Analysts Alpha Picks 2017
Singapore Stock
Small Caps
BEST WORLD INTERNATIONAL LTD
5ER.SI
CSE GLOBAL LTD
544.SI
CITYNEON HOLDINGS LIMITED
5HJ.SI
SUNNINGDALE TECH LTD
BHQ.SI
TALKMED GROUP LIMITED
5G3.SI
UMS HOLDINGS LIMITED
558.SI
VALUETRONICS HOLDINGS LIMITED
BN2.SI
CIMB analysts’ Alpha picks for 2017 (Small Cap)
- In small caps, we replace outperformers MMT, Auric Pacific, Dutech and CEI with CSE, Talkmed and UMS.
- We keep Best World, Cityneon, Sunningdale and Valuetronics on earnings growth potential and/or attractive valuations.
Best World (Add, TP S$2.97)
- The stock’s valuations are undemanding at just 11x forward P/E. This is below peers’ 16x and its historical peak band of 15-18x during its last earnings upcycle.
- FY17 is poised to be another record year as Best World converts its distribution in China to its core direct selling model. This is set to propel the group to a new level of profitability. Also, sales growth momentum in Taiwan remains strong on the back of increased product acceptance. The stock offers a 3% yield.
- Risks include regulatory changes or poor execution in China.
CSE Limited (Add, TP S$0.59)
- CSE Global looks to repeat FY16’s core net profit (US$21.0m) in FY17, signalling a bottom to the earnings slide. FY16 was a tough year, with core net profit narrowing 31.4% yoy (vs. US$34.1m in FY15).
- Its guidance is heartening; implies improved contract flows and several large greenfield projects given end- 16 order backlog was low at S$163m (vs. FY15: S$192.7m).
- Stock is a safe bet, with net cash position of S$70.2m (13.6 Scts/share); guaranteed DPS of 2.75 Scts (c.5.7% dividend yield).
- Target price is S$0.59, based on 12x FY18F P/E (historical 5-year average mean).
Cityneon (Add, TP S$1.27)
- FY16 was only the start of multi-year earnings growth for Cityneon, having secured and developed the licensing rights for Avengers S.T.A.T.I.O.N. and Transformers.
- Our current Add call and target price are premised on 15x FY18 P/E (10% discount to peers’ average) and 34-120% EPS growth in FY17-18F.
- We believe catalysts could be more travelling sets and the potential acquisition of more IPs in 2017.
Sunningdale Tech (Add, TP S$1.56)
- Sunningdale Tech trades at 8.7x/8.4x FY17F/FY18F P/E. Earnings growth is muted at 4.3% for FY18F with low ROEs of 8%.
- Over the years, despite the challenging industry conditions, Sunningdale has managed to stay profitable and has been rewarding shareholders with dividends. FY16 DPS was raised to S$0.06 (FY15: S$0.05).
- We believe that the company will continue to improve its cost efficiency and capitalise on its global manufacturing footprint. Trading at just 3.0x/2.5x FY17F/FY18F EV/EBITDA, it could also be of interest to private equity funds.
Talkmed (Add, TP S$1.83)
- Talkmed’s surprise decision to propose a 1 for 1 bonus issue nudges us to believe that major shareholders are now more receptive to improving shareholder value.
- We believe that accretive M&As are the way to go for fast growth. Talkmed has a strong net cash balance sheet (zero debt) to fund potential acquisitions.
- While there is some worry over any negative outcome from Dr Ang’s appeal against the Singapore medical Council, any positive outcome could also re-rate the shares immediately.
UMS Holdings (TP S$0.82)
- UMS has successfully renewed its manufacturing contract with key customer Applied Materials for another three years (with an option to renew for a subsequent three years). This removes market concerns over the loss of business.
- Industry forecaster SEMI expects the global semiconductor manufacturing equipment industry to grow by 9.3% in CY17. Applied Materials is also expecting a strong 2017.
- The company has been a consistent dividend payer due to its limited capex. Dividend yields over FY17F- 19F are 8.9%.
Valuetronics (Add, TP S$0.72)
- We think Valuetronics is still cheap at 9x FY17 P/E (4x ex-cash), given its sustainable earnings growth of 6- 13% for FY3/17-19F, and cash-generative business.
- Its penetration into the automotive sector and increasing exposure to Internet of Things (IOT) have not been fully priced in, in our view. The stock also offers a 6% dividend yield.
- Continued order wins and higher-than-expected dividend payout could catalyse the stock; key risk is unexpected order delays or cancellations.
LIM Siew Khee
CIMB Research
|
http://research.itradecimb.com/
2017-03-04
CIMB Research
SGX Stock
Analyst Report
2.970
Same
2.970
0.590
Same
0.590
1.270
Same
1.270
1.560
Same
1.560
1.830
Same
1.830
CIMB Research
SGX Stock
Analyst Report
0.820
Same
0.820
0.720
Same
0.720
