Stock investment ideas: Singapore-listed companies that are rated as a 'buy'

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There are many ways to generate investment ideas.

Some might use stock screeners while others get ideas by tapping on the collective wisdom of a community .

There are also investors who read analyst reports to find the next best buy.

Right now, let’s look at a couple of Singapore-listed stocks that are rated as a “Buy” by brokers here.

It could help you uncover some of the best stock ideas in our local stock market .

A primer on the different stock ratings

Analyst reports by brokers give a treasure trove of information that can be useful in our investment research.

They contain details such as the company background, how it has performed financially, and what its growth prospects are like.

After studying various aspects of a company, analysts derive a target price for the stock by using financial modelling and would rate the stock accordingly.

Here’s how some of the local brokerages rate the companies that they cover (sorted according to alphabetical order):

Broker Stock Rating Definition
CGS-CIMB Add Stock’s total return is expected to exceed 10 per cent over the next 12 months
Hold Stock’s total return is expected to be between 0 per cent and positive 10 per cent over the next 12 months
Reduce Stock’s total return is expected to fall below 0 per cent or more over the next 12 months
DBS Bank Strong Buy Over 20 per cent total return for the next 3 months, with identifiable share price catalysts within this time frame
Buy Over 15 per cent total return for small caps and over 10 per cent for large caps for the next 12 months
Hold -10 per cent to 15 per cent total return for small caps; -10 per cent to 10 per cent for large caps over the next 12 months
Fully Valued Negative total return (-10 per cent or lower) over the next 12 months
Sell Negative total return of (-20 per cent or lower) over the next 3 months, with identifiable share price catalysts within this time frame
KGI Outperform A positive view on the stock; stock is expected to outperform the expected total
return of the KGI coverage universe in the related market over a 12-month investment horizon
Neutral A neutral view on the stock; stock is expected to perform in line with the expected total
return of the KGI coverage universe in the related market over a 12-month investment horizon
Underperform Negative view on the stock; stock is expected to underperform the expected total return
of the KGI coverage universe in the related market over a 12-month investment horizon
Maybank Kim Eng Buy Total return is expected to be above 10 per cent in the next 12 months
Hold Total return is expected to be between 0 per cent to 10 per cent in the next 12 months
Sell Total return is expected to be below 0 per cent in the next 12 months
RHB Buy Share price may exceed 10 per cent over the next 12 months
Trading Buy Share price may exceed 15 per cent over the next 3 months; however, longer-term outlook remains uncertain
Neutral Share price may fall within the range of +/- 10 per cent over the next 12 months
Take Profit Target price has been attained; look to accumulate at lower levels
Sell Share price may fall by over 10 per cent over the next 12 months

Most of the brokers give their rating based on the stock’s expected total return , which considers a company’s share price appreciation plus its dividends.

The eagle-eyed ones would have also noticed that the broker ratings are given over a 12-month time frame.

If you are an investor, a one-year period is too short in my opinion.

Ideally, we should be investing for at least five years as there’s too much volatility in the short-term, and businesses take time to grow and flourish.

Not to mention that high-quality businesses tend to grow, grow, and grow over years and decades…

Therefore, if you are using broker reports, you must be aware that they have a time horizon limitation.

Broker Buy #1: Boustead Projects Limited

Boustead Projects Limited is a real estate solutions provider in Singapore and is a 53 per cent-owned subsidiary of Boustead Singapore Limited.

CGS-CIMB has maintained its “Add” rating on Boustead Projects as the company is embarking on a major step to unlock value.

At the end of last month, Boustead Projects announced that it had signed agreements to establish Boustead Industrial Fund (BIF).

BIF will enable Boustead Projects to unlock the value in its leasehold portfolio, strengthen its balance sheet, and create a long-term, sustainable platform to house its portfolio of stabilised, income-generating industrial properties.

Boustead Projects will hold an initial 25per cent stake in the fund (through the subscription of units and notes issued). Other initial investors include AP SG 21 Pte Ltd, a special purpose vehicle for institutional real estate investors, and Singapore-listed firm, Metro Holdings Limited.

