Excerpts from UOB KH report

Alpha Picks: Adding In Venture And AREIT

cafepho8.15Cafe Pho is a top-seller for Food Empire. The stock has the greatest upside potential among UOB KH's alpha picks.Our portfolio lost 3.0% mom in Oct 20 vs the FSSTI’s narrower decline of 1.7% mom.

Japfa outperformed on the back of its strong set of 3Q20 results, while top decliners were CapitaLand Mall Trust, Wilmar and YZJ.

For Nov 20, we remove Singtel and CapitaLand Mall Trust, and add Venture and Ascendas REIT to our portfolio.


WHAT’S NEW
UOB Nov20alpha Reviewing our picks in October. Our portfolio recorded a 3.0% mom decline vs the FSSTI’s retreat of 1.7% mom.

The hardest hit within our portfolio were CapitaLand Mall Trust (-10.4% mom), Wilmar (-8.2% mom) and YZJ (-7.1% mom).

Notable outperformers include Japfa (+7.5% mom), which reported stronger-than-expected 3Q20 results.

Remove Singtel, add Venture. While we retain our BUY rating on Singtel, we remove the stock from our portfolio, given the risk of higher-than-expected impairments in the near term.

In its place, we add Venture which we believe deserves to trade at higher valuation multiples, given:

a) its clients’ better earnings prospects;
b) sustainable dividend yield of 3.9%; and
c) outperformance vs peers, with net margin of about 10% even during the challenging environment in 1H20.

Consensus revenue forecasts for its clients show expectations of a strong recovery in 2021, to levels comparable or higher than 2019’s for key clients in its Test & Measurement (+4.2% yoy) and Life Sciences/Medical (+18.8% yoy) domains.

Switch out of CapitaLand Mall Trust for AREIT. Given the change in profile and asset mix post-merger with CapitaLand Commercial Trust, we remove CapitaLand Mall Trust at this juncture.

FOOD EMPIRE
Compelling valuation. At the current price, Food Empire trades at 8.4x 2021F PE, a significant discount compared to >20x for its regional peers.

For Ascendas REIT (AREIT), we think the retracement in its share price in the past month (-7.4%) presents a good buying opportunity.

While rental reversion swung to a negative in 3Q20, it is positive on a ytd basis at 4.2% and management has maintained guidance of low single-digit reversion for the full year.

Furthermore, we like AREIT for its quality tenant base and geographical diversification.


Full report here.


Share Prices

Counter NameLastChange
AEM Holdings5.000-0.080
Avarga0.2700.005
Avi-Tech Electronics0.380-
China Sunsine0.500-0.010
Food Empire0.775-0.030
Fortress Minerals0.395-
Geo Energy Res0.275-0.015
Golden Energy0.295-0.015
GSS Energy0.072-0.003
InnoTek0.770-0.020
ISDN Holdings0.695-0.045
ISOTeam0.133-
IX Biopharma0.230-
Jiutian Chemical0.072-0.001
KSH Holdings0.350-0.005
Leader Env0.072-
Medtecs Intl0.4000.110
Moya Asia0.064-
Nordic Group0.380-0.015
Oxley Holdings0.1930.003
REX International0.270-0.015
Riverstone0.7100.020
Sinostar PEC0.300-0.010
Southern Alliance Mining0.705-0.010
Sri Trang Agro1.2800.050
Straco Corp.0.470-
Sunpower Group0.485-0.020
The Trendlines0.107-
Totm Technologies0.1790.014
UG Healthcare0.3250.070
Uni-Asia Group1.250-0.050
Wilmar Intl4.220-0.100
Yangzijiang Shipbldg1.300-0.020

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