SMC Monthly - DBS Research 2016-02-04: Look for result boosters

SMC Monthly - DBS Research 2016-02-04: Look for result boosters JAPFA LTD UD2.SI  RIVERSTONE HOLDINGS LIMITED AP4.SI  MM2 ASIA LTD 41C .SI  OSIM INTERNATIONAL LTD O23.SI 

SMC Monthly - Look for result boosters 

  • With STI falling by nearly 9% in January, small cap names were not spared and our picks fell by an average of 5.9% since our last issue 
  • We focus our picks on names that should report strong earnings or declare an attractive dividend 
  • Good results - Japfa, Riverstone, mm2, Osim 
  • Dividends - CMH Pacific 

Sticking with our conviction picks. 

  • Despite the challenging start, we keep four of our five conviction picks intact. 
  • We believe Japfa (BUY, TP S$0.90), Riverstone Holdings (BUY, TP S$1.41) and mm2 (BUY, TP S$1.05) should report strong upcoming results that should help their share prices to re-rate. 
  • We pick Osim (BUY, TP S$1.28) to replace Sheng Siong given our recent upgrade of the stock on better-than-expected results. 
  • Meanwhile, CMH Pacific (BUY, TP S$1.45) is likely to reward shareholders with a final dividend of up to 3.5Scts. 

Value emerging from P/BV perspective. 

  • Following the recent market correction, many Singapore SMC names are trading well below their book values, suggesting that value has started to emerge. 
  • Aside from oil & gas-related companies that could potentially face asset impairment charges in the face of depressed oil prices, we highlight a couple of names that offer value: 
    1. Midas Holdings (BUY, TP S$0.49) is trading at c. 0.5x P/BV despite being profitable, 
    2. Perennial Real Estate Holdings (BUY, TP S$1.32) is at just 0.5x P/BV and 
    3. Centurion Corporation (BUY, TP S$0.59) trades at 0.6x P/BV and less than 7x PE. 

SMC Radars: Best World, Serial System, and Sunningdale. 

  • Best World could enter a period of rapid growth if the company successfully breaks into the Chinese direct-selling market while electronic component and product distributor, Serial System, has ambitions to grow beyond the electronic space. 
  • Leveraging on its competitive advantages in the manufacture of plastics parts and tooling, Sunningdale is well positioned to tap growth opportunities in the high-volume consumer/IT industry. 
  • We also feature leading local F&B group, Jumbo, whose growth is underpinned by new outlets in Shanghai and Singapore, in an Equity Explorer.

Paul YONG CFA DBS Vickers | Singapore Research Team DBS Vickers | 2016-02-04
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.41 Same 1.41
BUY Maintain BUY 0.90 Same 0.90
BUY Initiate BUY 1.05 Same 1.05