DBS Group Research has increased its target price for Singapore-based wealth management and brokerage platform iFast Corp to S$2.60 from S$2.35, and maintained its " buy" call.

 

The research team said in a note on Tuesday that it expects iFast to grow more quickly than the rest of the industry, riding on its scalable business model and expanded product range.

 

In its earlier years of business building, the group' s assets under administration (AUA) growth had roughly tracked the industry' s growth. However, for FY16 to FY18, iFast' s AUA' s three-year compound annual growth rate was18 per cent, surpassing the industry' s 12 per cent, noted DBS.

 

The fintech firm' s growth in recent years was thanks to the expansion of its product range - both in depth and breadth - coupled with the launch of its business-to-consumer division FSMOne in Singapore in FY16.

 

DBS analyst Ling Lee Keng said that as the coronavirus pandemic accelerates the pace of digitalisation, iFast will be a " clear beneficiary" of the growing adoption of fintech services given its scalable online-based business model. This will also enable the company' s growth to continue to outpace the industry. she added.

 

DBS upped its AUA growth assumption for iFast to 15 per cent for FY20 and FY21 each, from 12 per cent previously.

 

" We believe there is still room for growth as the as current AUA levels (of S$11.15 billion) remain low, at about 10 per cent of the around S$100 billion in assets under management of the authorised and recognised collective investment schemes in Singapore," Ms Ling said.

 

" Recent developments bode well for iFast. The group is in the bidding for more large-scale projects, which could be a game changer if awarded," she wrote. iFast is part of a consortium vying to operate Hong Kong' s digital pension system, and is also gunning for a digital wholesale bank licence in Singapore.

 

If iFast wins the digital bank licence and/or the Hong Kong pension project, these will create additional revenue streams and further enhance its range of products and services, DBS noted.

 

Compared to other analysts, DBS is more optimistic on iFast given the group' s scalable business model and the drive towards digitalisation, Ms Ling said.

 

Last week, CGS-CIMB downgraded its call on the stock to " hold" , although it raised its target price to S$2.44 from S$1.85 previously. CGS-CIMB described the counter as " too fast, too furious" , stating that market exuberance appeared to have " substantially" priced in iFast' s prospects of winning the Hong Kong and Singapore bids.

DESPITE deep cuts in the latest quarterly earnings of Singapore-listed companies and trusts, the worst is now behind them, said DBS Group Research in a market strategy report on Monday.

 

The second-quarter results season had suffered the full impact of global Covid-19 lockdowns, with a sharp 14.9 per cent FY20 cut in forecast earnings for stocks under DBS' s coverage.

 

" Looking beyond the ashes of the Q2 earnings slash, we seek opportunities from the list of companies that saw upward earnings revisions or recommendation upgrades," analysts Yeo Kee Yan and Janice Chua said. These are companies that have emerged positively from the second quarter.

 

DBS' s picks are Hutchison Port Holdings Trust (HPH Trust), ST Engineering, SIA Engineering Co (SIAEC), Wilmar International, UMS and Venture Corp, among counters with either a positive earnings revision of more than 5 per cent or a recommendation upgrade.

 

In addition, investor interest is likely to pick up for travel or leisure stocks, lifted by progress in Covid-19 vaccine candidates that are under third-phase trials, noted Mr Yeo and Ms Chua.

 

While the exact timeline for a vaccine to be made widely available is uncertain, DBS thinks the recovery in air travel will be swift once this materialises. The analysts pointed to empirical evidence showing that China' s domestic air travel had recovered promptly to near pre-Covid-19 levels in a pre-vaccine environment within five months.

 

DBS thus recommends investors look beyond the near term, to accumulate travel and leisure-related stocks in anticipation of the industry possibly recovering next year.

 

Its picks in the travel and leisure space are SIAEC, China Aviation Oil, ComfortDelGro Corp, Ascott Residence Trust, and Far East Hospitality Trust.

 

As for manufacturing and trade-related names, DBS noted the strengthening purchasing managers' indices in the US and China, as well as the transportation stocks' strong run-up from the third quarter.

 

These hint at a broadening manufacturing recovery and a revival in trade activities, said Mr Yeo and Ms Chua.

 

DBS' s picks in these areas are semiconductor components maker UMS Holdings, capital and consumer equipment service provider Frencken Group, and Venture Corp, which provides contract manufacturing services to electronic companies.

 

DBS also favours HPH Trust, which the research team sees as a proxy to improving global trade activity, offering a yield of about 11 per cent.

 

Separately, the DBS analysts like Yangzijiang Shipbuilding, given the mainboard-listed Chinese shipbuilder' s improving order flow and attractive valuation.

