Singapore Stock Picks 2017
Small Caps Stock
Analyst Recommendations
AEM HOLDINGS LTD
AWX.SI
BEST WORLD INTERNATIONAL LTD
5ER.SI
BOUSTEAD PROJECTS LIMITED
AVM.SI
CSE GLOBAL LTD
544.SI
HEALTH MANAGEMENT INTL LTD
588.SI
MM2 ASIA LTD.
1B0.SI
MEMTECH INTERNATIONAL LTD
BOL.SI
VALUETRONICS HOLDINGS LIMITED
BN2.SI
Singapore Alpha Picks 2017 - CIMB Analysts' Alpha Picks (Small Caps)
- Small-caps stock picks: Boustead Projects, CSE Global, Valuetronics, Best World, mm2 Asia and HMI.
- We add manufacturing/tech companies AEM and Memtech as valuations are attractive at c.8x CY18F P/E vs. average 3-year EPS CAGR of 54%.
- We remove Cityneon (capped by offer price to major shareholders).
AEM Holdings Limited (TP S$3.39)
- AEM trades at 9x FY17F and 7.6x FY18F P/Es.
- Earnings growth is expected to pick up in FY17F and FY18F due to rising contribution from its key customer.
- There could be margin upside in 2H17 as AEM obtains better terms from its suppliers and begins production for its customer in lower-cost Penang.
- A short-term catalyst could come from its quarterly earnings, which management projects will show both qoq and yoy growth. Its balance sheet is in a healthy net cash position and the company has a dividend policy of not less than 25% of profit after tax.
Best World (TP S$1.52)
- Best World International stock continues to defy gravity even after two consecutive years of > 100% EPS growth. 1Q17’s net profit grew an incredible 63% yoy and this is likely to accelerate.
- FY17F 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. Further, sales growth momentum in Taiwan remains strong on the back of increased product acceptance. The stock also offers a 2% yield.
- Risks include regulatory changes or poor execution in China.
Boustead Projects Limited (TP S$1.04)
- We like Boustead Projects for its market leadership in the niche industrial property design & build (D&B) space. The group also owns a medium-sized leasehold portfolio to counter the construction cyclicality.
- BP trades at 0.5x FY18F RNAV vs. Singapore industrial REITs’ average of 1.05x. BP had S$25m net cash (c.9% of market cap) as at end-FY17.
- Key re-rating catalysts include more D&B project wins and possible utilisation of its balance sheet for M&As to accelerate its progress towards an eventual REIT listing.
CSE Global (TP S$0.56)
- CSE Global currently trading at 10.3x CY18F P/E vs. our target of 12x (based on historical 5-year mean). It is net cash (1Q17: S$0.11/share), with a committed FY17F DPS of 2.75 Scts, implying 5.7% dividend yield.
- 1Q17 contract intake spiked to S$117.9m, driven by a large S$42m O&G contract in Mar, which trumped the order intake rate of the past eight quarters (c.S$57.7m-98.4m). Large order backlog by end-18F implies better CY18F net profit.
- Large contract wins by mid-CY17F and improvement in headline earnings in 2H17F are catalysts. 2Q17F results are guided to still be sluggish.
Health Management Int’l (TP S$0.83)
- We like HMI for its quality hospital assets (MMC and RSH) in Malaysia, which are well positioned to ride the increase in patient load, the higher revenue intensity and the medical tourism boom.
- HMI is also a cheaper regional healthcare play at 24x CY18F P/E and 13x CY18F EV/EBITDA vs. peers’ average of 40x CY18F P/E and 19x CY18F EV/EBITDA.
- Full consolidation of substantial minority interests with effect in 4QFY6/17 should remove stock overhang while potential M&As and better-thanexpected earnings could catalyse the stock.
mm2 Asia (TP S$0.65)
- Cinema expansion will be the key catalyst. mm2 Asia is in talks to possibly purchase Village Cinemas’ entire 50% stake in Golden Village (GV) cinemas in Singapore, which owns 11 cinemas and 91 screens, with 44% market share. If this materialises, we estimate this could add c.S$11m to its bottomline (c.40% of FY18F net profit).
- We also believe that Unusual is on track to double its earnings in FY18F, with more concerts to be carried out in North Asia. The recently-announced two soldout nights for Jacky Cheung’s “A Classic Tour” to Zhongshan, China, is a case in point.
- mm2 is trading at c.20x CY18F P/E vs. peers’ 27x.
- Our target price, based on SOP, has not factored in the potential acquisition of GV cinemas.
Memtech International (TP S$1.09)
- Memtech’s 1Q17 core net profit of US$1.7m and gross margin of 18.1% were a vast improvement over 1Q16’s US$0.4m and GPM of 15.9%, possibly signaling a better outlook ahead.
- We believe this earnings momentum could be sustained into FY17-18F, led by strong growth in both automotive and consumer electronics segments, which could re-rate the stock. The company is also poised for more customer wins in these segments.
- Our Add rating and target price of S$1.09 is pegged to 10x CY18F P/E, lower than Singapore peers’ average of 12x. The stock also offers 4-6% dividend yield.
Valuetronics (TP S$0.89)
- Valuetronics' FY3/17 core net profit of HK$151m (+25.1% yoy) surpassed ours/consensus expectations, thanks to strong sales growth in both ICE (+14.1% yoy) and CE (+19.7% yoy) segments respectively.
- Such double-digit sales momentum could sustain into FY18F, in our view, as the automotive connectivity modules and smart lighting are still at early stages of their product lifecycle.
- Our Add rating and TP of S$0.89 is pegged to 11x CY18 P/E (10% discount to peers’ average), backed by 4-5% dividend yield and 3-year EPS CAGR of 13.5%. The stock currently trades at 11.2x FY18 P/E (6.3x ex-cash).
Lim Siew Khee
CIMB Research
|
Singapore Research Team
CIMB Research
|
http://research.itradecimb.com/
2017-05-30
CIMB Research
SGX Stock
Analyst Report
3.390
Same
3.390
3.050
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3.050
1.040
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1.040
0.560
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0.830
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0.650
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0.650
1.090
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1.090
0.890
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0.890
