Stock Picks for 2010

I pick Hiap Hoe and Q&M: Hiap Hoe: earnings and RNAV surge to come from projects built on cheap land 1. Skyline 360: net saleable space: 123,192 sq ft, land cost: $756psf, other cost: $450psf, breakeven: $1,206psf, average selling price: $1,950psf, gross profit = ($1,950-1,206) X 123,192 = $91.65 million. 2. Waterscape: net saleable space: 213,437 sq ft, land cost: $609psf, other cost: $430psf, breakeven: $1,035, average selling price: $1,750psf, gross profit = ($1,750-$1,035) X 213,437 = $152.6 million. 3. The Aspine (60% stake in project): net saleable space: 79,800 sq ft, land cost: $1,870psf, other cost: $450psf, breakeven: $2,320, average selling price: $2,000psf, gross profit = ($2,000-$2,320) X 79,800 X 60% = $15.32m loss (60% share of total loss) 4. Hotel/SOHO project in Ah Hood Road (50% stake in project). Gross floor area = 426,000 sq ft. Company bought the land at $172 psf, compared to analyst estimate of fair value of $350-470psf. To be conservative, we use a gross profit of only $250psf for this project. Gross profit = $250psf X 426,000 = $106.5 million, and Hiap Hoe’s 50% stake in it is equal to $53.35m. Total gross profit above = $282.28 million, compared with mkt cap of $166.4m. RNAV should surge to $1.08. Co will experience big earnings and RNAV growth next 1-3 years, with huge cash inflows in next 2-4 years. Co is one of the most exposed (in % terms of co’s projects) to the Orchard Road vicinity, and if analysts’ touting growth in prime area prices are correct, then it will not have problem selling its Orchard area condos. It’s hotel exposure will also benefit if the IRs take off next few years. Q&M: low supply of such stocks (no other dental counter, and only one of few medical counters) and good demand means price may gain from simple law of supply and demand. But with high PE already, stock is riskier compared to Hiap Hoe.

Well done on Q&M. The share price performane is fantastic! Any more to share??

Go for small cap with strong growth potential. My pick . Way undervalued vs peer. In fact no comparison. Juring Island based. Take note so far no Co. has lost money doing work in JI. HiapSeng, HaiLeck, etc. All are able to pay superb dividend. Part of the reason is Oil CO. service contract. If you dont believe ask around. Oil Co. are highly structured and pay for service is guarantee! Big OIL will shine and so will those involve directly or indirectly servicing these large cluster! Another take is infrastructure play. Take note Semb Marine recent move to Tuas. Will PSA move! Big jobs ahead if PSA move freeing up premium water front land for goverment to joint up Brani and Tanjong Pagar. This will be the next CBD/IR/Waterfront district. My suspect is that this will be a High Net worth area - as it is a port and has deepwater potential with good water catchment for Yatch and also water activities. The excitment will depend on the master plan and creativity of Spore government!

Healthway Medical - Currently at 12c. In comparison to its peers, it is inexpensive whether you use PE or P/B ratios. If we look at their results in the last quarter, they outperformed Raffles Medical Group in terms of percentage growth. I continue to believe that a price of 17c would be barely fair. Over the next 12 months, I would be surprised if investors in this counter do not make a handsome profit. A strong growth story makes this a buy and hold counter for me.

To me, the key attraction about Sinotel at 62 cents are: a) Very inexpensive valuation at 6-7 X PE. Inexpensive on its own and in relation to US and HK listed peers which are doing 15X PE. b) High growth business. Much has been said about the multibillion dollar 3G network rollout in China. To catalyse the stock price, Sinotel has embarked on a foreign listing of its shares will boost the stock price in Singapore. After a lengthy process, Sinotel is on the verge of attracting US fund managers to buy its ADRs. In its business, Sinotel is expected to continue to enjoy a boom in its industry, and the full-blown effect can be increasingly seen in its profit and loss statements. Its recent Q3 profit was a hefty 52% jump year-on-year. A report recently, however, cautioned that Q$ will not be so robust because some projects were completed ahead of schedule in Q3.

I also like Singpost for its strong free cash flow > $120m and high dividend policy, not to mention, its crown jewel - Paya Lebar HQ which is offers huge developmental potential. SC Global should also be exciting if the luxury property market does well with the improving economy. Datapulse for always doing well whenever Microsoft releases a new OS version - Windows 7 and its high dividend yield. Did you notice how the PC sales remained resilient this year while everything tanked?