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■   We think 3QCY21 earnings season was a muted with 1.3% EPS upgrade for FY22F. Post-Covid-19, we are expecting 12-14% EPS growth in FY22-23F.
■   Recovery theme has long been anticipated. We switch from transport to consumer sector on declining/improving risk-reward profile.
■   Our end-2021F FSSTI target rises to 3,752 as we roll forward to CY23F, now based on 14x P/E, historical mean supported by 12% EPS growth.  
■   Big cap top picks:  Singpost, SIE, ThaiBev, AEM, AREIT, CIT, ST, STE, UOB, WIL and YZJ. Small caps: AZTECH, DELFI, HRNET, KMLY, SILV.

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Three stocks worth a closer look post 3Q21
The 3QCY21 earnings season of Singapore companies under our coverage showed a slight qoq improvement with positive-to-negative surprise ratio at 1.1x (2Q21: 0.95x), led by commodities and property realtors. We highlight three stocks whose share prices had inversely reacted to their 3Q21 results and could be worth a closer look. They are Wilmar (-1%, despite a strong beat, our 4Q21F NP [-50% qoq] could be conservative; we see earnings upside potential if margins/demand sustain), Aztech (-6%, although guided for a stronger recovery in 4Q21F, backed by order book growth and resumption of workforce by end-Oct), and UMS (+10%, despite earnings miss; market could have priced in full resumption of workforce and contribution of FY22F profit from doubling of production capacity, which we have not). Aztech and Wilmar are already in our country top-pick list.

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Downgrade Transport, upgrade Consumer
Singapore has expanded the Vaccinated Travel Lanes scheme (currently 16 countries, adding Indonesia, India, & Malaysia on 29/11, Qatar, RSA and UAE on 6/12). Inclusion of Indonesia (12.5%) and India (7.6%) is significant as they constitute the second and third largest number of visitor arrivals, after China (17%) – see Fig11. The recovery theme has been well reflected in the transport sector (mainly SIA and SATS) pricing in upside from border reopening, in our view, hence we downgrade the sector to Neutral. We expect a corresponding uptick in visitors and view this as positive for the hospitality sector as a whole. However we keep Neutral on gaming sector as GENS trades at c.8x FY22F EV/EBITDA, close to its pre-Covid/pre-Japan hopes valuations in 2015 when EBITDA hovered c.S$800m-900m. We note that the opening of the China outbound border could be an upside risk but visibility is uncertain in the next 6 months, in our view. However, we upgrade consumer sector to OW (from Neutral) as we see improving risk-reward profile with valuations still below pre-Covid levels. We keep our OW on Capital Goods (restructuring and renewable trend), Telco (earnings recovery and potential for asset monetisation), Technology (short-term super cycle demand growth), Healthcare (quality earnings), Property (-1 s.d. below long-term mean discount and brisk residential market transactions) and REITS (retail and hospitality names could see benefits from border reopening and post-Covid normalcy).

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Top picks
We add names that may not have priced in earnings recovery from border reopening –Singpost, SIE, ThaiBev and Delfi – all still trading below historical pre-Covid mean. We also add AEM on potential stronger orderbook/revenue guidance for FY22F and new customer wins. We remove CD (after IPO plan in Australia is shelved). We continue to like AREIT, CIT, ST, STE, UOB, WIL and YZJ. Among small caps, we add Silverlake as we think appetite to invest could pick up among FIs as fear of asset quality diminishes post-Covid. We remove Q&M as the stock has done well amid lower demand for PCR testing ahead. We also remove CSE as supply chain issues in the energy sector could be a near-term challenge.

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