3 Home-Grown Stocks That Need To Be On Your Watchlist
The Straits Times Index (STI) is now at its highest point since the financial crisis in 2008. While investors are showing concern of market jitters, analysts believe that there are opportunities to capture some good stocks from market overconcern. Here are three stocks that Maybank Kim Eng (MBKE), DBS and UOBKH think should be on your stock watchlist.
ST Engineering
Three years on after tough market conditions and restructuring costs, MBKE believes that ST Engineering’s growth catalysts are now falling in place.
Over the years, ST Engineering has been involved in a lot of mergers and acquisitions globally, either investing in or acquiring entities to secure technologies that can be applied or commercialised in its engineering solutions. M&As have also been carried out to justify an on-ground presence in various geographies. These M&A corporate actions have played an important part in driving ST Engineering’s revenue and profit growth cycles.
MBKE notes that ST Engineering’s aerospace Maintenance, Repair & Overhaul (MRO) is witnessing green shoots of growth from various factors: Recovery in global trade, capacity rationalisation and growth in the global aircraft fleet. The outlook for its electronics solutions also remains robust with a potential upside surprise.
With governments increasing investments in smart city infrastructure (e.g. smart street lighting, water management, metering, cyber-security), this could bring a spike to ST Engineering’s revenue in coming years. Its recent acquisitions of SP Tel and Aethon have given ST Engineering the capabilities to unlock growth in enterprise ICT, cyber security solutions and the autonomous robot market.
ST Engineering has also been focusing its efforts on forging greater integration across historically silo-like divisions. MBKE believes that it will help ST Engineering surprise on the upside on revenue (cross-selling) and cost synergies (central procurement, standardised systems) in coming 2-3 years.
BUY, TP $4.15
Chip Eng Seng
Singapore’s property market is on the cusp of an upcycle recovery across multiple segments from residential, commercial to hospitality. As a reputable homegrown property developer with solid operating and dividend track record, Chip Eng Seng offers a good investment opportunity for investors to add a proxy to the property market recovery to their portfolio.
So far, while a large majority of Chip Eng Seng’s property inventory has already been sold, profits will only be recognised gradually in the coming years. Looking ahead, Chip Eng Seng holds a solid property portfolio is valued at around $1.15 billion by UOBKH. The portfolio includes a series of future developments in Singapore and Australia.
UOBKH notes that the market has been undervaluing Chip Eng Seng due to its long-running litigation involving Melbourne Tower project. However, now with the expected sale of the Melbourne Tower, it could be a good time to buy Chip Eng Seng before it announces a special dividend. UOBKH likes Chip Eng Seng for its position as the cheapest dividend play in the property recovery. With its current 52 percent discount to revised net asset value and a 4.3 percent dividend yield, Chip Eng Seng definitely deserves investors’ attention.
BUY, TP $1.38
Banyan Tree Holdings
Banyan Tree Holdings (Banyan Tree) outperformed consensus expectations in 1Q18 with a 240 percent year-on-year growth in core profit. Its revenue grew 8.6 percent year-on-year due to higher revenue recognition from property sales as well as hotel revenue growth fuelled by strong demand in key markets like Thailand and Seychelles.
With the Thailand Ministry of Tourism targeting higher-end tourists for both Chinese and European tourist markets, Banyan Tree brand’s association with luxury is set to be a major beneficiary of this macro trend. The global upswing in economic activity is also powering broad-based growth in other key markets like China and Russia.
With the bright outlook in Banyan Tree’s key operating markets, UOBKH opines that Banyan Tree is only in the first innings of spectacular growth from its overtures in achieving an asset-light model and leveraging on strategic partners’ core competencies.
BUY, TP $1.00
