Monday, February 21, 2011

Strategy/Budget Report

Strategy/Budget Report: Following budget Report, UOB Kay Hian has Strategy Report on key sectors. Note that in house view, the biggest winners of Budget 2011 are Co’s that benefit from a rise in discretionary spending and rising demand for higher education….

Tip Co’s such as Raffles Edu & Informatics to benefit from subsidies given to adult Singaporeans to pursue their first degree or diploma on a part-time basis. Discretionary spending could rise and benefit companies such as Tiger Airways, FJ Benjamin, Epicentre, Eu Yang Sang and Osim…..

The levy on foreign workers is tipped not have a meaningful negative impact on shipyards as foreign worker levy makes up a small portion of total staff cost. As such, house expect no negative impact on earnings from this increase in foreign worker levy on both Keppel Corp (KepCorp/BUY/TP $13.00) and Sembcorp Marine (Hold/TP $4.90)…..

Zero-rating scheme for specialised warehouses could benefit SATS, although impact will be limited, while the 2011 Budget will have a minimal impact on property stocks. House remain Neutral on the property sector and prefer exposure to the office, industrial and hospitality space. OUE (BUY/ TP $4.25), Sabana REIT (BUY/ TP $1.20) and CDL Hospitality Trusts (BUY/TP $2.50)….

In conclusion, see limited impact of the Budget on the market. Forecast a constructive outlook for 2011, with a year-end FSSTI target of 3,550. In terms of stocks, favour a combination of large-cap laggards, high and sustainable dividend-yield stocks, inflation beneficiaries and stocks with specific catalysts. House top picks for FY11 are Ascendas REIT, CDL HT, Ezion, OCBC, OUE, SABANA REIT, SIA and Starhub.

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