Nomura tips Singapore equities face a subdued 2013 outlook, forecasting single-digit returns as economic restructuring drags earnings and as a sharp property-market pullback could undermine returns.
It views consensus estimates for 11% FY13 market EPS growth as too optimistic. But it adds, the market is “not expensive” at 1.4x FY13 book value vs its 1.7x long-term average and at 12.5x FY13 P/E vs its 12x-18x 15-year range.
“We are Bullish on conglomerates as we see the sector generating steady earnings growth that can support dividends. We are Bearish on gaming, given the strict policy regime, while developers are likely to underperform as fundamentals deteriorate. We are Neutral on banks on valuation grounds, while telcos and S-REITs are supported by dividend yields.”
It tips companies generating more earnings overseas than domestically and with defensive dividend yields, favouring Keppel (BN4.SG), Sembcorp (U96.SG) and ST Engineering (S63.SG). It likes Jardine Matheson (J36.SG), noting mostly ex-Singapore earnings.
It likes SATS’ (S58.SG) and ComfortDelGro’s (C52.SG) steady earnings and yields. It tips DBS (D05.SG) and Keppel Land (K17.SG) for attractive valuations and North Asia optionality.
Among cyclicals, it prefers First Resources (EB5.SG) on Nomura’s positive CPO-price outlook, and likes Bumitama (P8Z.SG). Among S-REITs, it tips Ascendas Hospitality Trust (Q1P.SG), with Biosensors (B20.SG) its healthcare pick.
