Singapore Small Caps Stock
Small Caps Stock Picks
AEM HOLDINGS LTD
AWX.SI
MEMTECH INTERNATIONAL LTD
BOL.SI
VALUETRONICS HOLDINGS LIMITED
BN2.SI
MM2 ASIA LTD.
1B0.SI
RIVERSTONE HOLDINGS LIMITED
AP4.SI
SmallCaps - Small-cap Performance To Moderate In 3Q17F
- Our 5 small-cap top picks outperformed the Straits Times Index (STI) for the period of 15 May-14 Aug 2017.
- We now remove UMS and Sunningdale from our list of small-cap top picks.
- New additions to the list this quarter are mm2 and Valuetronics.
- mm2 has priced in the lapsed Golden Village Cinema (GV) deal and its S$157m war chest at 18 Jul 17 enables earnings growth via M&A and investment in productions.
- In our view, Valuetronics could see further earnings upside as contribution from a new automotive customer kicks in in FY19F.
Big caps outperforming small caps YTD
- Big-cap stocks, represented by the STI that tracks the performance of the top 30 companies (by market cap) listed on the SGX, have gained 14.9% YTD.
- Mid-cap stocks, represented by the FTSE Straits Times Mid Cap Index, were the second-best performers, gaining 8.8% YTD.
- The FTSE Straits Times Small Cap Index, which tracks small cap stocks listed on the SGX, gained 7.5% YTD.
Portfolio performance
- The five small-cap stocks that we selected for our portfolio outperformed the STI YTD.
- For the period 15 May - 14 Aug 2017, the top performers of our portfolio were:
- Memtech (+21.3%),
- UMS (+12.5%),
- Sunningdale (+12.5%),
- AEM (+6.0%) and
- Riverstone (+3.9%).
- In comparison, the STI returned 1.4% during the same period.
Portfolio changes
- Given that the small caps under our coverage have done well YTD and their fundamental merits appear well appreciated by the market, we think investors should moderate their return expectations for small caps in 3Q17F.
- We are removing UMS and Sunningdale from our list of top picks and replacing them with Valuetronics and mm2.
mm2 Asia
- mm2’s 1QFY3/18 results were within our expectations. mm2 recently raised S$157m proceeds via issuance of new shares and convertible debt securities, intended for acquisitions and investment in productions.
- In her report, our small/mid-cap analyst Ngoh Yi Sin upgraded mm2 from Hold to Add with an unchanged SOP-based TP of S$0.58. (See report: mm2 Asia - 1QFY18 Casting Spotlight Back On Core Production)
- She thinks mm2’s current share price has factored in the lapsed GV Singapore deal and presents an attractive entry point.
- Risks are production delay and cost overrun.
Valuetronics
- Valuetronics 1Q18 core net profit of HK$50m was ahead of our/Bloomberg consensus full-year forecasts. Smart lighting business from its Dutch customer continued to lead earnings growth of the consumer electronics segment.
- Earlier-than-expected qualification by an automotive OEM was another positive.
- Our analyst Ngoh Yi Sin raised her TP to S$1.02, pegged to industry average of 11.9x CY18F P/E. (See report: Valuetronics Holdings Ltd - 1QFY18 Results Beat From Stronger Sales. Good Start To FY18 Earnings Highway.)
- Downside risks: order cancellation or delay.
- Re-rating catalysts: stronger earnings delivery, synergistic M&As.
William TNG CFA
CIMB Research
|
NGOH Yi Sin
CIMB Research
|
http://research.itradecimb.com/
2017-08-17
CIMB Research
SGX Stock
Analyst Report
3.430
Same
3.430
1.160
Same
1.160
1.020
Same
1.020
0.580
Same
0.580
1.200
Same
1.200
