Global trade tensions and geopolitical uncertainties in Europe have unnerved retail investors. Amidst the uncertainties, other brokerages are calling investors to load up on these three stocks due to their healthy long-term prospects.
Investors Takeaway: 3 Stocks With Buy Calls For Their Improving Outlook
- Sunningdale Tech
Sunningdale Tech (Sunningdale) did not have the best quarter in 1Q18. Core net profit for Sunningdale Tech dived 25.5 percent year-on-year due to weaker sales in the consumer/IT segment and forex impact on sales. Moreover, 1Q17 was also an exceptionally strong quarter for the consumer/IT segment as Sunningdale received advanced orders from customers looking to ramp up production. Nevertheless, Sunningdale is currently working with certain customers on orders for the next generation of consumer/IT products that would drive future growth.
Despite a weak quarterly performance, Sunningdale is still generating strong cash flows. UOBKH also notes that Sunningdale is in a good financial position to leverage on any acquisition opportunities to strengthen its geographical presence or open up new customer opportunities if the opportunity arises.
BUY, TP $2.00
- Y Ventures
2018 should see Y Ventures’ past initiatives start bearing fruit, according to UOBKH. These initiatives include the recognition of sales from Faire Leather from its launch in Kickstarter in November 2017. Y Ventures also managed to secure over 20 new consumer brands from personal care brand Footpure to maternity brand Mater Mothers’ Hospital for its services.
One important aspect that UOBKH believes has been underappreciated by the market is Y Ventures’ data analytics capability. The good sales figures of self-developed labels like JustNile and Faire Leather Co are proof of its proprietary data analytics capability. The potential partnership between Y Ventures and SingPost to develop a global buying platform that will focus on cross-border purchases (AORA) could also tap onto the data analytics capabilities of Y Ventures. This could spell a new growth trajectory for Y Ventures as it taps onto the growing e-commerce market projected to grow at 25 percent CAGR.
With the share price retracing from its peak, UOBKH thinks that it presents an excellent entry opportunity.
BUY, TP $0.80
With 60 coffee shops and four industrial canteens under the Kimly brand, Kimly has been providing staple food to general consumers. As a coffee shop and food court business, Kimly has a natural defensive business that is cash generative. Its gross margins have been stable at 20 percent since FY14.
The management has guided that it will be looking to add up to 1-2 coffee shops a year and ramp up its third-party brands. With a strong net cash position and consistent recurring operating cash flow, Kimly is now also looking at acquisition targets for vertical integration. RHB believes that Kimly will be on the lookout for value accretive acquisitions or joint ventures to boost up its value proposition. With mergers and acquisitions in the pipeline, growth would be exciting in the coming years for Kimly. Furthermore, Kimly is trading below the peer average price-to-earnings of 24 times.
BUY, TP $0.43