Boustead Projects will sell 14 of its industrial properties to BIF for $332.2 million, which is a slight premium to the market valuation of $331.2 million.

Assuming the deal goes (subject to shareholder approval), Boustead Projects is expected to make a profit of $136.1 million. From the gross proceeds of $328.4 million, the company could also declare a special dividend after using the cash for other needs.

Given Boustead Projects’ strong balance sheet, CGS-CIMB sees “high possibility of special dividends being declared after the transaction is approved”.

Assuming 50 per cent of the net cash proceeds are dished out as a special dividend, shareholders could get $0.22 per share, added the broker.

CGS-CIMB has a target price of $1.33 on Boustead Projects.

At the time of writing, Boustead Project shares are changing hands at $1.01 each, translating to a price-to-book (P/B) ratio of 1.1x and a dividend yield of 0.8 per cent.

Broker Buy #2: ComfortDelGro

ComfortDelGro Corporation Ltd is one of the world’s largest land transport companies , with operations in seven countries, including Singapore.

RHB has maintained its “Buy” call on the transport giant with a target price of $1.90.

It said in a company update that ComfortDelGro has a strong domestic earnings recovery story with the gradual re-opening of the Singapore economy. The company’s Singapore public transport and taxi businesses will support the recovery.

ComfortDelGro’s overseas operations are expected to see a gradual recovery in earnings too, with the availability of a vaccine.

RHB added that while full recovery to pre-Covid-19 earnings could take over two years, it forecasts ComfortDelGro to deliver a strong rebound in earnings this year.

Right now, at ComfortDelGro’s share price of $1.67, it has a price-to-earnings (P/E) ratio of 32x.

Broker Buy #3: Frencken

Frencken Group is an integrated technology solutions company serving firms in the automotive, healthcare, industrial, analytical & life sciences and semiconductor sectors.

At the end of last month, the company updated the market that it is taking an impairment loss of $6.2 million on investments made to develop a product in its medical segment for a customer. The product has not been launched yet.

Frencken is impairing all its costs associated with developing the product in the second half of 2020 (2H20). The impairment comes about as its customer has a strategic change in direction, and as such, Frencken cannot predict how much revenue the product will bring in.

Having said that, the company expects to remain profitable in 2H20 and for the whole of 2020.

For the nine months ended Sept 30, 2020, the company’s earnings stood at $32.1 million.

Both CGS-CIMB and Maybank Kim Eng are positive on Frencken as its business fundamentals are unaffected even with the impairment. The brokers have a target price of $1.39 for the company.

At Frencken’s share price of $1.28, it has a P/E ratio of 13x and a dividend yield of 2.3 per cent.

Broker Buy #4: Suntec REIT

Suntec REIT owns Suntec City, Singapore’s largest integrated commercial development. It also owns other properties in our country and Australia.

RHB has maintained its “Buy” rating on the diversified REIT which owns both retail and office properties.

The broker has a target price of $1.79 on Suntec REIT.

RHB said that Suntec REIT is its preferred pick in the office/retail REIT space due to its attractive valuation and earnings recovery from its recently completed and acquired buildings.

For the third quarter of 2020, Suntec REIT’s gross revenue tumbled 13.4 per cent year-on-year to $79.6 million largely due to the impact from the pandemic.

The lower revenue was slightly offset by new contributions from 21 Harris, 55 Currie, and Olderfleet 477 Collins Street properties in Australia.

Suntec REIT’s units are currently selling at $1.51 each, translating to a P/B ratio of 0.7x.

Broker Buy #5: Yangzijiang Shipbuilding

Yangzijiang Shipbuilding Holdings Ltd is a leading shipbuilder in China.

In a company update, UOB Kay Hian said it’s maintaining its “Buy” rating on the shipbuilder with a target price of $1.17.

Yangzijiang is one of UOB Kay Hian’s key stock picks for 2021 due to the “resumption of earnings growth, undemanding valuations and strong financial position”.

