UOBKH’s alpha pick portfolio managed to outperform the broader market last year. Even during the tumultuous month of last December, as a result of uncertainty from the US-China trade dispute and tightening of US monetary policy, UOBKH’s alpha picks managed to stay resilient and put up a reasonable performance.
UOBKH reshuffled its alpha picks with five recommendations for investors to start their alpha pursuit for 2019.
Investors Takeaway: Kick Off Your Alpha Pursuit With These 5 SG Stocks By UOBKH
- Netlink NBN Trust
Netlink NBN Trust (Netlink) is the latest addition into UOBKH’s set of alpha picks. According to UOBKH, Netlink has a dominant market share of 90 percent of the residential market and 35 percent of the non-residential fibre connections market. Netlink Trust’s growth is projected at a three-year CAGR of 6.2 percent and 8.5 percent respectively for FY18-21.
The new telco TPG is set to become Netlink Trust’s latest customer for non-building address point (NBAP) connections required for backhaul transmission. UOBKH forecasts TPG to add 3,000 base stations over the next three years for NBAP connections, boding well for the Trust.
BUY, TP $0.99; Current share price $0.78
SATS’s regional exposure to Asia’s passenger traffic growth and cargo volume growth is a key reason why UOBKH favours SATS as one of its alpha picks. So far, SATS’ revenue at operating regions has grown by 8.1 percent. With key revenue and earnings driver such as cruise revenue and food solutions in China improving, investors can expect SATS operating profit growth to be steady.
UOBKH notes that SATS management has indicated that it will pay out excess cash as dividend at the end of FY19. At its current share price, investors can expect at least four percent in dividend yield.
BUY, TP $5.60; Current share price $4.85
- Fu Yu
Over the past decade, Fu Yu has relied heavily on customers in traditional industries like printing and communications. Since FY17, management has been reducing concentration on the printing segment to diversify into a more stable business model.
Fu Yu has taken four key steps to optimise its business around loss-making operations. The privatisation of its Malaysia-listed subsidiary, termination of loss-making JV, turnaround of two of the five loss-making plants in China and amalgamation of two subsidiaries are expected to lift Fu Yu’s bottom line.
With improving net profit, free cash flow and strong net cash position, UOBKH foresees Fu Yu to offer higher but sustainable dividend yield in FY19. Investors can expect a potential nine percent dividend yield from Fu Yu this year.
BUY, TP $0.27; Current share price $0.205
OCBC is looking at plans to implement an internal ratings-based approach (IRBA) to compute risk-weighted assets (RWA) at OCBC Wing Hang. This will help OCBC lower its RWA intensity and further improve OCBC’s CET-1 capital adequacy ratio (CAR).
UOBKH highlights OCBC’s management plan to maintain dividend payout ratio at 40-50 percent of core earnings. With CET-1 CAR above its target range of 12.5-13.5 percent, investors can expect OCBC to improve its dividend payout ratio. This could bring its dividend yield to 4.3 percent in 2019.
BUY, TP $14.05; Current share price $11.46
As a multinational business, UOBKH likes Singtel for its geographical diversification that provides investors with a defensive shelter. With the Singapore mobile business only accounting for seven percent of its revenue, the new entry of TPG is unlikely to have a significant impact on Singtel’s group earnings.
Moreover, business in its Indonesian telco has been improving as churn rate normalises. The Indonesian associate Telkomsel is also benefitting from price recovery following the end of the Lebaran holidays.
BUY, TP $3.58; Current share price $3.05