By Say Cheong //
June 20, 2022

Inflation is going through the roof everywhere and US just announced that it has reached its 40 years high at 8.6% inflation!

In turn, high inflation will lead to FED’s acceleration of interest rates (i.e. tightening) and then cause a recession going forward. More pain is expected ahead as there are literally no signs of a turnaround now.

That said, we believe Singapore is poised to ride out the near term as countries reopen and economies start to stabilize.

Here are 7 stocks you should take note in that aspect.

Stock Idea #1 Centurion Corp

UOB Kay Hian has maintained its Buy rating on the stock with a target price of $0.43.

Positive rental reversion coupled with new acquisition in the United Kingdom bodes well for the company.

“During 1Q22, the company benefitted from positive rental reversions at most of its geographies with low to mid-single-digit increases. Singapore has clearly been the key driver and in the past 3-6 months, the pace of foreign workers returning to various industries has increased.

Thus, the 15% decline in worker volumes in 2021 has mostly recovered, with faster recovery seen in certain sectors like oil & gas, petrochemicals and construction while shipping and marine has seen a relatively slower recovery.

New acquisition in the UK. On 20 May 22, Centurion announced that it had acquired a 103-bed freehold student PBSA in Nottingham, UK, at a purchase consideration of £10.4m.

This asset, built in 2018, will complement the company’s two existing PBSA assets in Nottingham, namely dwell Castle Gate Haus and dwell Archer House. Demand for student accommodation will likely come from Nottingham Trent University and the University of Nottingham.

Notably, the Nottingham City Council estimates that there will be a shortfall of 2,000 PBSA beds in Nottingham even after all current pipeline beds are completed, and a further shortfall of 5,000 PBSA beds by 4Q24. ”

>> Read more about the company here.

Stock Idea #2 Q&M Dental Group Ltd

Phillips Capital has maintained its Buy rating on the company with a target price of $0.71.

The reopening of borders is one major driver of the positive sentiment.

“We believe the reopening of borders will become a near-term headwind as the availability of dentists decline and patients will likely fall due to travel reasons.

New dental clinics will be the key earnings driver for the company.

Other benefits of a larger dental chain are the de-risking revenue contribution from a larger pool of dentists and a more valuable referral ecosystem to the specialist dentist.

In 1Q22, industry outpatient dental admissions was down 14%, QNM likely took some market share judging by the more stable revenue. ”

>> Read more about the company here.

Stock Idea #3 Delfi Ltd

CGS CIMB has maintained its Add rating on the company with a target price of $1.09.

Enviable cash position and attractive valuation are two main attractive points of the company.

“Strong financial position and attractive valuation; Our TP of S$1.09 is based on 18x of FY23F P/E, which is 0.5 s.d. below its 5-year historical mean and similar to competitor Mayora (Hold, TP: Rp1,800).

We find the valuation attractive at 12x FY22F P/E, 1 s.d. below its 5-year historical mean. Delfi’s net cash position of US$99.9m also remains supportive of 60% payout ratio, which would translate into a respectable c.5% yield moving forward.

Re-rating catalyst: successful sales campaign across regional markets supporting own brands’ growth.”

>> Read more about the company here.

Stock Idea #4 City Developments

UOB Kay Hian has maintained its Buy rating on the company with a target price of $9.20.

The reopening of countries and the improvement in liquidity issues are bound to help the company ahead.

“With the post-COVID19 reopening coupled with tight office supply in Singapore, CDL stated that 2022 and 2023 should continue on the office market’s recovery path.

Notably for some of its assets like City Square Mall and Palais Renaissance in Singapore, tenant sales are close to, or have even surpassed pre-COVID levels. In the UK, CDL stated that an increase in recent lettings and longer-term commitments from existing occupiers have benefitted Aldgate House and 125 Old Broad Street.

As at end-1Q22, CDL had S$4.6b in cash and available credit facilities and net gearing of 53%, an improvement from end-21 when these metrics stood at S$3.9b and 61% respectively.

The infusion of cash has likely come from the sale of the Millennium Hilton Seoul and we expect CDL’s liquidity situation to improve further from the gains from the sale of its stake in the Tangling Shopping Centre and the Golden Mile Complex.”

>> Read more about the company here.

Stock Idea #5 Boustead Projects Limited

CGS CIMB has maintained its ADD rating on the stock and with its target price at $1.25.

Strong balance sheet will definitely help the company in charting its future growth

“With its strong net cash of S$203m (end-FY22), BP looks to grow further in Vietnam. It has inked strategic collaboration with a local partner, Khai Toan Joint Stock Company (KTG, Unlisted), to acquire a 60% stake in an industrial real estate fund (to be jointly set up with initial injection of 6 assets worth US$84m).

The fund plans to grow through a combination of M&A and greenfield development, and BP could benefit from growth of the income-yielding portfolio as a developer-owner. We expect the transaction to be completed by 1H23F.

Locally, BP intends to ramp up industrial property development efforts when there is more visibility on the current inflationary cycle and its cost impacts. ”

>> Read more about the company here.

Stock Idea #6 ST Engineering

Maybank Kim Eng has initiated a BUY rating on the company with a target price of $4.75.

The reopening of borders and astute acquisitions is bound to help the company.

“With borders re-opening, the aerospace landscape is improving. STE’s recent acquisition of TransCore holds growth promise in smart city solutions and rising defence spending could increase international sales at a robust

Significant contract wins with a record-breaking FY21 order book of SGD19.3b (+25% YoY) have provided good revenue visibility and promises sustainable dividend yields of 2.5%. The strategy to better integrate STE’s various divisions could surprise with revenue and cost synergies.”

>> Read more about the company here.

Stock Idea #7 Capitaland Integrated Commercial Trust

UOB Kay Hian has maintained its Buy rating on the company with a target price of $2.50.

The return of workers back to office is a major bright spot for the company

“Back working from the office again. Outlook has brightened with all employees allowed back to their workplaces since 26 Apr 22. 47% of employees have returned to work from their offices as of Apr 22.

Island-wide net absorption has reversed to positive territory for three consecutive quarters and was 307,282sf in 1Q22. Leasing demand is driven by non-bank financial services, technology, pharmaceutical and fast-moving consumer goods sectors.

Vacancy rate for Grade A Core CBD has tightened from the peak of 5.5% in 3Q21 to the current 4.5% in 1Q22. CBRE forecast rents for Grade A Core CBD to recover 6.9% to S$11.55psf/month in 2022 due to limited new supply.”

>> Read more about the company here.

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