The broker added that the new order wins worth nearly US$1.8 billion(S$2.3 billion) last year, up from US$0.8 billion in 2019, exceeded its expectations and should set the company up to generate higher profits this year.

Furthermore, in the final quarter of 2020 alone, Yangzijiang repurchased over $45 million worth of its own shares. The buyback exercise shows confidence in Yangzijiang’s business outlook.

At Yangzijiang’s share price of $0.995, it has a P/E ratio of 8x and a dividend yield of 4.5 per cent.

Broker Buy #1: CapitaLand Integrated Commercial Trust

CapitaLand Integrated Commercial Trust (CICT), which was formed from the merger of CapitaLand Mall Trust (CMT) and CapitaLand Commercial Trust (CCT), is one of the largest real estate investment trusts (REITs) in the Asia Pacific region.

DBS Group Research released a report on Dec 9, 2020 saying that CICT is the “biggest SREIT [Singapore REIT] at a bargain!”

CICT has attractive valuations as it sells close to its net asset value and sports a forward distribution yield of around 6 per cent. According to DBS, the REIT offers the highest yield among its large-cap peers which are trading at a yield of 5per cent.

DBS believes that with the release of Covid-19 vaccines, a V-shaped recovery will move valuations close to CICT’s historical average price-to-book ratio (P/B) ratio of 1.24x.

The bank has a “buy” call on the REIT with a target price of $2.50, up from $2.40 previously.

On Thursday, CICT’s units closed at $2.09 each, increasing 0.5 per cent for the day. At that price, the REIT has a P/B ratio of 1.0x.

Broker Buy #2: iFAST

iFAST Corporation Ltd recently lost out on the digital bank licence in Singapore, but DBS Group Research remains positive on iFAST’s business prospects.

The fintech company is still rated a “buy” by DBS with an unchanged target price of $3.96.

Due to iFAST’s expanding range of products and services, DBS expects the company’s assets under administration (AUA) growth to be faster than the industry’s growth even without the digital bank licence.

It added that “iFAST is also a clear beneficiary of the growing adoption of digitalisation”.

A catalyst for iFAST would be winning the bid for the Hong Kong pension scheme project.

The fintech firm, together with telecommunications provider PCCW, is one of the shortlisted consortium finalists to digitise the territory’s pension system.

The winner is expected to be announced soon.

A win by iFAST could contribute to over $10 million in earnings, according to DBS.

iFAST shares closed at $2.93 each on Thursday, down around 3 per cent for the day. At that price, it has a price-to-earnings (P/E) ratio of 46x and a dividend yield of 1.1 per cent.

Broker Buy #3: Lendlease Global Commercial REIT

UOB Kay Hian has initiated coverage on Lendlease Global Commercial REIT.

The REIT has a leasehold interest in Singapore’s 313@Somerset and three freehold office properties located in Milan, Italy.

In October this year, Lendlease Global Commercial REIT acquired a stake in Jem in Singapore via a 5 per cent interest in Lendlease Asian Retail Investment Fund 3.

The purchase also provides opportunities for the REIT to potentially increase its strategic stake in the fund over time.

UOB Kay Hian said that Lendlease Global Commercial REIT’s largest asset, 313@Somerset, “has a unique positioning due to its youth orientation and prime location sitting on top of Somerset MRT Station, which is one of the busiest MRT stations in Singapore”.

The REIT’s office properties in Milan, collectively known as Sky Complex, lend income stability due to the long weighted average lease expiry (WALE) of 11.6 years. WALE shows the average expiry period of all the leases within a portfolio of properties.

UOB Kay Hian has a “buy” call on Lendlease Global Commercial REIT with a target price of $0.97.

Units in Lendlease Global Commercial REIT ended Thursday flat at S$0.715 apiece. This translates to a P/B ratio of 0.8x.

Broker Buy #4: Medtecs

According to its website, Medtecs International Corporation Ltd is the world’s largest provider of personal protective equipment (PPE).

Here’s a snapshot of the PPEs Medtecs provides:

PHOTO: Medtecs 

DBS Group Research has initiated coverage on Medtecs with a “buy” call.

