Singapore Market Strategy - CGS-CIMB Research 2022-09-02: Inclusion Of Emperador Into The Straits Times Index

Singapore Market Strategy - Inclusion Of Emperador Into The Straits Times Index

  • Emperador (SGX:EMI) will replace ComfortDelGro (SGX:C52) in the Straits Times Index (STI) by FTSE Russell, with effect from 19 Sep.
  • We think the market could be surprised by this, as focus had always been on the top-40 market cap companies and the reserve list. Emperador’s market cap of S$8.3bn (22 Aug) could have helped the company bypass the reserve list and straight into the STI.
  • One of the ground rules for STI inclusion stated that “a company will be inserted into the STI at the quarterly review if it rises to 20th position or above when the eligible securities are ranked by full market capitalisation (before the application of any investability weightings).”
  • As of end-Aug 2022, STI ETFs had S$2.2bn worth of AUM.
    • ComfortDelGro's 0.94% constituent weight would translate into S$21m of passive outflow, or 2.4x ADTV (Average Daily Trading Volume).
    • Emperador’s free float of 15.1%, just passed the 15% requirement for inclusion. we estimate Emperador to hold a constituent weight of 0.39% upon inclusion, which could translate into passive inflow worth 3.2x ADTV, or S$2.74m.
  • While STI exclusion could put pressure on ComfortDelGro’s near-term share price, we see support at S$1.36, based on 13.1x FY23F P/E (2 standard deviation below its 5-year historical mean). We reiterate our ADD call on ComfortDelGro, as we expect further earnings recovery in coming quarters, driven by:
    • improved monetisation of its Singapore taxi business,
    • higher rail ridership, and
    • increased charter activities as tourism recovers.
  • ComfortDelGro also offers an attractive dividend yield of 5.9%.
  • Emperador recently completed its secondary listing on the SGX mainboard in Jul. Based on Bloomberg consensus, Emperador's share price trades at 25.6x FY23F P/E (1.4 standard deviation above its 5-year historical mean).
  • Following ComfortDelGro’s deletion, Keppel DC REIT (SGX:AJBU) is now ranked the lowest by market cap among STI constituents.
  • The STI reserve list (in order of size) is
    1. Olam (SGX:VC2),
    2. Suntec REIT (SGX:T82U),
    3. Keppel REIT (SGX:K71U),
    4. Frasers Centrepoint Trust (SGX:J69U) and
    5. Ascott Residence Trust (SGX:HMN) (new).

Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @

LOCK Mun Yee CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | ONG Khang Chuan CFA CGS-CIMB Research | 2022-09-02
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998 SAME 99998

Read also CGS-CIMB's most recent report:
2022-08-12 ComfortDelGro - Wheels In Motion

Target prices by 5 other brokers at ComfortDelGro Target Prices.
Listing of broker reports at ComfortDelGro Analyst Report.

Relevant links:
ComfortDelGro Share Price History,
ComfortDelGro Announcements,
ComfortDelGro Dividends & Corp Actions,
ComfortDelGro News Articles


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