The unprecedented rapid adoption of generative artificial intelligence (GenAI) coupled with the rising demand for 5G and internet of things (IoT) are major thematic developments that took place in 2023. These themes could influence medium-term earnings and valuations across sectors, say Maybank Securities analysts Thilan Wickramasinghe, Eric Ong, Kelvin Tan, Li Jialin, Jarick Seet and Krishna Guha.
GenAI is set to improve productivity and potentially drive new revenue streams across all sectors, note the team of analysts in their report dated Nov 29.
“Banks are likely the earliest beneficiaries given their already sizable investments in AI and systems integration. This could result in material use cases in middle-and-back office functions as well as new income sources through hyperpersonalisation and cross-selling,” they write.
Telcos’ 5G and ICT services should also benefit from the accelerated development of cloud computing, analytics and robotics ecosystems.
In addition, new production capacity coming on-stream regionally and new product launches are set to drive upside to margins and volumes for technology manufacturing.
Meanwhile, companies with strong balance sheets, strategies that focus on regional growth, as well as increasing its exposure to alternative energy should drive more acquisitions overseas. This is especially applicable to the healthcare, transport, technology manufacturing and industrials sectors, the analysts add.
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The economic re-opening of China, which was also a theme that experts were looking out for, ended up being a disappointment in 2023. That said, it created positive spill-overs for Singapore, says the team.
“Although China’s weakness was a disappointment, Singapore was a relative winner with private banking assets under management (AUM) and supply chain reorganization investments flowing in. This also catalysed local corporates to seek growth in regional markets through mergers and acquisitions (M&A) given their ability to leverage strong balance sheets and take advantage of low Southeast Asian valuations,” the team writes.
Among the sectors identified, the team has identified ComfortDelGro C52 (CDG), DBS Group Holdings, Frencken, Raffles Medical, Sembcorp Industries U96 , Singapore Telecommunications Z74 (Singtel), Singapore Technologies Engineering S63 (ST Engineering) and Venture Corporation V03 as their top picks.
These stocks are chosen as they have the strongest medium-term gearing towards these emerging developments and those that can deliver potential upside surprises to return on equities (ROEs), says the team.