Even though PPE demand and average sales price (ASP) would decline as the Covid-19 situation improves, DBS analysts expect ASPs and sales volumes to remain at 90 per cent and 60 per cent above pre-Covid levels, respectively, due to higher proportion of self-branded products sales and new customer relationships formed during the pandemic.

DBS said Medtecs is likely to accumulate a huge cash pile in the coming years. This could lead to merger and acquisition activities and reinstatement of its previous dividend policy of paying out 25per cent to 50per cent of its earnings as dividends.

The bank has a target price of $1.30 on Medtecs.

Medtecs shares closed at $0.99 each on Thursday, up 1 per cent for the day. At that price, the company’s selling at a P/E ratio of 10x.

Broker Buy #5: Singtel

Singapore Telecommunications Limited, together with Grab, was one of the winners of the digital full banking licences.

CGS-CIMB has maintained an “Add” rating on Singtel as the win represents an expansion into a potentially profitable business in the long run.

However, the broker doesn’t see any major earnings upside for Singtel for over the next three years from FY2021 to FY2024.

The Grab-Singtel bank can start operating from early-2022 but the Monetary Authority of Singapore (MAS) expects it to operate for one to two years in a restricted phase where it cannot widely accept deposits from the public and with an aggregate deposit cap of $50 million.

CGS-CIMB said that the bank is only expected to become a fully-functioning digital bank three to five years after that (2024-2026) when the deposit cap and limit on the scope of depositors are lifted.

The broker added that Singtel’s share of the capital requirements is manageable and that its dividend-paying capability remains intact.

CGS-CIMB has a target price of $3.10 on Singtel.

Singtel shares last changed hands at $2.34 each on Thursday, down 2.5 per cent. At that price, it has a P/E ratio of 23x.

Broker Buy #1: Fraser Centrepoint Trust

Frasers Centrepoint Trust is the second-largest suburban retail mall owner in Singapore with 11 malls, including Causeway Point, Northpoint City North Wing, and White Sands.

UOB Kay Hian has maintained its “Buy” call on the retail real estate investment trust (REIT).

The broker said that Frasers Centrepoint Trust’s acquisition of the 63.1 per cent stake in AsiaRetail Fund Limited (ARF) will contribute to distributable income for 11 months in FY2021 (financial year ending Sept 30, 2021) and also brings about cost savings.

Frasers Centrepoint Trust could also benefit from:

UOB Kay Hian also added that Frasers Centrepoint Trust provides an attractive distribution yield of 5.8 per cent for FY2021.

The broker has a target price of $3.15 for the retail REIT.

We think that Frasers Centrepoint Trust has the potential to grow over the long run and it could be something that REIT investors might want to consider looking into.

On Thursday, Frasers Centrepoint Trust’s units closed at $2.33 each, up 0.9 per cent for the day.

Broker Buy #2: Nanofilm

UOB Kay Hian has just initiated coverage on Nanofilm Technologies International Ltd, a provider of nanotechnology solutions in Asia.

The company was successfully listed on Oct 30, 2020 at an initial public offering (IPO) price of $2.59.

According to UOB Kay Hian, Nanofilm has a strong competitive advantage , allowing it to trade at a premium to its peers.

The broker expects Nanofilm’s bottom line to grow an annualised rate of 38.7per cent from 2019 to 2022. According to Nanofilm’s IPO prospectus, from 2017 to 2019, Nanofilm’s net profit rose 15 per cent per annum.

The analysts covering the company said that the increased growth rate in the coming years is likely to come from higher revenue from existing customers and from the application of its technology in new sectors, including biomedical, Internet of Things (IoT), and medical implant.

Additionally, most of its key customers could see growth from increasing usage of:

  • Smartphones (5G implementation, etc)
  • Wearables (nanotechnology solutions in smartwatch bands)
  • Computers (new application such as hinges)
  • Automobiles (other engine components such as fuel cells)
  • Nanofabrication (demand for optical lenses and sensory components)

In 2019, the company generated a net margin of around 25 per cent, more than double the industry average of 12 per cent during the year.

