Singapore Reopening Stocks

Stay the course despite anticipated surge in Omicron cases

South Africa 7D-moving average of new cases vs fatality

Source: DBS Research, Bloomberg

  • Singapore recorded 842 new COVID-19 cases on Tuesday with the reproduction ratio (R) rising above 1 to 1.09, health ministry warns of ‘imminent’ Omicron wave
  • We believe the current back-to-office transition will lead to more testing that also fuels the detection of more COVID cases, especially the more transmissible Omicron variant
    • The government had previously indicated that R is a key factor it considers when implementing restrictions
  • We maintain our positive stance on the reopening theme despite a possible spike in cases ahead because
    • ICU utilization rate currently remains low at 43.8%
    • Preliminary reports point to a less severe variant which could potentially create herd immunity in the population given its high transmissibility
    • South Africa, where Omicron was first detected, maintains a low fatality rate even as their 4th Omicron wave looks to have peaked in mid-Dec 2021
  • Domestic reopening stocks (ComfortDelGro, LREIT, CICT) could see near term buying opportunities if prices pullback due to the anticipated rise in local COVID cases
  • We also remain positive on international reopening names (SATSART) that could benefit in the event that Omicron creates widespread herd immunity and the global Omicron wave subsequently subsides

Singapore Property

Steep valuation discount too good to ignore

  • Cooling measures a timely response to strong property prices and transaction surge in 2021
  • Slowing market to have minimal impact on selected listed developers given strong pre-sales trends, leaving only c.27% of stock unsold
  • Developers trading below trough levels seen in past cooling measures, accumulate on further weakness
  • Picks are CLI, CDL and Ho Bee

Singapore REITs

Re-opening theme remains in focus

  • Re-opening plays a key theme as S-REITs held firm in Dec’21.
  • Hospitality S-REITs to rebound as Omicron fears subside; more optimistic outlook come 1Q22 results to drive further upside
  • Retail sales and office operational metrics may spring a surprise as workers return to office
  • Re-opening trade to remain a dominant theme for the S-REITs