UOB Kay Hian Research (UOBKH) is back with the latest list of alpha picks for October, listing six stocks recommended for investors.
The most recent update saw slight changes from the list in September, with Singtel being added onto the list and Cityneon removed due to its outstanding performance rising 15% month on month.
Following are the six stocks that investors should be watching.
Analysts are expecting a special dividend of $0.09 per share to be declared given the successful listing of Netlink Trust in July 2017.
Based on the successful IPO, Singtel has received $1,095.3 million in cash for divesting its 75.01% stake in the company in September 2017.
Besides being an estimated 65% of total proceeds being given out as special dividends, the rest of the proceeds will be used to invest in the core business, new opportunities, and to clear debts.
SingTel has also been benefiting from its expanding network in Indonesia and India. SingTel’s Indonesia mobile associate Telkomsel is reporting double-digit organic growth in subscriber base, and continuous increase in data usage.
Bharti Airtel is also expected to be reporting better numbers due to the massive industry consolidation.
UOB maintains a Buy call on Singapore Telecommunications Limited (SGX: Z74) with a target price of $4.53.
2. Wing Tai
Analysts at UOB are zooming in on Wing Tai’s low gearing of 2.4% which is the lowest gearing level within their coverage.
This means that the company is well able to use its debt headroom of up to $1.5 billion (rising to a net gearing level of 50%) for funding any future projects that it may want to take up, especially if it wants to buy more landbank.
UOBKH maintains Buy on Wing Tai Holdings Limited (SGX: W05) with a target price of $2.61 based on a 25% discount of its revised net asset value estimated to be $3.48/share.
Currently, Wing Tai is trading at a deep discount of 39% to its RNAV, and 0.52x price to book value.
As Qantas return to Changi Airport once again, SATS may potentially benefit from providing catering and ground handling services to the airline.
Moreover, it is also currently servicing Qantas’s sister airline, Jetstar.
With high global cargo volumes, SATS is also expected to attain higher gateway services revenue.
Considering a price-to-earnings ratio of 23.5x, and a dividend yield of 3.5%, UOBKH has given SATS Limited (SGX: S58) a Buy call with a target price of $5.40.
4. Thai Beverage
Sales volume should be increasing in the fourth quarter as sales agents typically stock up on inventory ahead of excise tax hikes.
Also, profit margins may even increase should the firm be able to increase their average selling price to pass on 100% or more of the increase in excise taxes.
Thai Beverage Public Company Limited (SGX: Y92) has been given a “Buy” call by UOBKH and now has a target price of $1.09.
With an impressive R&D team on board, Memtech holds more than 120 patents and definitely has an edge above the rest of its competitors due to their superior technology.
As one of the leading precision engineering manufacturers of liquid silicone rubber products, it has won entry into the supply chain of Beats by Dre.
UOBKH has given Memtech International Limited (SGX: BOL) a “Buy” call with a target price of $1.15, pegged to the sector’s price-to-earnings ratio of 12.5x.
Share price will certainly increase if there is a better than expected earnings reported in November for its third-quarter results.
6. CITIC Envirotech
As the global environmental protection and water company with cutting-edge technology protected by intellectual property rights, CITIC Envirotech is moving into new areas of growth in river rehabilitation, sludge treatment and the circular economy (keeping resources in use as long as possible).
With having access to clean water as a top priority of the Chinese government, we expect that the company’s superior technology will allow it to win new contracts to increase revenue.
UOB has marked CITIC Envirotech Limited (SGX: CEE) as a Buy with a discounted cash flow-based target price of $1.10.