• Stay invested; start looking for yields. Singapore banks have delivered YTD strong share price returns and we now view them more as yield rather than growth stocks. With interest rate cuts around the corner and economic growth remaining robust, we think it is time to position more aggressively in the REITs sector. Beyond REITs, investors should also look for high yields in companies (including banks) offering earnings/dividend sustainability or growth. We think selective opportunities also exist in companies undergoing restructuring, offering revenue certainty, laggards, and those trading at a low valuation despite the stable or improving earnings outlook.

• 1H24 results – a mixed bag. Within our coverage universe, better-thanexpected results came from the financial sector, where DBS, OCBC Bank (OCBC), and Singapore Exchange (SGX) reported earnings that were higher than our estimates. Elite UK REIT’s (ELITE) and Centurion Corp’s (CENT) results also offered upside surprises. Reported earnings for some consumer, plantation, and real estate companies as well as DPU for most REITs came in below our expectations.

• Updates to our macroeconomic calls. RHB Economics now expects two US Federal Funds Rate (FFR) cuts in 2024, once in September (-25bps) and another in December (-25bps). We have upgraded Singapore’s 2024 NODX growth to 1.5% from 0.5% while keeping the GDP growth forecast at 2.5% YoY. We expect that Singapore's manufacturing and trade-related sectors to contribute to the overall growth in 2H24. We have revised Singapore’s 2024 headline inflation from 3.5% YoY to 2.6% YoY, while keeping the core inflation forecast at 2.8%. We maintain that the Monetary Authority of Singapore (MAS) is expected to maintain its current policy parameters unchanged for the year.

• Key themes. Our investment themes are unchanged, but their order has changed. We now have a growing preference for yield stocks. We recommend that investors buy: i) A bit more aggressively into REITs, with a balance of high-quality industrial REITs for stable yields, office REITs (which we believe are undervalued), and selective overseas REITs; ii) companies beyond REITs offering high and rising dividend yield; iii) companies undergoing restructuring or laggard plays with improving earnings outlook; iv) global industrials, banks with ASEAN exposure, and defensive stocks if Donald Trump becomes US President again; and v) bottom-up opportunities in the small-cap space.

• Changes to our preferred picks. We have swapped CDL Hospitality (downgraded to Neutral) with Suntec REIT in our country's Top Picks. Elite UK REIT (ELITE), post initiation of coverage, makes it to our preferred overseas REIT exposure list. Raffles Medical is removed from our undervalued picks following poor 1H24 results. Meanwhile, Riverstone (RSTON) replaces APAC Realty in the non-REIT yield plays list.

Source: RHB Securities Research - 30 Aug 2024