Investors who are looking for new stocks to invest in can consider the following three stocks which have been identified with growth potential. There are many different strategies that companies adopt to achieve their growth goals and below are three different firms which have seen positive results from their various growth efforts.
- Singapore Medical Group
Singapore Medical Group’s (SMG) has been focusing on consolidating and expanding their market share as their growth strategy, given the finite industry growth in Singapore. To support that strategy, they “aim to build a good brand name and a leadership position”, critical for them to recruit doctors into their five different specialties department. Additionally, a reputable brand name can also help to attract overseas patients as they expand their reach abroad.
SMG’s expansion in Vietnam has been fruitful, with one of its medical centres already profitable, and the second one should start to be profitable by the end of 2018. Its operations in Vietnam are more extensive as compared to Singapore, hiring around 60 doctors as compared to having 45 back in Singapore. Primarily, the medical centres there focus on paediatrics, obstetrics and gynaecology (O&G), and health screening. Similarly, after more than three years of operating in Indonesia, its Indonesia operations have also finally broke even.
Analysts from MayBank Kim Eng are looking out for further acquisition actions, with every $1 million profit acquisition potentially raising target price by at least 7 percent. However, integrating merger and acquisition targets can be difficult and costly, and failure to do so will be detrimental to the entire operation of SMG.
Overall, MayBank Kim Eng maintains its “Buy” call on SMG with a target price of $0.78, representing an upside of 39.3 percent to its current share price of $0.56.
- Keppel Corporation
Keppel Corporation (KepCorp) has been driving growth through its multi-business strategy, and it has proven to be beneficial in 2017 as the group reported a 11.2 percent year on year increase in net profit despite the downturn in the oil and gas sector.
The top contributor was the property sector which accounted for 56 percent of the group’s nine months cumulative earnings for 2017. This trend is expected to continue as the group is focusing on increasing its presence in the core and growth markets. The Tianjin Eco-city has been reporting positive results with rising average selling price on the residential land from 2016.
For the offshore and marine sector, KepCorp will be focusing on new order flows. Already, the oil giant has secured about $1 billion worth of new orders this year. Next year, new orders of at least $1.5 billion are expected. The offshore and marine division is actively capitalising on its “production assets, specialised vessels and the growing gas market as well as exploring ways to repurpose its technology in the offshore industry for other uses”.
KepCorp has been increasing its core competency to consolidate its strength. For example in the investment division, Keppel Capital is expected to help KepCorp to recycle its capital and expand the capital base through co-investments to help the group grow without straining its balance sheet.
KepCorp is also trying to pursue expansion through establishing a new business unit Keppel Urban Solutions to provide “end-to-end integrated master developer of smart and sustainable precincts in Asia-Pacific”, which has the potential for growth amidst rapid urbanisation in different parts of the world and the rising focus on being sustainable.
Overall, OCBC investment analysts have placed a “Buy” call on the stock with a slight increase in fair value from $8.31 to $8.41.
- Ascendas India Trust
Ascendas India Trust (A-ITrust) has acquired six Indian warehouses for $112.5 million which has been seen as a “transformative transaction” which will help to fuel the next phase of growth for the trust. Analysts at DBS Research expects that the trust will deliver “a S-REIT leading 3-year Distribution Per Unit with compound annual growth rate of 9 percent, three to four times the average S-REIT”.
The acquisition of the new warehouses should increase A-ITrust medium-term earnings. Given its sponsor Ascendas-Singbridge’s strong historical performance in the Asian warehouse industry, it is likely that A-ITrust will be able to successfully expand into this sector as well.
With the unused land-bank and strong sponsor pipeline, A-ITrust will have access to over 5 million square foot of floor area, coupled with the recent addition of the Indian warehouse space. Meanwhile, we see A-ITrust’s ability to execute is further enhanced by its strong balance sheet.
Overall, investors should be mindful that a decline in Indian economy will result in lower rents or delays in completion of the acquisitions and development plans which will be the key risk facing the trust.
DBS research has placed a “Buy” call on this stock with a revised target price of $1.25.