Singapore Market Strategy - UOB Kay Hian 2024-12-09: Opportunities Abound Despite Muted Earnings Growth In 2025

• Despite our muted earnings outlook next year, we believe that the Straits Times Index (STI) can nevertheless witness P/E multiple expansion given the prevalence of blue-chip defensive stocks with strong cash flow generation and relatively high dividend yields.
• Despite its 3Q rally, the STI remains inexpensive in our view, trading at a forecast 2025 P/E and P/B of 11.5x and 1.2x respectively and paying a yield of 5.3%.

2025 EPS Growth Forecast

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• Our modest below-consensus 1.2% EPS growth forecast for our covered STI stocks for 2025 belies the fact that there are a number of stocks within our universe that should deliver strong returns in the near to medium term, backed by strong cash flow and sustainable dividend yields.
• The key sectors that will contribute to the positive earnings growth in UOB Kay Hian’s coverage universe for 2025 are the plantation, property, REITs, industrials, technology, telecommunications and “others” sectors.
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  • Industrials, technology and telecommunications should continue to experience strong earnings growth on a y-o-y basis.
  • The gaming segment will drive 2025 earnings growth within the “others” sector.
• We expect the large-cap finance and aviation sectors to be two key sectors that will degrade the positive earnings growth in 2025. Upside earnings surprise could come from lower-than-expected US interest rate cuts.
• We highlight that for the STI component stocks, Bloomberg consensus forecasts 2.7% y-o-y EPS growth for 2025.

“Safer than houses”.

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Singapore Research UOB Kay Hian Research | https://research.uobkayhian.com/ 2024-12-09 SGinvestors.io

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