The woes of the global market continue to drag down performance of the STI and investors are seeing the warning signs to be more selective in stock picking. Here are five stocks that UOBKH thinks will be better positioned.
Investors Takeaway: 5 Stocks To Make Your Portfolio More Robust
Valuetronics continue to enjoy healthy demand for the industrial and commercial electronics (ICE) segment. While it has not yet transpired to strong earnings this time round, UOBKH foresees a better earnings report for Valuetronics in the upcoming quarter. UOBKH highlights that recovery in the smart lighting segment is progressing smoothly. Valuetronics has also been focusing on more product innovation, which will help its consumer electronics division to continue driving stable growth in the upcoming quarters.
With continued robust growth from the ICE segment, UOBKH expects Valuetronics to be able to sustain and even surprise on its dividend payout.
BUY, TP $0.96
- ST Engineering
ST Engineering recently announced a $600 million acquisition of nacelle manufacturer MRAS. This is the company’s biggest acquisition since inception. UOBKH expects this deal to be immediately accretive, adding $0.012 earnings per share in 2019 and $0.0172 earnings per share in 2020.
This acquisition is seen as ST Engineering’s intent to move up the production value chain into an area with less competition, unlike its maintenance business. UOBKH also notes that by acquiring MRAS, its earnings will also be less orderbook-dependent on Airbus. Even with the acquisition, UOBKH forecasts ST Engineering to be able to offer an attractive yield of 4.7 percent for 2019.
BUY, TP $4.06
Singtel’s telco business is taking a positive turn, thanks to the industry consolidation in Australia. The merger between TPG Telecom and Vodafone Hutchinson Australia is seen as a positive sign for the Australian telco market as it will consolidate the market from four to three players. This will eventually lead to pricing stability instead of a continued price war among the telco players.
In Singapore, the recent worry has been about the entry of the fourth telco. However, the recent shift in attention to the change of shareholders in M1 has taken some attention off the fourth telco. That being said, Singtel is least affected by a fourth mobile operator in Singapore as overseas businesses account for about 70 percent of its profit. As fund flow comes back into laggards and defensive stocks, demand for Singtel’s shares should find some strength.
BUY, TP $3.94
OCBC’s management is expecting a significant portion of its mortgages to be re-priced in 3Q18, especially those pegged to long-term deposit rates and prime rates. With a higher interest rate environment, the upward movement in SIBOR and SOR will help OCBC achieve higher net interest margin as it re-prices its mortgages. As such, there should be ample room for OCBC to raise dividends, which is typically at 40-50 percent payout ratio.
BUY, TP $13.86
- CDL Hospitality Trusts
CDL Hospitality Trusts is facing no shortage of positive share price catalysts. From positive numbers on visitor arrivals, longer average length of stay, higher average daily room rate and RevPAR to strong supply pipeline, Singapore’s tourism industry seems to be on the trajectory of recovering. Moreover, the industry is seeing a tight supply of new rooms coming on-stream, helping to keep RevPAR buoyant. Demand-wise, our hospitality sector is also seeing a return of corporate travellers and Chinese visitors.
BUY, TP $1.86