It is that time of the year again as we approach the end of the year: Portfolio reviewing and rebalancing.
What are the stocks that we should be selling and taking profits? Which are the stocks that we should add into our portfolio to replace the stocks that we have sold?
To help investors narrow in on the top bargains in the market to add to our portfolio, here are six stocks various analysts have highlighted in this two-part series (stocks with potential for double-digit returns).
1. Chip Eng Seng
Chip Eng Seng might not sound anything like the kind of sexy property stocks that everyone wants to own, but DBS Research believes that it is one of those undervalued stocks that is often overlooked by the market.
Trading at substantial discount in a property market upturn
Chip Eng Seng started out as a construction company. It has since expanded its scope and scale over the past five decades.
It has gradually diversified into property development, investments and hospitality businesses.
Today, Chip Eng Seng is a property development and construction play that is trading at a huge discount to both its RNAV and NAV.
More sales to be recognised in 2018
Chip Eng Seng has been acquiring local and overseas projects in the recent years and these projects are set to be included for revenue consideration in FY17-18F.
DBS Research also expects over $1 billion in pre-sales from upcoming launches will further underpin its NAV growth in the near future.
That’s on top of the property developer’s recently approved purchases at Woodleigh and Changi Garden.
With these developments ripening in the near to medium-term, DBS Research is bullish on Chip Eng Seng’s potential to reward investors who jump on board earlier than the rest considering the discount.
DBS Research: Chip Eng Seng Corporation Limited (SGX: C29) – BUY; $1.18
2. Banyan Tree
The market has been slow to react to the turnaround story of Banyan Tree, but UOB Kay Hian Research (UOBKH) believes that this is an opportune time to make the most gain from Banyan Tree.
According to UOBKH, Banyan Tree’s management “shared their optimism for the future” and “reiterated their strategy to offload assets, increase revenue and improve margins”.
Rich Thai landbank ready for development
Banyan Tree currently holds the ownership to a beachfront landbank in Thailand with gross development value of $5-6 billion. Banyan Tree plans to develop it over the next 20 years to increase revenue and improve margins.
Tapping on expertise and network of Accor
Recently, Banyan Tree and Accor announced a partnership to expand in today’s competitive environment.
UOBKH foresees the deal between Banyan Tree and Accor to enable Banyan Tree to capitalise on Accor’s strong sales network to acquire for new hotel management contracts.
The partnership could also bring in more business for Banyan Tree’s existing hotels worldwide as customers will be able to book Banyan Tree hotels through Accor’s website.
UOBKH: Banyan Tree Holdings Limited (SGX: B58) – BUY; $0.92
3. Samudera Shipping
Global trade reflation theme
Global trade has been positive in countries in the Asian region, such as South Korea and Taiwan, which registered record levels last month. IMF also recently upgraded global growth for both 2017 and 2018.
With the latest trade data from China indicating global trade gaining strength, the shipping industry is expected to recover in tandem with increasing global trade.
KGI Securities Research highlights that the near-synchronous global economic growth is picking up momentum and should add further support for shipping stocks such as Samudera.
Low valuation gives investors potential for a good return on investment
Samudera Shipping is currently trading at a huge discount to global shipping peers. Global shipping peers are trading at an average of 1.5x P/B while Samudera is trading at 0.4x P/B.
Samudera also has a very strong balance sheet: Its net gearing of 0.2x is much lower vs peers’ average of 1.8x.
KGI Research: Samudera Shipping Line Limited (SGX: S56) – BUY; $0.38