0.660 0.80 21.2 BUY 1.8 30.1 24.4 (40.7) 23.6 2.8 3.8 Genting 13,888.7 1.155 1.35 16.9 BUY 6.9 29.2 23.7 85.2 23.5 2.6 1.9 * technical target Source: DBS Bank, Bloomberg Finance L.P. Singapore Traders Spectrum Model Portfolio Blue Chips You look to include blue chips into your portfolio to provide steady growth over a longer time period. Blue chips tend to be more stable and their holding period can extend beyond a year. Genting We see further upside to Genting, underpinned by expected positive Price Chart newsflow including continued recovery in earnings, details of GENS moving Sector: Consumer towards a more efficient capital structure, refresh of Resorts World Sentosa, Services and bid for a Japanese casino next year. Price: S$1.155 12-mth TP: S$1.35 Upside: 16.9% Entry date: 12-May-17 Entry price ($) S$1.08 Days passed 34 Dividend received S$0.000 % gain/(loss) 6.9% % chg relative to STI: 9% ST Engineering ST Engineering is a relatively defensive stock with a healthy balance sheet and secure dividend payouts. Its Aerospace segment has positioned itself Price Chart Sector: Industrials well by investing in growth markets while the Electronics segment should also benefit from the ‘Smart City’ trend. Price: S$3.72 12-mth TP: S$4.12 Upside: 10.8% Entry date: 17-Nov-16 Entry price ($) S$3.20 Days passed 210 Dividend received S$0.100 % gain/(loss) 19.4% % chg relative to STI: 6% Thai Beverage We expect stronger contribution from its associates (F&N and Frasers Price Chart Centrepoint Limited (FCL)) in 2H17. Further catalysts lies in corporate Sector: Consumer Goods restructuring of its stakes in F&N, and the potential monetisation of FCL. Price: S$0.895 12-mth TP: S$1.09 Upside: 21.8% Entry date: 15-Jun-17 Entry price ($) S$0.90 Days passed 0 Dividend received S$0.000 % gain/(loss) 0.0% % chg relative to STI: 0% Singapore Traders Spectrum Model Portfolio Dividend Income investing is part of your stock picking strategies. You look to include dividend stocks into your portfolio to provide a steady income stream. Croesus Retail Trust CRT, the first internally managed trust, will help to improve alignment between unitholders and management and removes one barrier to a Price Chart takeover. Medium-term upside potential from asset enhancement initiatives Sector: REITS (AEIs). Price: S$1.015 12-mth TP: S$1.15 Upside: 13.3% Entry date: 11-Jan-17 Entry price ($): S$0.85 Days passed: 155 Dividend received: S$0.036 % gain/(loss): 23.6% % chg relative to STI: 17% Sheng Siong We remain positive on Sheng Siong as we see higher margins continuing to Price Chart drive earnings growth in FY17F. We expect earnings growth to continue Sector: Consumer outpacing topline growth. Services Price: S$0.975 12-mth TP: S$1.14 Upside: 17.0% Entry date: 20-Mar-17 Entry price ($) S$0.945 Days passed 87 Dividend received S$0.0185 % gain/(loss) 5.1% % chg relative to STI: 4% Frasers Logistics & Ind'l Frasers Logistics & Industrial Trust (FLT) is attractive with a prospective yield of Trust close to 7.0%. With an under-geared balance sheet, FLT has the ability to Price Chart Sector: REITS surprise on the upside through acquisitions, if executed from a myriad of opportunities available from its sponsor. Price: S$1.065 12-mth TP: S$1.10 Upside: 3.3% Entry date: 20-Mar-17 Entry price ($) S$0.990 Days passed 87 Dividend received S$0.0349 % gain/(loss) 11.1% % chg relative to STI: 11% Keppel REIT KREIT trades at the biggest discount to book value of around 25% but has Price Chart the largest exposure to Premium Grade A buildings in Singapore, which we Sector: REIT believe will be best placed to take advantage of the expected upswing in the Singapore office market Price: S$1.145 12-mth TP: S$1.23 Upside: 7.4% Entry date: 17-May-17 Entry price ($) S$1.065 Days passed 29 Dividend received S$0.000 % gain/(loss) 7.5% % chg relative to STI: 9% Far East Hospitality We believe the demand-supply imbalance affecting the Singapore hospitality Trust sector will end in 2018. We recommend investors to be early, rather than Price Chart Sector: REITS wait for evidence of a turnaround next year. Price: S$0.650 12-mth TP: S$0.66 Upside: 1.5% Entry date: 30-May-17 Entry price ($) S$0.635 Days passed 16 Dividend received S$0.0000 % gain/(loss) 2.4% % chg relative to STI: 3% Singapore Traders Spectrum Model Portfolio Growth Your primary investment goal is capital growth.