Singapore Investment Bloggers Reveal Their Top Stock Picks for 2021
Sudhan Pâ—Ź
Recently, I came across this joke about 2020 and the years that follow:
It took me a while to get it.
Jokes aside, no matter what the next year or the year after that brings, we should be on top of our personal finance game.
To help you make the best of your investment journey, we picked the brains of folks behind a couple of investment/personal finance blogs here in Singapore.Â
Here are the eight companies that the bloggers think, in their opinion, would make good investments for 2021 and beyond.
Since investing is very personal, their picks may not be suitable for you, but you can still take their ideas as starting points for further research.
Top Stock Picks for 2021 by Singapore Investment Bloggers
Here’s a list of blogs covered and their respective representatives (arranged according to alphabetical order of blogs):
DollarsAndSense (Dinesh Dayani)
Top Pick by Dividend Titan: Link REIT
Link REIT (SEHK: 0823) is Asia’s largest real estate investment trust (REIT). At HK$140 billion market cap, this REIT has a massive portfolio of over 130 retail and office properties, mostly in Hong Kong.Â
What is little known to people about Link REIT was its listing.
You see, Link REIT’s sole purpose for its IPO in 2005 was to help manage all the good “neighbourhood” retail malls owned by the Hong Kong Housing Authority.
These retail malls — mostly located in older, urban district areas — were originally built 10 to 30 years ago to serve the nearby local residences.Â
I guess you can say it’s very similar to our Singapore heartland malls.Â
But what’s more interesting here is this.Â
Many of Link REIT’s retail malls are located in heavily-trafficked areas with a big residential catchment. And because these areas have limited land spaces with a high land cost, it makes it harder for new developments to come in.Â
Link REIT remains the dominant retail mall player in their respective sites.Â
While the COVID-19 pandemic has wrecked many Hong Kong retail malls, Link REIT has so far remained resilient during this tough time. In fact, its retail malls still command more than 95% rental collection rate throughout the year. And both its Hong Kong and China retail malls has so far sustained a 95% occupancy rate.Â
Here’s the thing. Link REIT’s properties are “value-accretive”. Its distribution per unit (DPU) has grown from HK$0.22 per unit in FY2006 to HK$2.87 per unit in FY2020. Even during the pandemic outbreak, Link REIT still maintained its first half DPU of HK$1.42 per unit.Â
And management aims to conserve a 100% dividend pay-out.
With its current price down around 20% since the start of 2020, its dividend yield is around 4.2% right now.
As far as I’m concerned, Link REIT holds a portfolio of high quality, neighbourhood retail malls, and it’s probably one REIT outside Singapore worth putting on your watchlist.Â
Top Pick by DollarsAndSense: Manulife US REIT
One REIT that I am looking to buy more of is Manulife US REIT (SGX: BTOU), or MUST for short.
MUST owns 9 high-quality freehold office properties in the US. While there’s some concern over remote-work gaining mainstream adoption because of COVID-19, I think offices will continue having a role to play. Furthermore, MUST’s office properties are in relatively good locations
Moreover, MUST has a diverse base of over 180 tenants in its properties. These tenants come from diverse sectors, including legal (22%), finance and insurance (18%), retail trade (14%), real estate (7%), Information (7%), public administration (5%) and consulting (4%). Exposure to heavily hit sectors — aviation, tourism, retail — are also minimal.
Despite the coronavirus crisis, MUST reported a healthy occupancy rate of 94.3% in its third-quarter 2020 update — slightly down from the previous quarter though. Its weighted average lease expiry (WALE) of 5.5 years provides good visibility in the mid-term.
With interest rates down, good quality REITs such as MUST and others will also be able to reduce their borrowing costs.
Finally, MUST is currently trading at a share price of US$0.75. This gives it close to 9% forward distribution yield.
Amid the low interest rate environment, being able to invest in high quality and freehold office properties that are able to deliver a good distribution yield is something I’m willing to do. Of course, we also must remember that with higher returns come higher risks.
Top Pick by Dr Wealth: Centurion Corporation
The majority of the COVID-19 cases in Singapore happened in the workers dormitory and Centurion Corp Ltd (SGX: OU8), being the largest operator in Singapore, was at the heart of the national issue.
There are about 293,000 foreign workers in the construction industry and most of them are staying in these dorms. We need them to build our infrastructure and we need to house them too. Hence, dorm operators still have a key role to play. It is even more important after the numerous cases in the dorms.
The authorities are stepping in to ensure a better living environment for the workers by tightening regulations such as minimum living and social space. Some of these new dorms would be developed by JTC but the government is not going to operate these dorms. Instead, they have tendered the projects to private operators.
