Time flies, and we are already in April! And as we enter into a new month, it is also time to update ourselves with the Alpha Picks of the month selected by UOB Kay Hian. March was not a great month for the STI as it slipped 2.6 percent month on month due to rising concerns of a trade war and also due to the rising interest rates environment. However, there’s some good news for investors as most of the Alpha Picks selected did better than the STI in March.
Going into April, UOB Kay Hian is focusing on the “defensives”, adding Sheng Siong into their basket with expectations of stronger growth in 2018. Singtel is also another one of their “Buy” stocks due to the geographical diversification of their business which reduces volatility.
Here is a closer look at the various Alpha Stocks selected by UOBKH:
- Sheng Siong Group
Sheng Siong’s four new stores are expected to bring about stronger growth for the group. The rising emphasis on “new and smaller outlets” are expected to increase efficiency for the stores. Also, changes made to their fresh-food sales mix and higher bulk discounts from brands that Sheng Siong are partners with will likely increase gross margin of the group.
Catalysts to drive the share price up is its ability to successfully bid for new stores and be able to boost sales in existing stores.
The Initial Offering Procedure of Great Eastern Life Malaysia is expected to be a strong driver for share price as the management divest their 30 percent shareholding. The confirmation of the plan is expected to happen in June as Great Eastern will have to submit plans to Bank Negara, and the plan is likely to be executed in the later half of the year. The IPO will raise proceeds for the group to reinvest in its primary business of commercial banking, likely to spur growth and rising share price.
- DBS Group
With increasing transparency on their dividend policy, it is expected that DBS will pay out about 57 percent of their profits for this year, returning the excess capital to investors. This also signals to investors the low likelihood that the bank will take over another regional bank. Further interest rate hikes will be helpful for the bank as net interest margin continues to climb.
- Keppel Corporation
Expecting a recovery in the oil and gas market, Keppel is a proxy that investors can use to ride the waves and see growth in the next few quarters. Rising assets under management also help to ensure higher recurring profit for the group. Should there be more successful bidding of contracts, it will be great news for the group.
- City Developments
With the residential property sector well set on its rod of recovery, City Developments is an attractive buy with the “largest residential landbank of more than 2090 attributable unit”. Hence those who want to have a piece of the pie of the growing residential property market may choose to invest in the stock.
- CDL H-Trusts
Rising corporate travel and travellers from China will help CDL H-Trusts to experience higher growth amidst tightening supply of hotels in Singapore as growth in the number of rooms is much lower in the next three years. As daily rates increase, revenue per available room grew by 1.1 percent in the fourth quarter of 2017 despite a slight 0.1 percent decrease in occupancy rate. Overall the outlook for the trust remains positive.
Singtel’s associate Telkomsel continues to perform well in Indonesia, with “double-digit growth in subscriber base and revenue growth from voice and data”. Also, given that Singtel is widely diversified with overseas businesses contributing to 70 percent of its profits, the group is well-shielded from the impending disruption expected to be caused by the fourth telco operating in Singapore. Further, Singtel boasts of strong cash flow and healthy dividend yield which is attractive for investors.
- Wing Tai Holdings
Wing Tai Holdings continues to be in a net cash position and has a significant debt headroom of up to $1.6 billion if it leverages up to 50 percent. This will give it enough capital to increase the amount of landbank purchased to increase its presence in its main market, i.e. Singapore, Malaysia and Australia. Investors can also watch the launch of Serangoon North Avenue 1 to track the performance of the group.
- Citic Envirotech
Still banking on the fact that access to clean water is an essential need of high priority to the Chinese government, analysts are expecting greater performance from the stock which is likely to win more contracts due to its “impressive track record and technology”. It’s offering of 83.2 million new shares at 14.8 percent premium signals that management opines that its shares are undervalued at current prices, and investors may seek to enter.