 

Meanwhile, Maybank Kim Eng has increased its target for the benchmark Straits Times Index (STI) to 2,995, from 2,200 previously, under a new methodology that takes into account fundamentals and massive market liquidity.

 

The higher STI target implies a 17.9 per cent upside, the brokerage said in a report on Friday, adding that its equity strategy calls for a balance between defence and growth, by weighting towards stocks with structural growth, dividend visibility and diversification.

 

Maybank KE' s top " buy" ideas are Wilmar, Ascendas Reit and ComfortDelGro, as the research team noted that fears of a worst-case scenario seemed to have " overshot lockdown reality, with less earnings misses and higher earnings per share (EPS) upgrades in the Q2 2020 results season" .

 

" Despite the worst of regional lockdowns in Q2, only 29 per cent of combined STI and Maybank KE coverage stocks missed Street expectations," its analysts wrote.

 

DBS on Monday maintained its year-end target for the STI at 2,850, with technical support at 2,440.

 

With the steep earnings cut in Q2, the STI now trades between 13.2 times (average) to 13.8 times (+0.5 standard deviation) of its 12-month price-to-earnings (PE) ratio.

 

Although the index' s PE valuation no longer looks attractive, investors will likely look beyond the constituents' FY20 earnings, DBS said.

 

This is seeing as the worst of earnings have likely passed, with global economies reopening, manufacturing activity recovering and Singapore' s shift out of its " circuit breaker" from June, the research team added.

 

The STI should continue to trade at an above-average PE in the current recession year when earnings forecasts are factoring in the Q2 global lockdowns, while Singapore' s GDP is expected to recover going forward, Mr Yeo and Ms Chua said.

 

The index' s price-to-book ratio is attractive " at a mere 0.84 times that is slightly lower than the Global Financial Crisis trough" , they added.

 

" While US markets should pause for a breather in the coming weeks, we think equities will remain in favour amid optimism of vaccine development, broadening recovery and lower-for-longer rates."

 

In the second quarter of this year, five stocks disappointed for every three stocks that beat expectations.

 

The main culprits for the Singapore market' s Q2 earnings drag were travel and leisure plays such as Genting Singapore and Singapore Airlines, as well as telco Singtel, along with a one-off cut for property developers CapitaLand, UOL and City Developments Limited, DBS said.

 

In contrast, technology names - UMS, Frencken and Hi-P International - and healthcare counters saw upward earnings revisions.

 

The STI' s forecast earnings per share (EPS) contraction has deepened to 36.1 per cent for FY20. That said, there will be an equally sharp jump of 35.4 per cent for FY21 EPS, boosted by the anticipated 5.5 per cent recovery in gross domestic product on a low-base effect, the DBS analysts wrote.

DBS has been named the best bank in the world by New York-based financial publication Global Finance, marking the third year in the row that the Singapore-headquartered bank has received the accolade from a financial publication.

 

DBS was also Global Finance' s pick for " Best Bank in the World" in 2018, and was named " Global Bank of the Year" by Financial Times publication The Banker in the same year. In 2019, DBS was named " World' s Best Bank" by financial publication Euromoney.

 

Joseph D Giarraputo, publisher and editorial director of Global Finance, said: " This year, a worldwide pandemic has upended commerce and made forecasting even more difficult, yet business must continue. DBS Bank is exemplary of a bank that was ready for the sharp rise in demand for digital banking services during the pandemic."

 

He noted how over the past decade, DBS invested heavily in all things digital and created a culture for banking that is inclusive and efficient. He said those investments are paying off at a time of economic uncertainty, and have strengthened the bank' s resilience and helped it to serve its customers in their time of need.

 

In selecting the world' s best bank every year, Global Finance considers factors including growth in assets, profitability, geographic reach, strategic relationships, new business development, reputation and management excellence, use of technology and digitisation, and innovation in products.

 

It also notes the opinions of equity analysts, credit rating analysts, banking consultants and others involved in the industry. During the pandemic, Global Finance also paid special attention to banks that attended carefully to their customers' needs in difficult markets and accomplished better results while laying the foundations for future success.

 

Past winners include Bank of America in 2019, ING in 2017, and BNP Paribas (Corporate) and Royal Bank of Canada (Consumer) in 2016 when the award was split into consumer and corporate banking.

 

DBS CEO Piyush Gupta said banks play an integral role in supporting employees, customers and the wider community during this extraordinarily difficult time.

 

" We are humbled by the acknowledgement of our efforts on this front, particularly how our investments in digital, and our culture of inclusivity, have enabled us to serve customers in their time of need. This underlies our whole focus on being a purpose-driven bank doing real things for real people for real economies," he said.