In this article, we continue to highlight some of CIMB’s top alpha picks for the New Year. For investors who are seeking to outperform the market, here are four large cap stocks that CIMB thinks will fit your investment goal in 2019.
Investors Takeaway: Kick Off 2019 With These 4 Alpha Large Caps By CIMB
According to CIMB, CapitaLand managed to put in a strong performance in 2018, achieving a 9M18 return-on-equity (ROE) of 6.9 percent. This puts it well on track to hit its annual ROE eight percent target and positions CapitaLand for a strong year in 2019.
Heading into 2019, CIMB notes that strong capital deployment following the divestment of $4 billion of assets and $6.1 billion of new investments announced to-date should continue to drive forward ROE expansion.
In 2019, CapitaLand continues to put focus on its rental income segment. CapitaLand is looking to underpin its rental income with its mall business and new forays into German office properties. 11 upcoming malls are set to open in 2019 in China and Singapore to help CapitaLand grow its recurrent income base.
Given its strong balance sheet and net debt-to-equity ratio of 0.51 times, CIMB highlights the significant headroom for CapitaLand to grow its AUM, leading to the recent announcement of the proposed acquisition of Ascendas-Singbridge.
BUY, TP $3.55; Current share price $3.30
- CDL Hospitality Trusts
2018 was not the best of year for CDL Hospitality Trusts as the Trump-Kim summit created an unexpected negative impact on occupancy. Other negative factors include refurbishment of Orchard hotel and closure of Dhevanafushi Maldives Luxury Resort. Moving forward, CIMB expects 2019 to be a better year owing to the anticipated recovery of the hospitality sector in Singapore, the resumption of DPU growth at Orchard Hotel and the Maldives Luxury resort. CIMB also notes that CDL Hospitality Trust is on the lookout for more acquisition opportunities after its maiden entry into Italy (Hotel Cerretani Florence).
BUY, TP $1.63; Current share price $1.56
- City Developments
City Developments’ share price has underperformed the STI in the past 12 months, largely due to the property cooling measures. Its current share price translates to a 50 percent discount to RNAV, which CIMB views as a beaten down valuation that is attractive for entry for the long term.
City Developments has outlined its strategic growth plan, enhanced and transformed its asset portfolio and business operations. The strategic plan includes improving asset management activities (including AEIs) to increase yields of existing properties and strategically invest in enterprise-driven initiatives. The management has set a long term target to achieve $900 million recurring EBITDA in 10 years’ time (vs $599 million in FY17) by growing fee income and new capital deployment.
BUY, TP $10.65; Current share price $8.79
Compared to its peers, OCBC has been holding off on repricing its mortgages till 3Q18. As a result, OCBC lagged behind its peers in net interest margin. However, this means that there is still room for OCBC to benefit from mortgage repricing to lift net interest margin. OCBC Wing Hang also has significant room to benefit from the prime rate rise.
According to CIMB, having taken a pre-emptive funding strategy to shore up its liquidity buffers, OCBC is poised to reap the benefits of its strategy in 2019. OCBC’s built-up liquidity buffers will moderate funding cost pressures in the rising interest rate environment. This will help OCBC to further expand its net interest margin in 2019.
BUY, TP $14.00; Current share price $11.74