In fact, Centurion has won the tender to operate four additional worker dorms consisting of 6,400 beds. This increased Centurion’s portfolio in Singapore by 22.9%.
Centurion’s share price has been depressed and it is trading at just a price-to-earnings (PE) of 3x and a price-to-book (PB) ratio of 0.5x, way below the five-year average PE and PB of 7x and 0.8x respectively.
Historically it has been giving dividends with a yield ranging between 3% to 6%.
The risks are its relatively high debt and exposure to students accommodation. It currently has a debt-to-asset of 50% (considering REITs kept the gearing to about 40%) and students may not return to overseas universities and withdraw from the hostels.
That said, I think there’s more upside than downside for Centurion and it could make a good recovery play in 2021, especially with the possibility of mass vaccination.
Top Pick by SG Budget Babe: Square Inc
There is no question that the future of payments is cashless, and the COVID-19 pandemic has only accelerated that trend. Square Inc (NYSE: SQ) with its Cash app (30 million users) is one player to ride on.
Even though its next largest competitor (Venmo under Paypal (NASDAQ: PYPL), with 40 million users) is not one to dismiss, Square has been able to move faster than its competitors and is a lot more forward-thinking when it comes to execution.
Square has several business segments in total, including selling POS terminals, payroll management, banking and lending through Square Capital, website services (to help merchants set up online stores), trading (competes with the ever-popular Robinhood), but their fastest-growing business is in Cash app, which has tripled from seven million users to more than 30 million users within just three years.
Cash allows people to send and receive money, use its debit card to purchase online or in-store, and also conduct Bitcoin transactions.
Gross profit margin has been growing at around 50% in the past few years, and Square has doubled its operating cash flows from 2017 to 2019 alone.
While transaction fees continue to constitute the majority of its revenue, Square’s subscriptions & services segment, together with Bitcoin transactions, has also been growing steadily in recent years.
I’m a fan of companies that have growing and strong recurring revenues, and Square definitely fulfils this criterion.
Management quality, led by Jack Dorsey, is also admirable and the company has a strong mission to “create more inclusion and greater equality in the global economy”, which he cites as “both a social need and a huge business opportunity”.
After all, the company was first started to fix a problem: when its co-founder could not accept credit card payment from a customer. From its roots of creating a plug-and-play mobile credit card reader, Square then quickly moved on to make the entire system “faster, affordable and more accessible” for everyone.
The work still isn’t done, but if you know Dorsey’s history as the guy who created and revived Twitter, then you’ll understand why I have faith that he’ll be able to deliver on Square’s vision and promises as well.
My entire thesis on Square will take over 1,500 words to deliver, but to sum it up quickly, a strong business model, solid financials and high management quality is the reason why I’m vested. Square is already up by more than 40% since I invested, but I have confidence that it’ll continue to grow, and won’t mind adding more along the way.
Top Pick by SmallCapAsia: Trip.com
Most Singaporeans are avid travellers given our small land size. One comparison online portal I love to use is Skyscanner. And not many would know that Skyscanner is part of the company called Trip.com (NASDAQ: TCOM).
Trip.com, formerly known as Ctrip, is an online travel service provider for accommodation reservation, transportation ticketing, packaged tours and corporate travel management.Â
The company is currently China’s largest online travel agency with about 60% market share and has evolved into a one-stop-shop for Chinese tourists.
In 2016, it expanded its footprint by buying over Skyscanner, a global travel search site. In November 2019, it renamed its company from Ctrip to Trip.com in a bid to take its wings globally.
According to market intelligence agency Mintel, the outbound travel segment in China is expected to grow 11.3% annually between 2018 to 2023, reaching 251 million travellers.
And this is just the outbound travelling. What about domestic travelling within China itself? Mintel estimates that the domestic segment will grow 10.5% annually from 2018, to reach 9.16 billion travellers in 2023.
With growing middle class, increased consumption power, and just 9% of Chinese residents having a passport, you get the drift.
Trip.com’s business closely mirrors the level of activity in the tourism industry. In fact, COVID-19 has already clipped its wings and the company has made losses in the current period.Â
This was expected. However, one should look at what’s in store after the vaccines are distributed in 2021 and things start to improve again.
While I don’t have a crystal ball to predict when the recovery will happen, I can simply just get a sense of the pent-up demand from my friends/family’s incessant nagging that they can’t wait to travel abroad again.
