OCBC Investment Research issued a report this morning saying that despite the market’s recent bounce, it remains realistic that the market will remain volatile.
But it holds the view that companies with resilient businesses and strong management will emergestronger than before.
Its picks, which it called the Resilient Singapore Sevens, are:
* ST Engineering (BUY: S$3.73);
* StarHub (BUY: S$3.51);
* Noble (BUY: S$2.99);
* Suntec REIT (BUY: S$1.71);
* SPH (BUY: S$5.25);
* Sino-Environment (BUY: S$2.26);
* Micro Mechanics (BUY: S$0.74).
The report said: “Based on historical performance and our interactions with management, we believe these companies possess the abovementioned characteristics that will outperform the market in the long term.”
| Share price S$ |
OIR Fair Value S$ |
Upside | Upcoming dividend (not annualised) |
Forecast FY dividend yield |
OCBC Investment Research comments |
|
| ST Engineering | 2.83 | 3.73 | 32% | 2 cts | 6.9% | Resilient company with strong management with diversified businesses in Aero, Marine and Land systems to mitigate earnings volatility. De-facto defence contractor for Singapore. Military spending to sustain business while volatile market will present cheap M&A opportunities. |
| Noble | 2.22 | 2.99 | 35% | Nil | 2.3% | Noble profits regardless of whether commodities' prices rise or fall. Its diversified portfolio of product offerings spanning agriculture, metals and energy means that the group will be cushioned from cyclical fluctuations within each asset class. Globalisation will continue to drive industrialisation and electrification, which will in turn sustain the demand for commodities such as steel and coal in the long term. |
| Starhub | 2.78 | 3.51 | 26% | 4.5 cts | 6.5% | Management has guided for S$0.18 of dividend to be paid in FY08, or S$0.045 per quarter. In addition, its business is less vulnerable to an economic slowdown; this is especially true for its mobile revenue as most have come to accept mobile phones as a part ofeveryday life. |
| Suntec | 1.5 | 1.71 | 14% | 2.5 cts | 6.4% | Location, location, location: Core asset Suntec City is set to realize its true potential as the Marina area blossoms with the completion of the Circle Line and the Integrated Resorts in 2010. The REIT's office portfolio is significantly under-rented at S$5-6psf and rent reversions will drive near-term growth. We feel the high yield (on quality assets) is a great entry point for investors with a defensive bent. |
| SPH | 4.05 | 5.25 | 30% | 19 cts | 6.2% | SPH continues to be the dominant print media company in Singapore. Its recent property development (Sky@Eleven) is on track for 2010 TOP and will contribute to earnings. Although material costs have been rising, we believe this can be mitigated byraising prices. Investments in new media will ensure that SPH remains relavant to tomorrow's communication mediums. |
| Micro-Mechanics | 0.70 | 0.74 | 6% | 5.5 cts | 7.9% | Well established background. Resilient to volatility in semicon industry due to prudent cost management policy and supply of highvalue consumable parts. Proven track record of maintaining GPM and NPM above 55% and 20% respectively for FY05-07. |
| Sino-Env | 1.14 | 2.26 | 98% | Nil | Nil | Unique wastegas treatment company poised to benefit from China's ongoing drive to clean up its environment. We believe that the clean-up efforts will not stop after the Beijing Olympics but would speed up instead once the rest of the world gets a first-hand look at the environmental issues there. It is sitting on a bulging order book and our revenue targets for FY08 and most of FY09 have been filled. |
