DBS thinks that there are three unique stocks in the market that will still allow investors to make a decent return on their investment.
Investors Takeaway: 3 Unique SG Stocks That Every Investors Should Take Notice
Blue Chips + Growth: SembCorp Industries
Among the blue chips, DBS has taken a liking for Sembcorp Industries. According to DBS, Sembcorp Industries offers a unique value proposition as a proxy to ride the cyclical O&M upturn. At the same time, it is supported by a defensive utilities business, especially with its India operations showing signs of turnaround with an improving spread. DBS believes that this should re-rate its Energy business which is undervalued at 0.6 times P/BV and six times PE against 6-7 percent ROE.
Furthermore, DBS strongly believes in the long-term growth prospects of Sembcorp Industries Energy arm. DBS notes that the Energy arm has expanded its global footprint into key emerging markets like – India, Bangladesh, Vietnam and Myanmar. Investors can also look forward to a potential merger between Keppel’s O&M arm and Sembcorp Marine in view of keener competition in the sector.
BUY, TP $3.90
Blue Chips + Dividend: ST Engineering
Blue chip and growth seldom go together but ST Engineering is one of the few blue chip stocks that owns that title. In recent months, ST Engineering has been making multiple acquisitions to drive its inorganic growth. ST Engineering acquired Newtec and MRAS to widen its revenue base.
Besides inorganic growth, ST Engineering has also been driving organic growth at its Aerospace MRO segment. There has been an increase in orders from ongoing issues with new generation aircraft and engines, as well as ramp up of Airbus Passenger-to-Freighter programmes.
In the medium to long term, the growth story remains intact as ST Engineering continues to focus on smart city and IOT related products and contracts, as well as robotics and automation solutions in transport, logistics, healthcare and hospitality domains.
BUY, TP $4.50
Jumbo was a recent addition into DBS’ model portfolio under the growth category. One of the reasons why Jumbo was included in the growth category is that Jumbo is on track to post higher margins in 2H19. The shift in margins can be attributed to three reasons: Closure of lower margin stores and opening of higher-end and higher footfall restaurant outlets; higher franchise income from franchise outlets established in FY18; and absence of expenses incurred for its 30th anniversary celebrations. Right now, Jumbo is trading attractively at 17-19 times forward PE (-1 SD from its historical mean) and offers a decent dividend yield of 3.6-4.2 percent.
BUY, TP $0.51