● The Singapore stock market sure is experiencing a "climate change", heating up nicely. The Straits Times Index (STI) reached all-time highs in September 2025, rising briefly above 4,300 points. ● Liquidity in small and mid-cap stocks in July increased significantly by 94% month-on-month, indicating broader participation beyond blue chips. ● Last week (29 Aug), CGS International refreshed its alpha portfolio, removing the outperformers (UOL, Hong Leong Asia, Marco Polo Marine and Q&M Dental) and inserting new picks and retaining potential future gainers. ● Five of its stock picks have potential upside in excess of 30% (as of the time of publication of the CGS report). Read more below... |
Excerpts from CGS report
Analysts: LOCK Mun Yee & LIM Siew Khee
| SembCorp Industries |
We believe the recent c.28% share price pullback post-results is overdone, with the stock now trading at just 10x CY26F P/E, a 30% discount to regional peers’ 13x.
While 1H25 earnings were impacted by temporary high-priced renewable imports and the absence of one-off gas gains, SCI’s long-term contracted Singapore gas and related services earnings remain defensive, with 87% of its portfolio locked into 5– 10 year contracts.
We believe contract renewals at lower spreads are already in the price, and see upside as most high-priced contracts from 2022–23 have been renewed, setting the stage for margin recovery from 2H25F.
| Yangzijiang Shipbuilding |
We are more positive on YZJSGD after the recent results update, and we believe its order outlook has turned more positive.
We are not overly concerned about a slight GM (gross margin) moderation in 2H25F vs. 35% in 1H25, as orderbook quality remains high with US$23.2bn backlog and c.US$2bn LOIs, mostly in small- to mid-sized containerships for delivery in 2028F/2029F.
Current yard capacity supports sustainable order wins of c.US$4.5bn p.a., and the stock trades at just 7.5x CY26F P/E — over 50% below China CSSC Holdings’ c.17x — leaving room for a valuation re-rating.
| CSE Global |
CSE offers exposure to secular tailwinds in urbanisation, electrification, decarbonisation and AI, with its DC (data center) revenue growing at a >150% 3-year CAGR and now contributing a rising share of group revenue when it was only started three years ago.
CEO Lim Boon KhengIn the medium-term, CSE expects its DC contracts to transition into a flow-type business model, driven by recurring maintenance revenue rather than lumpy project wins.
This shift should support a more predictable revenue stream, in our view.
Given that flow business typically yields higher margins than greenfield projects as well, we anticipate margin improvement as CSE continues to expand its DC footprint.
At 12x FY26F P/E with c.4% yield, we see upside from large DC/electrification wins and margin expansion.
| Frencken |
We have an Add call as we stay positive on the outlook for Frencken’s key semicon segment, which would help achieve 6-13% FY25-27F core EPS growth.
We reiterate our 18.4x P/E (2 s.d. above its 5-year average) valuation basis.
On rollover to FY27F, our TP is raised to S$2.06.
Potential rerating catalysts: faster recovery in its semicon business segment and better cost controls.
Downside risks: further cost escalation affecting its net profit negatively and further weakening in demand for its semicon business segment.
| UMS Integration |
We have an Add call on UMS, with S$1.87 TP based on 20.8x FY27F P/E (+2 s.d. above its 5-year, FY21-25 average P/E) as we believe that its FY25F-27F net profit growth of 11.1- 19.4% justifies this premium.
| We like Frencken and UMS |
| "In the small-cap space, we favour Frencken (Add, TP S$2.06) as a beneficiary of the semicon industry recovery and the ongoing outsourcing trend from its European customers. UMS (Add, TP S$1.87) continues to work on growing its business with a new customer. Management hopes to grow this new customer to be as big a revenue contributor as its existing key semicon customer." -- CGS |
In addition, dividend yields of 3.70% over FY25-27F should lend support to the share price.
Re-rating catalysts: faster traction with its new customer and return of orders for aircraft components.
Downside risks: 1) negative impact from its key customer’s loss of sales in China and 2) foreign exchange fluctuations.
Full CGS report here.
See also: CGS Has 4 New High Conviction Picks: Betting on Re-Ratings and Revival of Market
