The last few days of 2018 were a roller coaster ride for investors around the world. The US stock market sunk into correction territory before rebounding with the highest daily gain in US history. DBS foresees uncertainty to continue affecting the market following a climbing wall of worries from trade war to interest rate hike to currency turmoil.
For investors, DBS recommends investors to stay defensive with stocks in these four investment themes:
- Defensive plays with strong earnings visibility
- Yield play with growth
- Bombed out value play
- Trade diversion beneficiaries
Investors Takeaway: Defensive Stocks With Strong Earnings Visibility By DBS
According to DBS, Yangzijiang Shipbuilding (Yangzijiang) holds a strong order book with a value of US$4 billion as of 3Q18. This implies a healthy book-to-bill ratio of roughly two times to provide revenue visibility for the next two years.
Based on its order book, Yangzijiang is now ranked no. 1 in China and no. 4 in the world. In 2019, the management targets to secure new orders of US$1.8 billion0 in 2019 to maintain its revenue coverage at two times. This will keep Yangzijiang’s order book at a healthy level which will keep operational activities at optimum.
BUY, TP $1.82; Current share price $1.29
For long term investors who are looking for good investment opportunities for the long term, ST Engineering is definitely one to look out for. Apart from its stable core business, ST Engineering is also sitting at the cusp of the next phase of its growth story while trading at reasonable valuation.
The recent acquisition of nacelle systems provider MRA Systems showcased ST Engineering’s intention to create inorganic growth. Furthermore, ST Engineering continues to be making good progress in the fields of logistics automation and systems integration for electric and autonomous vehicles. This will allow ST Engineering to tap on to new markets to drive its revenue.
ST Engineering will begin selling its recently developed suite of adaptable, scalable autonomous material handling equipment for warehouse, airport, seaport and manufacturing facilities to capitalise on the trend of logistics automation starting 2019.
DBS added, another area of growth that ST Engineering is targeting is the smart city segment. The smart city market is set to become thrice the size of the global MRO market. As the Singapore government pushes for smart technology usage across the utility, healthcare, housing and transport spaces, ST Engineering is aiming to more than double its smart city revenue.
BUY, TP $4.15; Current share price $3.58