5 large cap alpha stock picks by CIMB to survive a ‘rocky’ 2017
SINGAPORE (Dec 7) :
CIMB says uncertainty is the new name of the game in 2017 on the back of upcoming events.
These include an expected US Fed rate hike, the Brexit Article 50 trigger timeline, Donald Trump’s presidency, multiple elections in Europe, and whether OPEC remains committed to its production cuts.
“The path to a new status quo is likely to be a rocky one,” says CIMB analyst Lim Siew Khee in a Monday report. “[These events] are more than enough to keep the equity markets on their toes.”
According to CIMB, the key themes for 2017 are expected to be: “rising interest rates, dollars and commodity prices”.
1) First Resources.....
CIMB has an “add” rating on First Resources, with a target price of $2.32.
“First Resources is our preferred pick for its young estate profile and strong management, as its cost of production is among the lowest among the Singapore planters,” says Lim.
CIMB has also upgraded the commodities sector from “underweight” to “neutral” on the back of improving production prospects.
Shares of First Resources are trading at $1.96.
2) Venture Corporation.....
CIMB has an “add” rating on Venture Corp, with a target price of $10.94.
“Venture’s past efforts in engaging less price sensitive customers have borne fruit in recent years, driving our projected 16.3% earnings growth in FY17F,” says Lim.
CIMB has assigned an “overweight” rating to the recreated tech and manufacturing sector on the back of a strong US dollar and a more hopeful US recovery.
Shares of Venture Corp are trading at $9.98.
3) Singapore Technologies Engineering.....
CIMB has an “add” rating on ST Engineering, with a target price of $3.75.
Lim says “the worst could be over” for ST Engineering’s land systems segment following the disposal of its loss-making Chinese operations. It marine segment is also expected to see better days ahead with recovering oil price.
Meanwhile, the stronger US economy and US dollar could provide a boost to ST Engineering, which derives 25% of its revenue in the US.
Shares of ST Engineering are trading at $3.38.
4) Dairy Farm International Holdings.....
CIMB has an “add” rating on Dairy Farm, with a target price of US$8.70.
“After two consecutive years of earnings declines, margins finally look like they have bottomed and we think it is now time to revisit the stock,” says Lim.
Lim adds that Dairy Farm is showing signs of recovery in previous problem markets Indonesia and Singapore, while its investments in Greater China are doing well.
CIMB is keeping its “overweight” rating on the consumers sector.
Shares of Dairy Farm are trading 11 cents higher at US$7.26.
5) UOL Group....
UOB has an “add” rating on UOL, with a target price of $7.96.
“UOL is our preferred pick among developers, trading at a 42% discount to RNAV,” says Lim.
CIMB is also keeping its “overweight” rating on the property developers sector on the back of multi-year low valuations, with bad news already priced in.
Shares of UOL are trading 4 cents higher at $6.19.
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