Top Pick by The Fifth Person:Â Mapletree Commercial Trust
I like the long-term potential for Singapore retail REITs. Despite the impact of COVID-19 on the retail sector, malls remain a central facet of life in Singapore as seen by the fact that shopper traffic has already recovered to 70-80% of pre-pandemic levels for popular malls.
I believe well-located malls — especially those near transport nodes — with a well-curated mix of food, stores, and experiential retail will continue to draw in shoppers. As the pandemic eases and normalcy resumes, we will see more and more shoppers return to the malls.
Mapletree Commercial Trust (SGX: N2IU), or MCT for short, is one retail REIT that stands to gain from a full recovery. The REIT owns VivoCity, the largest shopping mall in Singapore.
VivoCity enjoys a steady stream of visitors from weekend shoppers and the weekday office crowd, boosted by the fact that it’s the only large mall in the Harbourfront/Alexandra area. Committed occupancy rates at VivoCity remain high at 97.9% despite the impact of COVID-19 and is likely to maintain at this rate or be better moving forward.Â
Another factor would be the return of tourists. VivoCity serves as the only connection for those taking public transport into Sentosa. A successful vaccine rollout around the world would see travel recover and would be a huge boost in tourist traffic for the mall.Â
VivoCity contributed 27.6% of MCT’s net property income (NPI) in 1H 20/21. However, the mall contributed nearly half of the overall NPI before the pandemic. We can expect VivoCity to steadily increase its NPI contribution as the situation improves.
MCT’s unit price has recovered since its April low but is still about 15% below its 2020 peak. While the short-term outlook may appear uncertain for now, MCT remains a well-managed REIT with high-quality assets that is expected to do well over the long run.
Top Pick by The Smart Investor: Mercado LibreÂ
Online shopping and electronic payments are among the biggest beneficiaries of the pandemic. Owning a business that taps on one of these trends would be great.Â
But what if you could get a company which is both a massive online retailer and a huge e-payment provider?Â
Even better, what if this company operates in a market that is still vastly under-penetrated?
If this piques your interest, say hello to Latin American online retailer, Mercado Libre (NASDAQ: MELI).   Â
In 2021, Mercado Libre will become one of the 17 stocks that I have held for a decade or more. The stock is up around 2,800% since my 2011 purchase, placing it in second place behind my biggest winner, Netflix (NASDAQ: NFLX), which has risen around 16,000%. Â
Despite Mercado Libre’s gains, it is still early days for the US$85 billion-dollar company.Â
Online retail penetration in Latin America is rising fast and is expected to hit 10% this year, twice the figure pre-COVID.Â
But while the rise in online buying has been swift, the penetration rate pales in comparison to the US and China, where e-commerce already accounts for over 30% of retail, according to the Financial Times.  Â
And Mercado Libre is well-positioned to capitalise on this trend.Â
The company’s marketplace plays host to over 110 million unique active users that transacted over US$14 billion in gross merchandise volume and performed almost US$34 billion worth of electronic payments for the first nine months of 2020 alone.Â
Mercado Libre also has a solid track record of adding new services as it expands.Â
As such, I would expect the business to look vastly different 10 years from now, unlocking new markets as it grows.Â
A high stock valuation presents short term risks.Â
But if your view stretches beyond 2021 and into 2030, I believe you could be amply rewarded for your conviction to buy and hold for the long haul.   Â
Top Pick by Value Invest Asia: Trade Desk
For 2021, the world we live in will still be as volatile as ever. However, as a long-term investor, I believe that humanity will continue to make progress in every aspect of our lives. More importantly, the businesses that have enjoyed a strong tailwind in 2020 will only grow stronger in the next year.Â
The one company I am optimistic about and has been featured in our VIA Club “Stock of The Month” for September 2020 is Trade Desk Inc (NASDAQ: TTD).
Trade Desk is a technology platform that allows buyers of advertising to match advertising placement directly with media outlets across the internet. Its customers, mostly ad agencies, can buy advertising placement across different formats and devices.Â
Trade Desk is essentially a marketplace for advertising. In the digital advertising space where it is dominated by Google and Facebook, Trade Desk offers media outlets to break free from that duopoly and find advertisers directly.
The demand for Trade Desk service is greater than ever. Its revenue has been growing at 48% a year over the past three years. Its net income has grown at an even more impressive rate of 74% a year over the same period.
With the US government looking into anti-trust issues surrounding major platforms like Google and Facebook, Trade Desk offers a real alternative to all stakeholders. With a huge market to grow into, an ultra-strong balance sheet with a business model that is generating strong cash flow, the best of Trade Desk is yet to come in my opinion.
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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.Â
