The implementation of additional tariffs on Chinese imports sent markets reeling. Although trade talks are ongoing and there may still be possibilities for a deal, economists and analysts are anticipating that ramifications are beginning to bite. Amidst the uncertainties and a global economic slowdown, the STI shines as one of the most attractive markets in ASEAN to invest in, given its low price-to-earnings and high dividend yield.

According to MBKE, against this backdrop, there are still some interesting names that investors can find within the small/mid-cap space. Here are five small/mid-cap stocks that MBKE thinks you should be adding into your portfolio to prepare for 2H19.

Investors Takeaway: 5 Small/Mid-Cap Stocks To Add to Your Portfolio By MBKE

  1. CDL Hospitality Trusts

CDL Hospitality Trusts was singled out by MBKE as its top hospitality sector pick, noting that the scale and liquidity render it a good proxy for a sustained recovery in Singapore’s hospitality sector.

Besides that, MBKE also highlights that CDL Hospitality Trusts’ overseas expansion has been gaining traction with a continued push into Europe being supported by positive carry from low funding costs and low gearing.

BUY, TP $1.80; Current share price $1.62

  1. Frasers Centrepoint Trust

According to MBKE, Frasers Centrepoint Trust has visible growth drivers and potential acquisition catalysts that investors should keep in mind of. The low gearing of 28.8 percent, translating to $800 million debt headroom should allow Frasers Centrepoint Trust to act on potential acquisition opportunities if they exist.

Right now, a slew of pipeline assets are awaiting for acquisition by Frasers Centrepoint Trust including Northpoint City’s South Wing. Recently, Frasers Centrepoint Trust has already acquired the remaining stake in Punggol Waterway Point with a placement exercise that was oversubscribed by 2.3 times. MBKE believes that its recent acquisition move will help Frasers Centrepoint Trust to further cement its suburban mall footprint.

BUY, TP: $2.60 Current share price $2.58

  1. Japfa

Japfa continues to be a long-term secular play on the growing affluence of the emerging economies like Indonesia, Vietnam, Myanmar, India, and China. The long term secular consumption growth trends with operations in populous, high-growth emerging economies, where per capita protein consumption is still low, will continue to drive Japfa’s share price. MBKE also notes that increasing penetration level of industrialised farming practices can help Japfa to materially lower unit production costs.

BUY, TP $0.93; Current share price $0.535

  1. Bumitama Agri

Bumitama Agri is now trading at -1SD from its historical mean. This presents an interesting investment opportunity for investors given the positive medium-to-long term industry outlook. MBKE’s optimism in the medium-to-long term stems from the overall slowdown in new planting and the need to accelerate replanting some of the older trees (which will likely slow down fresh fruit bunch growth forecasts in 2020-21). Moving forward, MBKE expects 14 percent EPS growth in FY19 underpinned by higher output and better prices and the company’s low cost of production.

BUY, TP $0.97; Current share price $0.625

  1. Valuetronics

This year, Valuetronics has emerged as a laggard play in the Singapore technology sector due to overhang from risks of further allocation losses as a result of the trade war. While the trade war has now escalated, MBKE thinks that the risks of trade war has already been priced into Valuetronics’ current share price.

Valuetronics is currently trading at an attractive valuation with dividend yield of 6-7 percent for FY19-21E and four times FY19E EV/EBITDA. Its strong balance sheet with no debt and net cash that accounts for 40 percent of its market cap should further boost confidence for its strong fundamentals. As clarity of ASEAN production plans in the scheme of the whole trade war unfolds, it could catalyse the share price of Valuetronics.

BUY, TP $0.990; Current share price $0.685

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