The gist of the MAS’s latest financial stability report is that global growth has stabilised on the back of unconventional monetary policies, but considerable risks lie ahead (when those policies come to an end) as there has been a build-up of private- and public-sector debt.
The MAS recognises that Singapore household and corporate balance sheets are fine, but remains watchful of the property market and reckons that the banking sector needs to guard against liquidity risks and credit-quality deterioration. Most of the MAS’s comments are not new and have been addressed in our 2014 outlook report. Our end-CY14 FSSTI target remains 3,600, based on 14.4x CY15 P/E.
Containership orders have been very strong in 2013, and we expect orders to continue into 2014-15, benefitting primarily the Korean shipyards. Container shipping, on the other hand, will likely face a challenging 2014, as oversupply accumulates.
We stay Overweight on the Offshore and Marine sector, and Neutral on Container Shipping. HHI is our top Outperform pick, followed by DSME, as they gain from more containership orders, among other catalysts. OOIL remains our top pick in the container shipping space on valuation grounds and on its internal strengths, though immediate investor interest may be limited. Our forecasts for OOIL and CSCL have been lowered here.
In the big-cap space, companies have healthy balance sheets but their earnings have sputtered somewhat. We believe that the only way to outperform is to select companies using the bottom-up approach, identifying those with the right business models and products.
Mired in a highly competitive market; downgrade to SELL. The electronics and furniture retailing market is highly fragmented, with scant opportunities for price or cost leadership. As such, we think Courts Asia is taking steps in the right direction to create differentiation, though for now, the company’s credit operations seem to be its only competitive edge.
Share price has declined 22% YTD but a reversal looks unlikely anytime soon. Downgrade to SELL.