Stock Investment Ideas: Singapore-Listed Companies That Are Rated as a "Buy"
There are many ways to generate investment ideas.
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):
|CGS-CIMB||Add||Stock’s total return is expected to exceed 10% over the next 12 months|
|Hold||Stock’s total return is expected to be between 0% and positive 10% over the next 12 months|
|Reduce||Stock’s total return is expected to fall below 0% or more over the next 12 months|
|DBS Bank||Strong Buy||Over 20% total return for the next 3 months, with identifiable share price catalysts within this time frame|
|Buy||Over 15% total return for small caps and over 10% for large caps for the next 12 months|
|Hold||-10% to 15% total return for small caps; -10% to 10% for large caps over the next 12 months|
|Fully Valued||Negative total return (-10% or lower) over the next 12 months|
|Sell||Negative total return of (-20% 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% in the next 12 months|
|Hold||Total return is expected to be between 0% to 10% in the next 12 months|
|Sell||Total return is expected to be below 0% in the next 12 months|
|RHB||Buy||Share price may exceed 10% over the next 12 months|
|Trading Buy||Share price may exceed 15% over the next 3 months; however, longer-term outlook remains uncertain|
|Neutral||Share price may fall within the range of +/- 10% 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% 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 (SGX: AVM) is a real estate solutions provider in Singapore and is a 53%-owned subsidiary of Boustead Singapore Limited (SGX: F9D).
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 25% 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 (SGX: M01).
Boustead Projects will sell 14 of its industrial properties to BIF for S$332.2 million, which is a slight premium to the market valuation of S$331.2 million.
Assuming the deal goes (subject to shareholder approval), Boustead Projects is expected to make a profit of S$136.1 million. From the gross proceeds of S$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% of the net cash proceeds are dished out as a special dividend, shareholders could get S$0.22 per share, added the broker.
CGS-CIMB has a target price of S$1.33 on Boustead Projects.
Broker Buy #2: ComfortDelGro
RHB has maintained its “Buy” call on the transport giant with a target price of S$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 S$1.67, it has a price-to-earnings (P/E) ratio of 32x.
Broker Buy #3: Frencken
Frencken Group (SGX: E28) 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 S$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 30 September 2020, the company’s earnings stood at S$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 S$1.39 for the company.
At Frencken’s share price of S$1.28, it has a P/E ratio of 13x and a dividend yield of 2.3%.
Broker Buy #4: Suntec REIT
Suntec REIT (SGX: T82U) 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 S$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% year-on-year to S$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 S$1.51 each, translating to a P/B ratio of 0.7x.
Broker Buy #5: Yangzijiang Shipbuilding
Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6) 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 S$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 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 S$45 million worth of its own shares. The buyback exercise shows confidence in Yangzijiang’s business outlook.
At Yangzijiang’s share price of S$0.995, it has a P/E ratio of 8x and a dividend yield of 4.5%.
[Editor’s note: Content below was originally published on 10 December 2020]
Broker Buy #1: CapitaLand Integrated Commercial Trust
CapitaLand Integrated Commercial Trust (SGX: C38U) (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 9 December 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%. According to DBS, the REIT offers the highest yield among its large-cap peers which are trading at a yield of 5%.
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 S$2.50, up from $2.40 previously.
On Thursday, CICT’s units closed at S$2.09 each, increasing 0.5% for the day. At that price, the REIT has a P/B ratio of 1.0x.
Broker Buy #2: iFAST
The fintech company is still rated a “buy” by DBS with an unchanged target price of S$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 S$10 million in earnings, according to DBS.
iFAST shares closed at S$2.93 each on Thursday, down around 3% for the day. At that price, it has a price-to-earnings (P/E) ratio of 46x and a dividend yield of 1.1%.
Broker Buy #3: Lendlease Global Commercial REIT
UOB Kay Hian has initiated coverage on Lendlease Global Commercial REIT (SGX: JYEU).
The REIT has a leasehold interest in Singapore’s [email protected] 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% 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, [email protected], “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 S$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 (SGX: 546) is the world’s largest provider of personal protective equipment (PPE).
Here’s a snapshot of the PPEs Medtecs provides:
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% and 60% 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 25% to 50% of its earnings as dividends.
The bank has a target price of S$1.30 on Medtecs.
Medtecs shares closed at S$0.99 each on Thursday, up 1% for the day. At that price, the company’s selling at a P/E ratio of 10x.
Broker Buy #5: Singtel
Singapore Telecommunications Limited (SGX: Z74), 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 S$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 S$3.10 on Singtel.
Singtel shares last changed hands at S$2.34 each on Thursday, down 2.5%. At that price, it has a P/E ratio of 23x.
[Editor’s note: Content below was originally published on 26 November 2020]
Broker Buy #1: Fraser Centrepoint Trust
Frasers Centrepoint Trust (SGX: J69U) 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% stake in AsiaRetail Fund Limited (ARF) will contribute to distributable income for 11 months in FY2021 (financial year ending 30 September 2021) and also brings about cost savings.
Frasers Centrepoint Trust could also benefit from:
- Higher index weighting in the FTSE EPRA/NAREIT Global Developed Index
- Potential inclusion in the Straits Times Index (STI) reserve list
- Possible acquisition of Northpoint City (South Wing)
UOB Kay Hian also added that Frasers Centrepoint Trust provides an attractive distribution yield of 5.8% for FY2021.
The broker has a target price of S$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 S$2.33 each, up 0.9% for the day.
Broker Buy #2: Nanofilm
UOB Kay Hian has just initiated coverage on Nanofilm Technologies International Ltd (SGX: MZH), a provider of nanotechnology solutions in Asia.
The company was successfully listed on 30 October 2020 at an initial public offering (IPO) price of S$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 38.7% from 2019 to 2022. According to Nanofilm’s IPO prospectus, from 2017 to 2019, Nanofilm’s net profit rose 15% 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%, more than double the industry average of 12% during the year.
UOB Kay Hian has a “buy” rating and target price of S$4.07 for Nanofilm.
Nanofilm’s shares closed at S$3.27 apiece on Thursday, rising around 5% 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 (SGX: U96) is a well-known conglomerate in Singapore. The group recently did a demerger exercise with Sembcorp Marine (SGX: S51) and is now left with the energy and urban business segments.
In a company update on 24 November, 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 S$1.66 previously to S$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 S$1.84 each, up 2% for the day. At that price, it’s selling at a P/B ratio of 0.6x.
Broker Buy #4: Thai Beverage
Here are some highlights for Thai Beverage’s latest earnings:
- Thai Beverage’s total sales declined by 5.2% year-on-year to THB 253.5 billion due to the COVID-19 pandemic.
- Profit attributable to shareholders fell 2.2% to THB 22.8 billion.
- However, attributable profit from normal operations (which excludes the beer business restructuring costs) increased by 9.2% 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% and 7%, 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% year-on-year. However, the final dividend for FY2020 was THB 0.36 per share, up 9% 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 S$0.90 to S$0.93.
At Thai Beverage’s share price of S$0.72 on 25 November, 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 (SGX: BVA)(KLSE: 7113), the world’s largest glove manufacturer.
Earlier this week, Top Glove announced that it has temporarily shut down 16 facilities in Klang since 18 November, 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 10 September 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% 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 31 August 2021) net profit forecast will be -1.9%.
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 S$2.34 each on Thursday, up 7% for the day. At that price, it’s selling at P/E of 31x.
Have Burning Questions Surrounding The Stock Market?
Why not check out the SeedlyCommunity and participate in the lively discussion regarding stocks!
Disclaimer: 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.