SINGAPORE (Dec 18): Against an outlook that is “turning less cloudy”, DBS Group Research has advised investors to adopt a “barbell approach” to strike a balanced risk-reward.
In particular, the research house says it favours real estate investment trusts (REITs) and yield stocks with growth potential, given the anticipated rise at the long end of the yield curve.
Its top picks are Ascendas REIT, Mapletree Logistics Trust, Mapletree Industrial Trust, Keppel DC REIT, Suntec REIT, Frasers Centrepoint Trust and Ascendas India Trust.
“We prefer REITs that can leverage off structural growth trends, [such as] logistics, data centres and business parks,” DBS writes in a note dated Dec 12.
Hospitality REITs should also gain from the robust line-up of returning and inaugural conferences next year, it says.
This is coupled with the slowing growth of supply at about 1.5% and the average hotel occupancies that are currently close to about 90%.
See also: Valuing vice stocks
As such, DBS says it favours CDL Hospitality Trust, Far East Hospitality Trust and Ascott Residence Trust.
“We believe that hospitality REITs can finally break out on expectations of a turn in RevPAR outlook,” it says.
Beyond the REITs, DBS says it looks for stocks that offer a yield of at least 4% with good growth prospects.
See also: Investors turn positive on Venture Corp on share buybacks and higher revenue guidance of customers
The research house notes that Singapore Telecommunications, which has a yield of 4.9% based on its Dec 6 closing price, is underpinned by earlier-than-expected tariff hikes in India.
SIA Engineering, which has a yield of 4.6%, should see an improvement in its core operating margin, workload at its engine shops, and recovery in associate and joint venture profits, it says.
Meanwhile, ST Engineering, which has a yield of 4.0%, is enjoying strong earnings visibility from its record order book of $15.9 billion, it adds.