UOB Kay Hian has a “buy” rating and target price of $4.07 for Nanofilm.

Nanofilm’s shares closed at $3.27 apiece on Thursday, rising around 5 per cent for the day. At that price, it’s selling at a price-to-earnings (P/E) ratio of over 50x.

Broker Buy #3: Sembcorp Industries

Sembcorp Industries Limited is a well-known conglomerate in Singapore. The group recently did a demerger exercise with Sembcorp Marine and is now left with the energy and urban business segments.

In a company update on Nov 24, UOB Kay Hian said that Sembcorp Industries is well-positioned for a recovery next year.

The brokerage’s reasoning behind this is that the “news of successful vaccine trials has led to higher certainty that the global economic recovery may be swifter than expected, thus positively impacting energy demand”.

The earnings capability of Sembcorp Industries is also more apparent now since it’s not marred by the losses at Sembcorp Marine.

UOB Kay Hian has upgraded its target price for Sembcorp Industries from $1.66 previously to $2.02, with a price-to-book (P/B) target of 0.9x (in-line with the historical five-year average of 0.91x).

On Thursday, Sembcorp Industries’ shares closed at $1.84 each, up 2 per cent for the day. At that price, it’s selling at a P/B ratio of 0.6x.

Broker Buy #4: Thai Beverage

Thai Beverage Public Company Limited reported its earnings for the full-year ended Sept 30, 2020 (FY2020) on Nov 25.

Here are some highlights for Thai Beverage’s latest earnings:

  • Thai Beverage’s total sales declined by 5.2 per cent year-on-year to THB 253.5 billion ($11 billion) due to the Covid-19 pandemic.
  • Profit attributable to shareholders fell 2.2 per cent to THB 22.8 billion.
  • However, attributable profit from normal operations (which excludes the beer business restructuring costs) increased by 9.2 per cent to THB 25.4 billion.

In its research report, DBS said that the declines in Thai Beverage’s total sales and profit attributable to shareholders were above its expectations. It was expecting steeper falls of 9 per cent and 7 per cent, respectively.

It added that the impact of Covid-19 could have been mitigated by the operational resilience of the company, as well as reasonable cost control by Thai Beverage’s management.

Thai Beverage declared a total dividend of THB 0.46 per share for FY2020, down 4 per cent year-on-year. However, the final dividend for FY2020 was THB 0.36 per share, up 9 per cent year-on-year.

DBS commented that the final dividend was “marginally higher” than its expected THB 0.33 per share.

It added that the higher dividend demonstrates the company’s confidence in its cash flow and financing.

DBS upped its price target on Thai Beverage from $0.90 to $0.93.

At Thai Beverage’s share price of $0.72 on Nov 25, DBS feels that the market hasn’t priced in the company’s potential as Southeast Asia’s largest food and beverage player.

Broker Buy #5: Top Glove

CGS-CIMB has maintained an “Add” rating on Top Glove Corporation Bhd, the world’s largest glove manufacturer.

Earlier this week, Top Glove announced that it has temporarily shut down 16 facilities in Klang since Nov 18, while the remaining 12 plants in the location are operating at reduced capacities.

The news caused Top Glove’s shares to sink to a level not seen since Sept 10, 2020.

The work stoppage is due to the government’s directive following a coronavirus outbreak among more than 2,400 of the company’s workers.

Based on CGS-CIMB’s estimates, Top Glove’s Klang facilities contribute up to 50 per cent of its total current production capacity.

Assuming that all 28 plants in Klang are not operational for two weeks, the broker estimates that the impact on FY2021 (financial year ending Aug 31, 2021) net profit forecast will be -1.9 per cent.

CGS-CIMB has kept its “Add” call and has a target price of RM10.00 (around S$3.29) as it awaits further updates.

Top Glove shares closed at $2.34 each on Thursday, up 7 per cent for the day. At that price, it’s selling at P/E of 31x.

This article was first published in SeedlyDisclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the companies mentioned.