Excerpts from analysts' report

DBS Vickers analysts: Yeo Kee Yan & Ling Kee Keng

Small-cap names can often shine despite uncertainty and malaise in the broader market. We begin 2016 with the following conviction picks under the following themes:

1) Growth – MM2, Riverstone and Sheng Siong
2) Yield – China Merchants Holdings (Pacific)
3) Recovery – Japfa

For mm2 Asia (BUY, TP S$1.05), earnings should be boosted by growth in local productions as well as its expansion into the China market. Riverstone (BUY, TP S$2.83) should benefit from an enlarged capacity as well as a strong USD vs 
Ringgit, while Sheng Siong (BUY TP S$1.01) is looking to see both store growth and margin expansion.

Japfa chick10.15Parent stock chickens used to lay eggs for DOC (day-old chicks). Photo: RHBA rebound in dayold-chick prices should help Japfa’s (BUY TP S$0.90) earnings to recover, and lastly, CM Pacific (BUY TP S$1.45) offers a highly attractive dividend yield of over 8%, with long-term earnings bolstered by recently acquired toll roads in China.

Watch out for potential reversions for oil & gas-related names. While we are bearish on near term oil prices, if it does recover significantly, and holds, we can expect to see a rebound in stock prices of oil & gas companies.

Among these names, we think Ezion (BUY, TP S$1) and Pacific Radiance (BUY, TP S$0.42) should bear the most watching.

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