ARE YOU vested in the 5 hot stocks identified by The Edge during this year’s market trough in March 2009? Many of you would be, going by the amazing number of pageviews (about 4,000) chalked up by our story on the stock picks. Well done!
The five stocks, as we reported back then (see link at the bottom of this page) are: ASL Marine, Boustead, Epure, Pan-U Corp, and Sinotel.
Back in March, NextInsight highlighted that more than a hundred profitable stocks trading on SGX met all the following criteria: below 5X historic PE; dividend yield 5% or more; and trading below book value.
Four months down the road today, the Straits Times Index has appreciated over 50%, and the above list has narrowed to less than 40 stocks.
We also highlighted 5 hot stocks shortlisted by The Edge in its story published on 9 March 2009 headlined "Low PER stocks: Five stocks trading at up to five times earnings".
We were surprised to find the best performer to-date from The Edge's picks emerged from the highly challenged marine & offshore sector.
The stock price of ASL Marine has more than doubed to close at 84.5 cents yesterday.
| The Edge 5 Picks | Thu close price | PE | Gain since 16 March |
| ASL MARINE | 84.5 cents | 4.0 X | 117% |
| SINOTEL | 23.5 cents | 2.8 X | 104% |
| EPURE | 50.5 cents | 12.7 X | 87% |
| BOUSTEAD | 71.5 cents | 6.2 X | 64% |
| STRAITS TIMES INDEX | 2,401 | 12.6 X | 51% |
| PAN-UNITED CORP | 50.5 cents | 5.8 X | 29% |
From a 'cheap' PE of 1.8 X, ASL’s valuation has improved to 4 X.
Ironically, the worst performer was from the hugely popular construction sector.
Of the 5 picks of The Edge, Singapore’s largest ready-mixed concrete player, Pan-United Corp, was the only stock that under-performed the STI, gaining about 29% to reach 50.5 cents.
The relatively muted gain may be because its PE in March of 4.2 X was not as depressed as the other stocks.
With the solid gains in the stock prices, what do analysts say about the stocks? NextInsight scrutinises analyst reports for some answers:
ASL Marine
OCBC Investment Research maintained its buy call on ASL Marine on 13 July with a price target of S$1.03, but cautioned that orders for new vessels will be dampened given that ship financing remains difficult.
It likes ASL's relatively low gearing (net debt-to-equity: 0.17x), strong order book (S$ 582 million extends to FY11) and diversified income streams.
The shipyard operator cum vessel charterer announced on 11 May that it had chalked up net profits of S$23.9 million for its 3Q09 financial period ended March.
Group revenues had grown 16.6% yoy, with shipbuilding showing the strongest growth.
The stock is currently trading around 3.5x FY09 forward PE, lower than the average 9x of its comparable peers.
Sinotel
Sinotel was the next best performer among picks of The Edge, gaining about 90% to close at 23.5 cents yesterday.
DMG maintained its “buy” call on the wireless equipment solutions provider for China’s telcos on 6 July, with target price at 32 cents.
The issue with Sinotel is its need for large amounts of working capital, but it has been able to secure additional credit facilities.
It announced on 3 July that it had secured an additional Rmb 30 million in the credit facility granted by DBS, bringing the total facility to Rmb 65 million.
With this, additional working capital is available to fund new and on-going projects, and Sinotel is able to take on more orders. Interestingly, Sinotel's customers are required to pay direct to the banks, which act as a third-party check on Sinotel.
Sinotel’s 1Q09 revenues grew 24% y-o-y to Rmb 96.6 million while its net profits grew 17.7% to Rmb 28.8 million.
Recent story: SINOTEL: Lively Q&A with investors
Epure
DBS Vickers maintained its ‘Buy’ call on Epure on 6 July, with target price at 64 cents.
The leading Chinese water and wastewater treatment solutions provider has been busy.
It has announced plans to invest in 3 build-operate-transfer (BOT) projects in the Chinese province of Shaanxi since March this year.
DBS Vickers likes Epure because of its track record in securing projects, its large growing order book (Rmb 800 million as at end Jun), and a stabilizing economic outlook in China.
Boustead
DBS Vickers upgraded Boustead to a ‘Buy’ on 29 May, with target price at 89 cents.
Boustead is a global industrial infrastructure engineering solutions provider.
Its infrastructure solutions cater to diverse sectors, including oil & gas, solid waste energy recovery, water and wastewater treatment.
However, real estate development of industrial buildings is its big revenue generator, accounting for about 60% of FY09 revenues.
On 28 May, it posted FY09 revenues of S$516.6 million, up 17.9% yoy for its financial year ended March. Net profits were S$65.5 million, up 12.9%.
Its charismatic chairman and CEO, Mr Wong Fong Fui, was named CEO of the Year 2008 for mid-cap listed companies at the Singapore Corporate Awards hosted on 24 Apr by The Business Times.
From 43.5 cents on 16 Mar, Boustead’s stock price has gained about 60%, and now hovers around 70 cents (historic PE of about 6 X).
Its share price is also supported by a share buyback mandate.
Pan-United Corp
OCBC Investment Research downgraded Pan-United Corp to ‘Hold’ on 14 May, valuing it at 52 cents (last close price 50.5 cents).
Following its 1-cent dividend going ex in early May, it reported on 12 May that group 1Q09 revenues were up 10% yoy at S$128.3 million.
However price erosion on its ready mixed concrete business resulted in a 22% drop in pretax profits.
Net earnings were S$9.9 million, down 15% YoY.
From 39 cents on 16 March, the stock price ran all the way up to 60 cents on 3 Jun before retreating to about 50 cents currently.
Two-thirds of Pan-United Corp’s pretax profits (FY08) come from its basic building materials business.
Cargo volumes at its 51.3%-owned Changshu port were adversely affected by China’s severe trade contraction in Jan 2009 but managed to pick up for the rest of 1Q09, thanks to China's Rmb 4 trillion domestic stimulus package.
However, a bright spot was seen in its shipping division, where it took delivery of more tugs and barges while utilization and charter rates are reported to have sustained pricing levels. Shipping contributes about 20% to its pretax profits.
Related story: The Edge picks 5 stocks at forward PE of 5X or less
