With the cuts in TPs, we now arrive at a fair Straits Times Index (STI) target of 2,080 over the next 12 months.
Over the past few weeks, we have reviewed the financial forecasts and TPs for all the stocks under our coverage. When economic conditions eventually improve, these companies could return to similar levels of profit or even exceed their previous peak profit levels. These are the companies that are seen to survive this downturn. Even with the deterioration in business conditions, banks will continue to support these corporates for their working capital and capital expenditure needs. On the other hand, there are corporates whose balance sheets are strong. Investors are closely scrutinising companies that have overstretched via massive borrowings to fund their growth, or have yet to generate sufficient operating cash flow, as these corporates are at the highest risk of breaching bank covenants if business conditions worsen further. The market remains concerned about the impact of global economic deterioration on corporate earnings. TARGETING survivors: Some corporates may not have banks' support through this rough patch.
