Investors looking out for stock picks by leading investment banks should pay attention to the newly published list of stock picks released by Maybank Kim Eng Research (MBKE).
UOB is MBKE’s preferred pick in the banking sector as it opines that the current pricing strategy and discipline at UOB will help it to maintain the best customer spreads in the sector.
Currently, UOB’s “selective-lending” strategy is working well for the firm as it monitors its pricing strictly to ensure that their margins are not significantly compressed by high-quality customers (those who have lower lending rates due to lower credit risks).
UOB has also taken a step ahead in the provisioning cycle by pre-emptively building up its general provision buffer, which currently stands at 1.2%, higher than that of peers, making it well-shielded from further deterioration in the oil and gas sector.
In addition, the bank’s loan growth expectation was recently increased to 5.0% to 9.0% after revealing its results for the first half of the year and analysts are expecting the positive trend to continue as they raise their expectations.
Overall, MBKE is confident about UOB Limited (SGX: U11) future prospects, giving it a BUY call with a target price of $26.40.
2. Ascendas REIT
MBKE has their eyes in the business parks segment of industrial space as they expect the sector to recover.
With 60% of portfolio exposure to this area, Ascendas REIT is, therefore, the best proxy for investors to gain exposure and profit off the recovery wave.
Furthermore, Ascendas REIT’s acquisition of central business district fringe office property in Queensland (Australia) has been viewed favourably by analysts as it improves the distribution per unit for investors.
It is fully occupied by quality tenants such as the State of Queensland (Department of Health), and three data centre operators, which are unlikely to move in the short term, thus providing stable earnings for the REIT.
The acquisition is also in-line with management’s strategy of trying to increase their exposure to freehold assets in Australia.
RHB has commented that Ascendas REIT’s increased exposure to Australia, which are mainly freehold properties, is positive for the REIT.
This is particularly true since these assets have in-built annual rental escalations which help to enhance the yield for Ascendas REIT.
MBKE has set Ascendas REIT’s (SGX: A17U) target price at $2.90 and gave it a BUY call.
3. UOL Group
UOL Group is also included as one of MBKE’s stock picks for investors who are keen on profiting off the expected increase in property prices in Singapore.
CIMB Research also commented that UOL Group is a sound investment choice due to its high recurring income base in rental, hotel operations and from its investments.
MBKE opines that UOL Group has the potential to unlock value in the medium term with the restructuring of holdings.
UOL Group has recently increased its interest in United Industrial Corp (UIC) to 48.96% from a previous 44.71%, which has deepened its effective ownership of UIC.
Overall MBKE gave UOL Group Limited (SGX: U14) a target price of $9.43, noting that there is plenty of room to appreciate from its current share price of $8.13 as of 28 Sep 2017 (9:40am).
Other stock picks by MBKE includes GuocoLand (SGX: F17; TP: $2.75), CapitaLand Commercial Trust (SGX: C61U; TP:$1.81), and Genting Singapore (SGX: G13; TP:$1.35).