Our Alpha Picks portfolio narrowly beat the STI in May with a 1.5% mom decline vs the latter’s 1.7% mom decline. For June, we add one newly-initiated stock, Sea Ltd as well as potential re-opening play ComfortDelGro, and remove Singtel.
• A narrow win in May. For the month of May, our Alpha Picks portfolio outperformed the STI by 0.2ppt, losing 1.5% mom vs the STI which fell 1.7%. Following the lead of global and regional markets, the STI dipped in mid-May to trough at 3,032 on 14 May only to recover in the last week as MSCI Singapore Index revisions led to increased fund inflows. With the Singapore Government potentially relaxing Phase 2 (Heightened Alert) restrictions in mid-Jun 21, there appears to be upside to some re-opening plays.
• Banks and industrials outperformed but industrial and hospitality trusts were a drag. Only three companies in our portfolio showed a positive return for May: Yangzijiang (+4.9% mom), OCBC (+1.3% mom) and Innotek (+0.5% mom). On the negative side, Far East Hospitality Trust (-7.1% mom) and Ascendas REIT (-5.8%) were key drags on the portfolio for the month.
• Adding Sea Ltd and ComfortDelGro. We add newly initiated Sea Ltd to our Alpha Picks as we like the Tencent-backed company’s position as it is one of Southeast Asia’s largest internet companies, and is making inroads into Latin America. Its strong position in the digital entertainment market could be augmented by digital banking growth opportunities in the near to medium term. We also add ComfortDelGro as we expect a recovery in land transport ridership as Singapore appears to be on track to relax COVID-19 stay-home
• We remove Singtel from the portfolio as we do not see meaningful upside for the company post its disappointing FY21 results that were below our and street estimates. In addition, the company guided for 60-80% dividend payout ratio for FY22 vs expectations for a 100% payout ratio.