STI 4 Apr 2017Straits Times Index, Source: Bloomberg

Based on the highlights by industry experts during Maybank Kim Eng’s Invest ASEAN 2017 conference, keeping up with the changing times and margin protection from increased competition is the key theme in the market.

Times are changing with nationalistic agendas are on the rise in ASEAN and anti-globalisation sentiments growing in Western countries, not forgetting Trump’s presidency being the most prominent thus far.

The outlook of Singapore’s market from attendees of the conference varies according to industry. However, most attendees remained cautiously positive based on the general overall impression analysts from Maybank Kim Research had. In this challenging environment, companies will need to focus themselves on margin protection.

Analysts from the street favour these four Singapore stocks, believing that they will continue their growth amidst the current headwinds persisting in Singapore’s economy.

1. Best World International Limited

5ERSource: Best World International, Bloomberg

After gaining its direct selling licence in China, sales for Best World International Limited (SGX: 5ER) are gaining momentum. Currently, the company has over 250 outlets in China selling Best World International’s skincare products as demand continues to grow along with “interest from members of other direct-selling companies”. A licence for direct selling in China is valuable as direct selling remains illegal in the country.

Market coverage is expected to increase as the management plans to expand to Changsha City, Hunan. Presently, Hunan province is Best World International’s largest market in China.

In the next five years, the company plans to increase its sales in China to CNY2.6 billion which will place them within the top 15 of direct sellers in China. For Taiwan, the company aims to grow its sales by an estimated 60 percent to TWD 4.6 billion.

Analysts from Maybank Kim Eng Research gave Best World International a “Buy” call with a target price of $2.34.

2. CapitaLand Commercial Trust

C61USource: CapitaLand Commercial Trust, Bloomberg

Despite the high supply of office properties in the market, quality remains the key for sustainability which does not appear to be a problem for CapitaLand Commercial Trust (CCT; SGX: C61U). This comes as the management continues to drive for initiatives that may create value for its investors that includes the possibility of Golden Shoe’s redevelopment.

However, operating environment for CCT is expected to remain tough given that the higher passing rents that were locked in three to four years ago will result in negative rental reversions ahead. Distribution Per Unit (DPU) will remain stable as it has a $20 million tax-exempt income that in may distribute.

With a target yield of five percent, analysts from Maybank Kim Eng Research gave CCT a “Buy” call with a target price of $1.81.

3. Raffles Medical Group

R01Source: Raffles Medical Group, Bloomberg

Singapore’s medical sector remains the darling of investors despite the woes in the economy. Raffles Medical Group Limited (SGX: R01) is the prized gem of the sector and has been actively diversifying its exposure to Singapore by expanding overseas. This will also drive revenue exponentially in the long run given the growth limitations in Singapore.

Raffles Medical’s planned Shanghai hospital is making good progress and is on track to open in early 2019. As China’s financial hub, Shanghai has immense potential for Raffles Medical given the high population and income level. Currently, they are in the discussion to build hospitals in other cities such as Shenzhen.

In terms of the mass market, Raffles Medical is still in the process of restructuring MC Holdings which was acquired in 2015 from International SOS. MC Holdings is a provider of comprehensive clinical care and operates 10 clinics in Cambodia, China and Vietnam.

Expansion in Singapore remains on track with the extension of Raffles Hospital to open in late 2017. Meanwhile, capacity utilisation remains efficient as Raffles Medical has tied up with the government to provide emergency care.

Analysts from Maybank Kim Eng Research gave Raffles Medical a “Buy” call with a target price of $1.70.

4. Singapore Medical Group

5OTSource: Singapore Medical Group, Bloomberg

Singapore Medical Group Limited (SGX: 5OT) gained 270 percent in the past year after returning their profits in the black. Its strategy is to acquire promising medical group and its doctors when they are undervalued in exchange for equity in Singapore Medical. The management expects revenue to growth with stronger margin in the next few years.

Threats from competition remain low as there is an absence of trends of government doctors leaving the public service to start a competing organisation. A key concern is having insufficient members for the group in follow-up and execution after its CEO sources the deals.

Analysts from Maybank Kim Eng Research gave Singapore Medical a “Buy” call with a target price of $0.67.

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