By Say Cheong //
November 1, 2022

While the US FED has decided to loosen up a bit on the interest rate hike acceleration, inflation is still running high and big companies like Meta and Amazon have all reported poor earnings results and weak outlook guidance.

Investors can take comfort in solid stocks to tide out the turbulence; the analysts have identified 7 such stocks that you should consider.

Stock Idea #1 Keppel Corp

UOB Kay Hian has maintained its Buy rating on the stock with a target price of $10.11.

The foundation that the company has placed will result in strong future growth.

“Thus far in 2022, Keppel (KEP) has announced a slew of initiatives and acquisitions that, in our view, are intended to set the stage for the company’s next stage of growth.

These are tabled overleaf and we calculate the total growth capex involved at more than S$3.2b at either the KEP level or at its subsidiary or associate level.

Focused growth on the infrastructure segment. We highlight that all of the growth capex to date has been on the infrastructure segment.

In our view, this is understandable given that its offshore & marine segment is in the process of being divested and activity in its key business segment of China real estate has been on enforced hiatus given the country’s “zero-COVID” strategy.

In our view, the key acquisitions ytd were the onshore and offshore wind power acquisitions in Europe and the waste management business in South Korea, where KEP’s 18%-owned subsidiary Keppel Infrastructure Trust (KIT) has taken key positions in.”

>> Read more about the company here.

Stock Idea #2 UMS Holding Ltd

CGS CIMB has maintained its ADD rating on the company with a target price of $2.17.

The expected lower tax rate will boost the company’s bottom line.

“On 14 Sep 2022, UMS issued a press release stating that its application for the reinstatement of the pioneer tax status for Ultimate Manufacturing Solutions (M) Sdn. Bhd. (Ultimate) has been approved by the Malaysian Investment Development Authority (MIDA).

MIDA has also informed UMS of the relaxation of the employment conditions of Malaysian citizens under the Malaysian government’s 80:20 rule, whereby 80% of its employees must be Malaysians.

On 22 Jul 2022, Malaysia’s Ministry of International Trade and Industry (MITI) announced the postponement of the 80:20 employment ruling to end-2024.

UMS guided that it would write back about S$15m in tax provisions previously provided for in its upcoming 3Q22F results (in 2021, UMS released its 3Q21 results on 12 Nov 2021).

The group will also submit another application to extend Ultimate’s pioneer tax status by another 5 years, from 2023 to 2027 (no timeline of when the Malaysian authorities will approve this application was provided).

Previously, Ultimate had been granted the pioneer status tax incentive with a 100% tax exemption from income tax for a period of 10 years commencing from 11 Aug 2017 to 10 Aug 2027 by MIDA”

Read more about the company here.

Stock Idea #3 Raffles Medical Group

Maybank Kim Eng has maintained its Buy rating on the company with a target price of $1.57.

The well placed growth model and business segment will help the company in its growth.

“Historically, c.30% of RFMD’s hospital patients are foreigners, mostly nationals from regional countries. It offers health tourism packages and international patient services to take care of their needs.

Notably, the hospital Group Practice Model of collaborative care also allows its medical specialists to offer team-based care, which is especially important for patients who have multiple medical conditions and require the care of more than one doctor.

As a team, specialists diagnose and treat patients efficiently. As such, costs are kept low by not repeating consultations or examinations unnecessarily.

RFMD has over 7,000 corporate clients and management continues to focus on pursuing growth in this segment. Its clinic network is also part of the government’s PHPC scheme.”

>> Read more about the company here.

Stock Idea #4 Singapore Airlines

CGS CIMB has maintained its ADD rating on the company with a target price of $6.10.

With strong capacity restoration and muted competition allow the company to catch the demand recovery.

“We expect SIA to do very well in the coming quarters, due to the combination of rising capacity restoration, strong demand, high load factors and robust yields.

The SIA group’s ASK capacity rose from 4QFY3/22’s 52% of the pre-pandemic base to 1QFY23’s 66% and we forecast further recovery to 73% in 2QFY23F and to 79% in 3QFY23F.

For FY23F as a whole, we think that the SIA group should be able to restore 74% of its preCovid-19 capacity, rising to at least 95% in FY24F or higher if China reopens its borders sooner.

Competition has also been relatively muted so far, with airlines in Southeast Asia gradually ramping up capacity deployment and certain key competitors such as Cathay Pacific and the mainland Chinese airlines still held back by Hong Kong’s border controls.”

>> Read more about the company here.

Stock Idea #5 Yangzijiang Shipbuilding

UOB Kay Hian has maintained its BUY rating on the stock with a target price at $1.44.

With diversification into building LNG carriers, the company will definitely enjoy the growth in the industry.

“In early-Sep 22, Yangzijiang Shipbuilding (YZJ) announced that it had obtained a licence from Gaztransport & Technigaz (GTT) for the construction of vessels using GTT’s Mark III membrane technologies.

The technology involves cargo or fuel containment and insulation and, being widely used in the LNG shipping industry, will now enable YZJ to compete in the international market to construct LNG vessels.

According to shipping industry sources, YZJ could be well placed to win new LNG carrier orders given that the Korean yards are full, and European shipowners have been looking for shipbuilding capacity. ”

>> Read more about the company here.

Stock Idea #6 Mapletree Industrial Trust

Maybank Kim Eng has maintained its BUY rating on the company with a target price of $3.00.

Its improving fundamentals is one big reason of the analyst’s positive evaluation.

MINT has an established framework and internal policies, but could further improve on its quantitative “E” metrics.

We saw a large increase in MINT’s Scope 2 GHG emissions in FY21, mainly due to four additional data centres under operational control in North America.

Notably, lower scope 2 emissions are observed in its Singapore portfolio and partially offset the overall increase.

In our view, MINT needs to deepen its renewable energy efforts against the backdrop of utility rate hikes, taking assets such as data centres and hi-tech buildings into consideration. We believe scores could be higher with further  disclosure on renewable energy usage. ”

>> Read more about the company here.

Stock Idea #7 Nanofilm Technologies International Limited

CGS CIMB has maintained its Add rating on the company with a target price of $3.05.

The new joint venture in China is bound to bring in new revenue streams

“For a start, the JV will be targeting the domestic China market via its JV partner, Everwin, and Nanofilm believes that its coating solution can be cost competitive to the existing electroplating solution.

In addition, as electroplating is a pollutive process, it has been difficult for suppliers to obtain approval for capacity expansion.

In its announcements, Nanofilm also shared that based on studies by the International Energy Agency, the total addressable market (TAM) of advanced batteries for electric vehicles in China is estimated to be above 6.5m units.

It amounts to US$79bn in 2023F and growing at a compounded annual growth rate of 10% to reach US$156bn in 2030F. Nanofilm will also work with its partners to address global market opportunities.

Nanofilm believes the TAM for advanced batteries used in electric vehicles could grow from an estimated US$239bn in 2023F to US$782bn in 2030F.”

>> Read more about the company here.

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