Blue chips have always been the focus of most Singaporean investors. However, instead of solely focusing on blue chips, RHB recommends investors to add some quality small-mid cap names in to their portfolio to increase the potential returns. Here are 6 small-mid cap gems that RHB thinks investors should be adding into their portfolio.
Investors Takeaway: 6 Gems In SG Small-Mid Cap Space
RHB remains highly positive on GSS Energy’s prospects in the short term as it expects a number of potential catalysts, such as the discovery of hydrocarbon in its Trembul Operating area. Notwithstanding that, RHB thinks that the precision engineering segment will be spurred by more new projects in the automotive and consumer spaces.
BUY, TP $0.25; Current share price $0.142
HRnetgroup saw strong growth in 1Q18, especially in its bottom line. Apart from that, Human Resource Management firm also has a $290 million cash war chest to fund potential acquisitions. In addition, HRnetgroup generates a free cash flow of $15-20 million per annum and its operations demand little capital expenditure. The management also guided to a turnaround in Hong Kong operations, which suggests stronger organic growth ahead as well.
BUY, TP $1.14; Current share price $0.845
Despite a weak quarter in 1Q18, ISOTeam has been picked out by RHB as a small cap to own in the Singapore market. RHB notes that ISOTeam has a healthy orderbook that is valued at $84.4 million. With few large project tender results to be announced in the upcoming months, ISOTeam can expect to add onto its orderbook to bring additional visibility to its FY18 earnings.
BUY, TP $0.42; Current share price $0.35
One of the sectors that RHB is positive on for 2018 is the consumer sector. Among the consumer names, RHB prefers defensive consumer stocks that have rich cash flow generation. Kimly is the top small cap consumer stock that RHB recommends.
Having announced a positive 2Q18, Kimly’s outlook for FY18 is looking positive. RHB believes that the new outlets which Kimly had invested in during 2017 and those coming up in 2018 are likely to be profitable in 2019-2020. In addition, RHB highlights that growth will be exciting for Kimly in the coming years with mergers and acquisitions in the pipeline for coffee shop and food court operator.
BUY, TP $0.43; Current share price $0.35
Malaysia’s recent removal of goods and services tax (GST) will act as a positive catalyst for Silverlake Axis, according to RHB, as it would help to maintain the group’s margins going forward. In addition, Silverlake Axis is currently on its earnings cycle’s bottom. Over the last few months, Silverlake Axis managed to clinch several new key banking projects which have bumped up its orderbook significantly to over RM380 million. This provides visibility to strong earnings growth in FY19-FY20.
BUY, TP $0.65; Current share price $0.545
Valuetronics Holdings (Valuetronics) share price slipped in the last two months as worries over trade war between US and China escalated. However, with US and China still engaged in talks to resolve their trade dispute, the situation is not as malignant. Moreover, fundamentals and growth prospects of Valuetronics is still largely intact. Thus, the selldown of Valuetronics is overdone according to RHB. Investors should be looking at it as an opportunity to buy the stock at a discount.
BUY, TP $0.96; Current share price $0.76