- Earnings of Singapore stocks under our coverage were revised downwards by 5.4% in FY23 and 1.6% in FY24F, led by drags in real estate, industrials, and telcos, while banks remain stable. Pockets of positive revisions to FY24F earnings are found in the industrials and technology sectors.
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STI rangebound between 3,030-3,300.
- We maintain our 2024 year-end target of 3,485 for the STI, pegged at 11.3X (-1.5 standard deviation) FY25F P/E. The STI’s attractive valuations and above 5% dividend yields are factors that offset a muted earnings growth outlook.
- STI is likely to be rangebound between 3,030 and 3,300 in the coming months, with a recovery towards the latter figure possibly ahead of the index stocks going ex-dividend.
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3 takeaways from FY23 results season
1. Prefer industrials and technology for earnings visibility.
- We seek out opportunities in stocks with earnings resilience amid negative earnings revisions in the wider market. Average FY24F/25F earnings growth of above 10% is also attractive as we enter a prolonged period of muted earnings growth, with STI earnings growth forecast at around 3%.
- Double-digit average earnings growth for Yangzijiang Shipbuilding (SGX:BS6) and ST Engineering (SGX:S63) is underpinned by their robust orderbooks. We take comfort in our analysts’ recent positive earnings revisions for Keppel (SGX:BN4) and ComfortDelGro (SGX:C52) on their improving and steady earnings bases.
- Earnings recovery for selected technology stocks UMS (SGX:558) and Venture Corp (SGX:V03) should pan out under an improving industry outlook, with a potential boost from the ongoing AI boom.
2. Stick to REITs as the Fed pivot continues to play out.
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