HOSPITALITY STILL “ON THE TABLE”
On the other hand, analysts seem slightly more upbeat about the outlook of the hospitality sector.
RHB Singapore, for instance, has Genting Singapore as one of its preferred stock picks for the year ahead. Apart from the reopening of Singapore’s borders to those fully vaccinated, the easing of travel curbs by more countries will likely continue and boost the integrated resort operator’s recovery, it said.
To be sure, the recovery may still be missing a “last leg of runway” as strict travel measures remain in key markets in North Asia, namely China and Japan that accounted for one-third of pre-pandemic footfalls in both gaming and non-gaming facilities, said CGS-CIMB analyst Tay Wee Kuang in a report.
Nevertheless, Singapore’s easing of domestic rules to allow for larger work-related events of up to 1,000 people to be held means that more business activities can now resume, he added, while reiterating an “add” call on the stock and noting that a “recovery to pre-COVID operations remains on the table” albeit at a slower pace.
Beyond that, business trusts that have hotels in their portfolios are also in the good books of some market analysts.
Apart from seeing better occupancy levels and room rates as travel demand picks up, the likes of Ascott Residence Trust and CDL Hospitality Trusts have also delved into the “extended-stay” asset class over the course of the pandemic as part of diversifying their portfolios, Phillip Securities Research’s Natalie Ong told CNA.
“They haven't been idling. Instead, they have been trying to strengthen their portfolio by incorporating other streams of stable income,” said the research analyst, adding that most hospitality trusts are still trading at about 15 to 20 per cent below pre-pandemic levels.
Opportunities also exist in other parts of the Singapore market, analysts said although they recommend investors to stay defensive amid rising inflation and a confluence of external growth risks.
“We expect the market to remain volatile with increased external risks,” said CGS-CIMB analysts in their Singapore strategy report. “We advocate a near-term defensive position in REITs (real estate investment trusts) and high dividend yield stocks and remain constructive on capital goods.”
Technology and banking sectors have also “reverted to mean valuations and priced in some of the slower growth expectations”, hence presenting long-term opportunities, they added.
RHB, in a report dated Jun 1, reiterated its “barbell portfolio strategy, with a healthy weightage for defensive stocks”.
“Defensive meaning when things go south, the company still makes money and that cash flow does not completely disappear,” said Mr Jaiswal.
These include banks that are beneficiaries of the current rising interest rate environment, companies that are less affected by inflationary pressures such as the commodity sector, as well as those that can continue to deliver margin expansion such as homegrown telco Singtel or taxi operator ComfortDelGro.
Morgan Stanley’s equity analysts Wilson Ng and Derek Chang said Singapore banks are “especially well-positioned” to weather cost inflation headwinds and provide sustained growth in earnings and dividends, given how they are “positively levered to both rising interest rates and the reopening theme”.
“Valuation multiples do not look overstretched, so we believe banks may be more viable alternatives to stocks in the real estate and travel-related sectors as a shelter against high inflation,” they wrote in a May 12 report.
Apart from banks, Mr Ng and Mr Chang also like energy stocks while technology stocks can “offer a secular growth story at much more attractive valuations than before”.