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.

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.

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 Holdings4.0200.040
Avi-Tech Electronics0.400-
BH Global0.310-
China Sunsine0.560-0.015
Food Empire0.9450.010
Fortress Minerals0.440-
Golden Energy0.150-
GSS Energy0.063-0.002
ISDN Holdings0.6300.020
IX Biopharma0.2650.015
KSH Holdings0.370-0.005
Leader Env0.144-0.002
Medtecs Intl1.0900.020
Moya Asia0.069-0.001
Nordic Group0.245-0.005
Oxley Holdings0.260-0.005
REX International0.1790.001
Southern Alliance Mining0.7600.030
Sri Trang Agro2.010-0.040
Straco Corp.0.575-
Sunpower Group0.890-
The Trendlines0.1040.002
UG Healthcare0.6800.035
Uni-Asia Group0.620-
Wilmar Intl5.240-0.140
Yangzijiang Shipbldg1.3900.010
Yinda Infocomm0.1460.001

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