Left Brain Right B - the DBS Vickers Securities Equities Research

Regional Equity Strategy 4Q 2009
Strategy Overview: Asia Equity
Fig. 21: Singapore relative to Hong Kong fwd PE
(x)
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
93 95 97 99 01 03 05 07 09
However, EPS upgrade has been slower than expected vs the
rest of the region. (Fig. 22). This is mainly due to 1) dilutive
effect of the rights issues which we estimate at about 15%
overall dilution on the market, and 2) earnings for the
Industrials sector have yet to be upgraded. Singapore sectors
are highly cyclical, with about 55% exposed to domestic
cyclicals (financials, consumer discretionary), and 21%
externally (Industrials). We expect earnings for the domestic
cyclicals to be upgraded in line with the domestic economy and
for Industrials to be upgraded according with the improvement
in global IP. (Fig. 23 & 24)
Fig. 23: Singapore 12-mth forward GDP growth and
earnings growth forecast trend
8
6
(%) (%)
40
GDP growth (L)
30
Source: Datasream, DBS, IBES
High upgrade potential
4
20
We have upgraded our 2009 Singapore's economic growth
forecast to -3%, up from -5% in the previous quarter. 2010
forecast is now at 5.2% vs 4.8% previously. Net profit growth
for 2009 remains negative at -6% (based on DBSV coverage),
but was up from -12% in the last quarter.
2
0
-2
Earnings growth (R)
10
0
-10
Fig. 22: 12-month fwd EPS integer: Singapore, Hong
Kong and Asia ex-Japan
(index)
115
110
-4
02 03 04 05 06 07 08 09
Source: Consensus Economics Inc, DBS, IBES
Fig. 24: Global IP vs Singapore Industrials earnings
forecasts
-20
105
100
95
(index)
115
110
105
(index)
25
20
90
85
100
95
90
15
10
80
Jan Feb Mar Apr May Jun Jul Aug Sep
Singapore Hong Kong Asia ex-Japan
Source: Datasream, DBS, IBES
85
80
75
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Global Industrial Production Index (L)
MSCI Sing Industrials - 12-month forward EPS (R)
Source: Datasream
5
0
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