The Trump effect that had buoyed global markets has ironically turned to take its toll on as tensions with China ratcheted up a notch. Despite the underperformance of the Straits Times Index in 2018, UOBKH’s top picks managed to outperform the broader market last year.
Given UOBKH’s good track record, it may pay off to heed UOBKH’s top picks for 2019.
Investors Takeaway: 4 Investment Ideas For Alpha In 2019 By UOBKH
- Recovery Of Thai Beverage
According to UOBKH, with the dismal share price performance in 2018, there is a good chance Thai Beverage (ThaiBev) will fare much better this year. Since the start of the year, the stock has already risen over 20 percent to $0.735. With a $0.80 price target, UOBKH sees almost another nine percent potential upside, with limited downside risks.
ThaiBev: BUY, TP $0.80; Current share price $0.730
- Bank On The Banks
Among the large caps, UOBKH favours the banks as one of its top picks. UOBKH cites the continued loan growth and stable net interest margin (NIM) as the key reasons. Between DBS and OCBC, UOBKH has a preference of OCBC over DBS for its potential to catch up in NIM expansion and dividend payout. From a valuation perspective, OCBC is also trading at a more attractive level, i.e. more than -1 standard deviation (SD) away from its long term price-to-book value mean. UOBKH also notes that both stocks offer relatively attractive dividend yield of at least four percent.
OCBC: BUY, TP $14.05; Current share price $11.40
DBS: BUY, TP $29.50; Current share price $24.05
- Don’t Discount Property Plays
Due to the cooling measures introduced in 2018, property stocks took a beating in their valuations in 2H18. Going forward, UOBKH thinks that investors should not discount property plays given that they have already hit a low.
Among the property stocks, UOBKH’s preferred pick is CapitaLand for its diversified asset base with 88 percent of income underpinned on a recurring basis. Another property play that UOBKH recommends is PropNex. UOBKH notes that PropNex is poised to see a record 2019 on the back of an unprecedented heavy launch pipeline and unsold inventory.
CapitaLand: BUY, TP $4.40; Current share price $3.29
PropNex: BUY, TP $0.65; Current share price $0.510
- Industrial Plays
For 2019, UOBKH recommends looking at SATS over ST Engineering as the latter would be hard pressed to offer similar return after its 2018 outperformance. UOBKH believes that earnings from MRAS Systems – its prized acquisition in 2018 – need to kick in for ST Engineering to warrant higher valuations. The contributions from MRAS Systems should come meaningfully in 2H19.
On the other hand, SATS share price had declined more than 10 percent in 2018 after SATS announced dismal earnings due to losses from its Indonesian associate, mostly due to forex translation. With a strengthening Rupiah, UOBKH expects this to turnaround in 2019 and translate to better earnings result in SATS’ 3Q19 performance.
SATS: BUY, TP $5.60; Current share price $4.82
ST Engineering: BUY, TP $4.06; Current share price $3.67