2016 proved to be a volatile year with multiple political events and weak corporate earnings. Overall, the market still saw growth despite all the challenges in the year.
On the bright side, analysts from UOB Kay Hian believe that corporate earnings could recover in 2017 and the target for the Straits Times Index will be at 3,000.
Challenges for the coming year will include policy changes from the inauguration of the new US president and the aftermath of Brexit. Ongoing populist movements taking place globally could have a huge impact with Europe being the next in line for it.
Moving back to home ground, given the lacklustre recovery and moderate valuations, UOBKH suggests that investors should look at themes such as laggard blue chips, companies with viable yield and earnings, as well as scalable companies. It highlighted finance, healthcare and REITs as the top three sectors with stocks that will be able to fit the above investment themes. Here are five stocks investors should look at:
1. Oversea-Chinese Banking Corporation
OCBC is a laggard blue chip stock in the finance sector with visible earnings and dividend yield. OCBC stands to benefit from the US Federal Reserve interest rate hike and analysts anticipate a higher net interest margin (NIM). Worries from non-performing loans subside as provisions arising from their loans to the offshore and marine (O&M) sector have been made.
The bank continues to drive its revenue through a strong wealth management unit and its ability to keep credit costs low in comparison to its peers. Analysts from UOB Kay Hian Research gave OCBC a “Buy” call with a target price of $10.45.
2. Singapore Telecommunications
Singtel is a laggard blue chip stock with strong visibility in its earnings and yield given the nature of its business. Despite the announcement of TPG as the fourth telco in Singapore, Singtel is expected to be the least affected by this among the current three mobile operators. Its mobile business in Singapore currently accounts for 13 percent of the total group revenue.
Diversification of its operations across multiple countries also made the impact of new competition less damaging to Singtel. Analysts from UOB Kay Hian Research gave Singtel a “Buy” call with a target price of $4.54.
ComfortDelGro is a laggard blue chip stock that is known for its defensive nature as it offers investors a decent yield of 3.63 percent according to Bloomberg. Its strong balance sheet with earnings and dividend yield visibility makes it one of the recommended stocks to buy.
Analysts from UBS Research believe that the recently announced acquisition of CabCharge Australia should be funded by ComfortDelGro without any significant strain on its balance sheet. They gave the stock a “Buy” call with a target price of $3.43.
4. Frasers Logistics and Industrial Trust
Frasers Logistics and Industrial Trust provides a stable dividend yield of 6.83 percent based on its IPO prospectus and price of $0.89. The REIT was only listed in June 2016 and offers investors a pure play in Australia’s logistics and industrial segment. Distribution per unit for the REIT is 2.8 percent higher than forecast, and it is expected to give investors a higher yield given the stronger-than-expected 4Q2016 results.
Analysts from UOB Kay Hian Research gave the REIT a “Buy” call with a target price of $1.11.
5. Raffles Medical Group
With expenditure on healthcare rising globally, Raffles Medical is one of the stocks that investors can consider for a longer term investment. Its exposure in emerging countries will provide long term growth opportunities as the rising middle class in these countries can afford more and better healthcare.
On top of that, its fall of 11.4 percent from its one year high of $1.67 implies a good opportunity for investors to buy low. Analysts from UOB Kay Hian Research gave Raffles Medical Group a “Buy” call with a target price of $1.70.