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: Hongkong Land
Hongkong Land Holdings Limited (SGX: H78) is a property investment, management, and development company with assets in various Asian countries, including Singapore.
CGS-CIMB has reiterated its “Add” rating on Hongkong Land, even though COVID-19 impacted its latest financial results.
For 2020, Hongkong Land’s underlying profit, which reflects its core business, fell 11% year-on-year to US$963 million.
Retail rent relief granted for Hongkong Land’s investment properties and a lower contribution from development properties due to fewer expected residential completions led to the profit decline.
However, CGS-CIMB is optimistic about Hongkong Land’s likely expansion of its development property land bank in China.
Hongkong Land’s management cited that it has enjoyed a short payback period and a more predictable profit margin in the country.
The company’s leaders expect negative office rental reversion in the first half of this year. However, they remain optimistic about leasing demand due to its office buildings’ prime locations. Demand is likely to hold up even with the work-from-home trend.
CGS-CIMB has a target price of US$5.70 on Hongkong Land.
Broker Buy #2: OCBC
Oversea-Chinese Banking Corporation Limited (SGX: O39) (OCBC) is one of Singapore’s three listed banks.
For 2020, OCBC’s total income fell 7% year-on-year while net profit tumbled 26%.
However, with a gradual improvement in consumer sentiments and business confidence, OCBC expects a strong recovery by the second half of 2021.
Phillip Securities has upgraded the bank to “Buy” with a target price of S$13.65.
The broker said that OCBC’s 2020 earnings beat its expectation by 27%.
With the improved outlook, Phillip Securities has raised its estimate for OCBC’s 2021 earnings by 19% due to higher insurance and wealth-management income and lower allowances.
At OCBC’s share price of S$11.58, it has a P/B ratio of 1.1x and a dividend yield of 2.7%.
Broker Buy #3: Riverstone
DBS Group Research has maintained its “Buy” rating on Riverstone Holdings Limited (SGX: AP4).
The company is a manufacturer of premium nitrile gloves for the healthcare sector. It also makes nitrile and natural rubber cleanroom gloves used in the electronics industry.
DBS said that Riverstone’s 2020 earnings beat its expectations with higher margins.
Riverstone saw an 85% year-on-year increase in revenue to RM1.83 billion for 2020 as it shipped more healthcare and cleanroom gloves amid the pandemic.
Meanwhile, net profit ballooned 396% to a record high of RM647.3 million, and dividend per share surged 495% to 22.0 sen.
Looking ahead, Riverstone believes demand for healthcare and cleanroom gloves will remain high due to the ongoing COVID-19 testing and vaccine rollout, which require the usage of gloves.
DBS echoed Riverstone’s views and said that it expects “robust demand for healthcare gloves in near to medium term”.
It added that “cleanroom gloves provide earnings resiliency and sustainable growth over the long-term”.
DBS has a target price of S$1.85 on Riverstone.
At Riverstone’s share price of S$1.33, it has a price-to-earnings (P/E) ratio of 9x and a dividend yield of 5.9%.
Broker Buy #4: Straits Trading
Straits Trading Co Ltd (SGX: S20) is a conglomerate with businesses in resources, real estate and hospitality.
Its investments consist of stakes in companies such as the world’s third-largest tin producer, Malaysia Smelting Corporation Berhad (SGX: NPW), Straits Real Estate, and ARA Asset Management, which was once a listed firm here.
The conglomerate is rated a “Buy” by DBS with a target price of S$3.90.
DBS said that it sees compelling value in the company since it has a P/B of just 0.7x and an even steeper discount to its actual value.
It added that the possible re-listing of ARA in 2021 or 2022 is a crucial catalyst and could be worth anything between S$5 billion and S$6.4 billion.
Meanwhile, Straits Real Estate, the conglomerate’s real estate arm, has stable recurring cash flows and remains on track to grow its assets under management to S$2.4 billion by 2022, up from S$1.8 billion now.
At Straits Trading’s current share price of S$2.82, it has a market capitalisation of S$1.15 billion.
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$1.36.
On 5 March 2021, Yangzijiang announced it had entered into shipbuilding contracts for another 31 vessels, with a contract value of US$1.74 billion.
They are mainly scheduled for deliveries from 2022 to 2023.
The latest win is on top of that announced on 8 February, where it said it had secured orders for 29 vessels with a value of US$1.3 billion.
Year-to-date, Yangzijiang had secured a total of 60 shipbuilding contracts worth US$3.04 billion, the highest since 2008, as noted by UOB Kay Hian.
The broker said that since most of this year’s orders are containerships (which generate higher profit margins), Yangzijiang’s earnings should be “well supported”.
For 2020, Yangzijiang’s revenue fell 37% year-on-year to RMB 14.84 billion, while its net profit decreased by 19% to RMB 2.52 billion.
At Yangzijiang’s share price of S$1.24, it has a P/E ratio of 9x and a dividend yield of 3.6%.
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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.