Excerpts from UOB Kay Hian report

STRATEGY – Singapore Alpha Picks: Outperformed In 3Q19; Add Yangzijang

While the FSSTI retreated 6.1% in 3Q19, our alpha picks gained 2.0% in the quarter, led by our small/mid-cap picks (Fu Yu: +11.5%, Koufu: +5.8%) and our short call on SATS (-11.2%).

For September, our portfolio rose 0.9% mom, surpassing the FSSTI’s gain of 0.4% mom; notable outperformers for the month were Fu Yu and CDREIT.

For October, we add Yangzijiang as we believe the recent share price weakness is unwarranted and it is currently trading at an inexpensive valuation of 0.56x 2019F P/B.


ANALYSTS’ TOP ALPHA* PICKS

Analyst

Company

Rec

Change#

Catalyst

Adrian Loh

Yangzijiang

BUY

-

New ship-building order announcements

John Cheong/ Joohijit Kaur

Venture Corp

BUY

-0.7

New product launches, US-China trade deal

Adrian Loh

Keppel Corp

BUY

-6.8

Continued recovery in new-order flow in 2H19

Loke Peihao/ Jonathan Koh

CDREIT

BUY

-1.8

Recovery in contribution from Orchard Hotel; growing Singapore tourist arrivals

Leow Huey Chuen

Wilmar

BUY

9.9

Announcement of the final approval for the listing of Yihai Kerry Arawana Holdings.

K Ajith

ST Engineering

BUY

-0.3

Already in place.

Jonathan Koh

DBS

BUY

-11.0

US-China trade deal and strong deposit franchise which ensures firmer NIM.

John Cheong/ Joohijit Kaur

Koufu

BUY

-10.6

Sale of its two central kitchens and better-than-expected contribution from R&B Tea.

John Cheong

Fu Yu

BUY

16.0

Higher-than-expected dividend or potential takeover offer.

* Denotes a timeframe of 1-3 months and not UOBKH’s usual 12-month investment horizon for stock recommendation
# Share price change since stock was selected as Alpha Pick
Source: UOB Kay Hian



ACTION
RenYuanLin 4.2016Ren Yuan Lin, chairman, YZJ. NextInsight file photoAdding Yangzijiang to our October portfolio. We add Yangzijiang as we see the slump in share price in August post news reports of the chairman assisting investigations in China to be unwarranted, given that it does not involve the company or its funds.

Meanwhile, mid-term shipbuilding outlook appears positive.

On a valuation basis, it is currently trading at 0.56x 2019F P/B which we view as inexpensive as it is -2SD below the company’s 5-year historical P/B.

KEY RECOMMENDATIONS

Company

Share Price
(S$)

Target Price
 (S$)

Upside (%)

CDL Htrust   

1.62

2.06

27.2

DBS

Fu Yu   

24.57

31.30

27.4

0.225

0.285

26.7

Keppel Corp   

5.87

7.61

29.6

Koufu

0.72

0.95

31.9

ST Engineering   

3.81

4.34

13.9

Venture Corp   

15.37

17.70

15.2

Wilmar

3.65

4.40

20.5

Yangzijiang

0.96

1.46

52.1

Source: UOB Kay Hian


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