Bargain Hunting Blue Chips – With Technical And Fundamental Analysis

Lim Si Jie

If you are worried about a possible market crash, here is DBS advice for you: Opportunity, not calamity. DBS believes that the recent market correction is an opportunity to bargain hunt as the market takes a breather. According to DBS’ estimates, the earnings growth trend seems to be on an accelerated trend. Earnings revisions have been positive with an expected one percent improvement in FY18. This should build a strong case for the bull run to continue despite the recent market correction.

Investors Takeaway: Bargain Hunting Blue Chips With Technical And Fundamental Analysis

With Technical Analysis

So, what should investors look out for and how should we filter for bargain stocks? DBS came up with six filter criteria that will help investors’ bargain hunting. These filter criteria include:

1. BUY recommendations from DBS
2. At least 20 percent upside to DBS’ 12-month TP for the stocks
3. At least ten percent price decline from its high in January
4. 14-day RSI below 30
5. Weekly stochastics below 30
6. Trading three percent above or below its 200-day EMA support

Among the universe of stocks that are covered, DBS recommends Sembcorp Industries, Yangzijiang Shipbuilding, Singapore Telecommunications, CapitaLandGenting Singapore, UOL Group, and CapitaCom Trust.


Source: DBS

With Fundamental Analysis

OCBC Bank: Riding On Interest Rate Hike Trajectory

Property and REIT sector has been at the brunt of the recent market correction. DBS notes that this is due to the sensitivity of these sectors towards an accelerated interest rate hike. On the contrary, banks have been pretty resilient given that they are beneficiaries of a rising SIBOR. Thus, DBS believes that the banks should be given a stronger weighting in investors’ portfolio.

DBS notes that banks are on track to offer the highest earnings growth of 21.5 percent with upside from rising net interest margin and sustainable loan growth. Moreover, there is also potential for dividend upside. OCBC Bank is DBS’ top pick for the banking sector for its key differentiating factor in its insurance business. DBS is forecasting possible earnings surprises from its insurance business in a rising interest-rate environment.

BUY, TP $14.00. Current share price: $13.45

Singapore Airlines: Flying High As Global Economies Recover

Singapore Airlines (SIA) is also another blue chip that DBS recommends on the back of its strong macro tailwind. Thanks to the synchronised global economic recovery, SIA should benefit from stronger travel demand. This will keep its load factors firm and improve SIA’s passenger yields. With full-year earnings poised to more than double from a low base, there is also room for SIA to raise its dividend payout to an implied dividend yield of close to four percent.

BUY, TP $12.00. Current share price: $11.20

Keppel Corp: Bargain Buy With Decent Upside Potential

The oil and gas sector is also another great source for bargain hunting, according to DBS. The oil and gas sector is recovering well as oil prices recover. As such, capex growth will be supported down the value chain.

For more risk averse investors, DBS recommends Keppel Corp as its oil and gas pick. Keppel Corp’s offshore and marine orders are expected to triple this year to $3 billion, buoyed by more favourable conditions in the oil and gas sector. DBS also notes that the market has been overlooking Keppel Corp’s property segment despite Keppel Land’s huge historical landbank of 6.5 million square meter held at a low cost. In addition, investors can be hopeful of a special dividend to mark the company’s 50th anniversary this year.

BUY, TP $10.20. Current share price: $7.88