5 Best Singapore Stocks to Buy for a Resilient Portfolio

December 8, 2022

The stock market has been on a downtrend recently as investors are bracing themselves for a volatile market in 2023. That’s due to rising interest rates, geopolitical risks and a potential recession.

While the US Federal Reserve (Fed) has signalled that it is likely to slow its interest rate hikes going forward, most of the top management in US banks have warned that the persistently high inflation could push the economy into a recession next year.

With so much uncertainty on the horizon, I thought it would be useful to look at some of the best defensive Singapore stocks that investors can accumulate in order to build a resilient portfolio.

1. Sheng Siong

One of the best defensive strategies in a recessionary environment would be the consumer staples sector.

I believe that fear of a recession will also prompt consumers to prioritise spending on essentials, like groceries, over discretionary spending.

Among the consumer staple stocks in Singapore, I believe Sheng Siong Group Ltd (SGX: OV8) is a good example due to its resilient business.

Sheng Siong is one of the largest retailers and supermarket chains in Singapore with 66 outlets currently.

During Sheng Siong’s Q3 FY2022’s earnings, gross margin continued to expand, rising to 29.4%, from 29% a year ago.

The rise was mainly due to an increase in sales mix of products with higher margins.

Sheng Siong ended the quarter with a net cash position of S$228.6 million and held no debt on its balance sheet.

While near-term headwinds will also affect Sheng Siong’s expansionary plans, its sturdy business model, resilient margins, clean balance sheet and consistent positive free cash flow, will all fit well into investors’ portfolios during a volatile market.

2. UOB

Net interest margin (NIM) expansion – amid the rising interest rate environment – will continue to be a key bright spot for Singapore banks.

However, with US Fed fund futures pricing in the peak of its policy rate at around 5% by the middle of 2023, further upward earnings revisions could be limited.

This means that sequential NIM expansion could slow as funding costs pick up.

Nonetheless, I believe that United Overseas Bank Ltd (SGX: U11), also known as UOB, will help investors to weather the volatile market, supported by the increase in its NIM.

The acquisition of Citigroup’s Malaysian and Thailand consumer banking business is also another positive catalyst.

Tim has also written about UOB in his latest writeup on the Top 5 Singapore Stocks to Buy in December.

3. Raffles Medical Group

Raffles Medical Group (SGX: BSL) is an integrated healthcare player that owns three hospitals in Singapore and China as well as a chain of clinics in Asia.

During Q3 FY2022, Raffles Medical Group reported an increase of 62.1% in its profit after tax, to S$38.3 million as compared to a year ago.

Meanwhile, revenue was up by 6.5% to S$199.5 million during the same period due to return of foreign patients seeking treatment. There was also an uptick in domestic patients returning for elective treatments.

While higher inflation and interest rates could dampen demand for high-end healthcare services, the ease in travel restrictions could boost the return of its patients seeking treatment at its Raffles Hospital, Raffles Medical and Raffles Dental branches.

In China, the recent easing of restrictions and the shift away from the COVID-zero policy will also be beneficial to Raffles Medical Group.

4. Thai Beverage

The year 2022 has been a good one for Thai Beverage Public Company Ltd (SGX: Y92), or simply known as ThaiBev.

ThaiBev is the largest beverage company in Thailand. It manufactures Chang Beer and other beverages.

It has a 28.4% associate stake in Singapore-listed Fraser & Neave Ltd (SGX: F99) (F&N), the maker of 100Plus and Fruit Tree juices.

In addition to that, it also holds stakes in SABECO, a leading beer producer in Vietnam, and Grand Royal Group, the largest whisky player in Myanmar.

During Q4 FY2022, revenue and earnings before interest, tax, depreciation and amortization (EBITDA) grew 33% and 39% respectively from a low base.

This is as Thailand was still under strict COVID restrictions last year with numerous provinces in partial lockdown.

The outlook for FY2023 remains positive on stronger on-trade sales, improved sales on major events, including the FIFA World Cup and an improved domestic economy with the return of foreign tourists.

ThaiBev’s gross margin has also remained stable despite volatile commodity prices, an indication of its pricing power.

With the reopening in Thailand and Vietnam, ThaiBev could benefit from further volume growth.

5. Keppel REIT

Another way to defend yourself against the volatile market is to look into dividend stocks such as Singapore REITs.

I believe that Keppel REIT (SGX: K71U) is one of those given its 12-month forward dividend yield of 6.5%.

The office-focused REIT has a strong track record and owns 11 properties.

In Q3 2022, Singapore office rents reached a 14-year high, exceeding their pre-pandemic peak, providing an earnings boost to commercial REIT players such as Keppel REIT.

The acquisition of Keppel Bay Tower also boosted earnings with distributable income coming in at $165.4 million during the first nine months of 2022, an increase of 3.4% from a year ago.

Committed occupancy increased to 96.8% while average signing rent for Singapore office leases continued to rise to S$11.47 per square foot per month.

Keppel REIT will also be distributing S$100 million out of its accumulated capital gain over the next five years as it celebrates its 20th anniversary in 2026.

Stay defensive amid rising fear of recession

Looking ahead, the geopolitical and macro uncertainties will continue to weigh on the stock market.

While opportunities will continue to emerge for long-term investors during this volatile market environment, one of the stress-free measures is to build up some defensive stocks in your portfolio.

With Sheng Siong, UOB, Raffles Medical Group, ThaiBev and Keppel REIT, investors can have various defensive options that fit into their portfolio.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

Share this

Subscribe to our weekly
newsletter and stay updated!