This article first appeared on our Shares Investment eBook “Stocks Worth Considering In 2017”. This particular article is based on an MBKE report dated 13 December 2016, with an investment horizon of 12 months.
MBKE recommends is a bottom-up strategy with a focus on companies with a strong business model in sectors that are driven by secular growth. MBKE highlights that stocks with (1) low earnings cyclicality, (2) cash flow stability and low balance sheet risk within a preference framework of secular growth drivers and (3) business models with demonstrated track record will provide potential upside for investors in a year of uncertainty. Here are 6 stocks that we’ve shortlisted.
1. Jumbo Group
Jumbo Group is one of MBKE’s top recommendation for its combination of a resilient home base and successful overseas thrust that should provide catalysts to outperform. Its focus on seafood with a wide clientele appeal and strong branding among local and foreign food lovers make it the default choice for premium seafood delicacies.
Jumbo’s core Singapore market provides stable incremental growth while overseas markets (China for now, but could include Thailand in the future) are expected to provide higher growth quantum in coming years. Best of all, valuations have not yet priced in the expected catalysts.
Jumbo Group (SGX:42R) – BUY, Target price: $0.78
2. Ezion Holdings
Among the O&M sector, Ezion Holdings is one of the relatively more resilient stocks. Ezion’s “exposure to production and maintenance services allows them to keep most of its assets utilised and to generate free cash flow from FY16-18E.” Ezion has a high chance of surviving the current downturn because there are no immediate balance sheet risks. Ezion’s five new assets scheduled for contribution in 1H17 could serve as a near-term stock catalyst to drive earnings per share (EPS) growth.
Ezion Holdings (SGX:5ME) – BUY, Target price: $0.42
3. Bumitama Agri
Having planted an average of ~9,000 hectares (ha) of nucleus area per year over the past decade or so, Bumitama Agri is considered one of the fastest-growing plantation companies. Bumitama Agri now has a “sizeable nucleus planted area of 120,000 ha of relatively young oil palm trees”.
With an average age of around eight years old, Bumitama Agri is expected to grow its fresh fruit bunches (FFB) output at a 10-percent CAGR over the new few years up to 2018. Moving forward, MBKE expects FFB yields to normalise and grow sharply by 25 percent in 2017.
Bumitama Agri (SGX:P8Z) – BUY, Target price: $0.97
4. UOL Group Limited
In a tough operating environment for property developers, UOL remains as one of the worthy developers to invest in, according to MBKE. UOL has the “highest share of recurring income base amongst locally covered developers” with a “conservative residential portfolio with high pre-sales and no exposure to qualifying certificates (QC) penalties over the next two years”.
Moreover, with a massive 43-percent discount to the underlying market value of its assets, it is high-reward-low-risk for investors.
UOL Group Limited (SGX:U14) – BUY, Target price: $7.37
5. Raffles Medical Group Limited
As Singapore’s leading integrated healthcare organisation with a “robust track record and exciting development plans in China”, Raffles Medical Group Limited is one of the top picks among locally listed stocks. MBKE reckons that Raffles Med’s local expansions will support medium-term growth, while long-term growth will be driven by its expansions in China. Moreover, MBKE believes that the market has not fully priced in the potential catalysts from its expansions in China.
Raffles Medical Group Limited (SGX:R01) – BUY, Target price: $1.85
6. CapitaLand Commercial Trust
MBKE recommends Capitaland Commercial Trust (CCT) as it is one of the better-positioned REITs to ride through near-term headwinds in the sector with its “favourable lease expiry profile and strong weighted average lease expiration (WALE) of 6.8 years”. Unlike distributions for office REITs that are supported by non-core distributions, CCT’s distribution highlights the underlying fundamentals of its properties. CCT is currently valued at a 14-percent discount to the value of its offices in Singapore.
CapitaLand Commercial Trust (SGX:C61U) – BUY, Target price: $1.81
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