Excerpts from analysts'report
UOB Kay Hian analysts: Andrew Chow, CFA & the Singapore Research Team
 Innovalues has more than 150 CNC machines for its automotive segment. NextInsight file photo.♦ Hitting the road on Singapore strategy and mid-cap picks. We had recently marketed our 2H16 Singapore strategy as well as our key mid-cap picks in Taiwan and Malaysia. This report highlights key feedback and stocks that garnered the most interest. |
Keen interest in selected mid-caps. Investors were keen about hearing our top picks for mid-caps. China Aviation Oil (BUY; Target: S$1.56) garnered the most interest followed by Innovalues and Cityneon.
CAO saw a lot of interest given its compelling business model with a monopoly in China’s jet fuel import market, which makes it an excellent proxy to the booming aviation sector in China. Equally impressive, was its strong corporate governance as well as risk management practices, which has been put in place by its strategic shareholder BP (which has a 20% stake).
Innovalues and Cityneon enjoyed selective interest. M&As look active in Singapore and Innovalues could be a beneficiary as sector consolidation makes it an attractive candidate.
| Company | Share price |
Target price |
| China Aviation Oil | $1.235 | $1.56 |
| Innovalues | $1.01 | $1.06 |
| Nera Tel | $0.685 | $0.835 |
| Valuetronics | $0.515 | $0.60 |
• Tactical trades for O&G stocks. While fundamentals for the shipyard sector are likely to be challenging, we highlighted that there are potential tactical trades, particularly for investors that take a view that oil prices could end closer to US$60.00/bbl by end-16.
In view of the challenging fundamental outlook, we highlighted that risk seeking investors could trade in liquid stocks with strong balances. Based on a correlation analysis, stocks that could offer potential trading opportunities include Keppel Corp, SCI, SMM and Ezion. Please see the table below highlighting potential entry and target prices for these stocks.
Stock selections for 2H16. Our key picks include Singtel, City Developments, DBS, STE, CD REIT, ART and Bumitama. Mid-cap gems include China Aviation Oil, Innovalues, Neratel and Valuetronics. On our SELL list are SIA Engineering, StarHub and M1.
Full report here.
