SINGAPORE (Feb 22): DBS is picking growth stocks Genting Singapore, Thai Beverage, UOB, SGX, Sheng Siong, Bumitama Agri and First Resources to benefit from the expansionary Budget 2017 and expects them to offer EPS growth of between 11% to 83%.

The research house also like ST Engineering as a key proxy to benefit from smart nation initiatives while offering an attractive dividend yield of 4.1%.

In a Tuesday report, lead analyst Janice Chua says Budget 2017, though expansionary, is sufficiently prudent to steer Singapore through the economic transition.

With S$2.4 billion set aside to pursue recommendations laid by Committee of Future Economy (CFE) committee, the Budget also lays the groundwork for medium term growth.

“With the S$600 million in International Partnership Fund to co-invest with Singapore companies to expand globally, this could spur more M&A deals,” says Chua.

In terms of infrastructure projects, Chua expects them to be accelerated in the construction sector as S$700 million worth of public sector infrastructure projects will be brought forward to start in FY17 and FY18.

However, Chua says DBS will only turn positive on ready-mixed concrete (RMC) players like Pan-United, Hong Leong Asia and Lian Beng when the pricing and volume outlook for RMC improve.

And although the introduction of volume-based duty of 10 Singapore cents/litre of diesel will increase the cost for taxi drivers, this should be offset by the cut of S$850/year on the special tax for diesel taxis.

“Overall, we expect the impact on ComfortDelgro to be muted,” says Chua who is maintaining its “buy” recommendation on the stock with a target price of S$2.94.

Meanwhile, to help the offshore & marine sector, the foreign worker levy hikes will be deferred by one more year till end Jun 2018.

Chua says the move could save Keppel O&M and Sembcorp Marine S$3-5 million respectively in 2017-2018.

“While this might not be a very significant amount, every bit helps given the challenging operating environment and plunge in profitability,” says the lead analyst.

As for the Straits Times Index, Chua says the momentum should drive up the benchmark index and has revised the STI target higher to 3,250 from 3,150.

Chua expects STI earnings growth of 9% and 5.9% for FY17F and FY18F respectively, given the earnings revision trend has turned a positive for FY17F and FY18F for the first time in two years.

But in the short-term, she expects a pause to the current rally given the uncertainty over a possible March rate hike and the French elections in April that could lead to more volatility.