By Say Cheong //
October 8, 2021

September has been yet another event-filled month with the US tech sell-off and China Clampdown. In the local context, daily COVID cases have surged higher than even our STI Index!

Jokes aside, countries around the world are opening up and are starting to accommodate the endemic status. Companies around the world, including Singapore are also coping with the changes and growing with it.

Here are 7 stocks that we have sieved out that you should take note for the month of October.

#1 HRnet Group Limited

CGS CIMB has maintained Buy rating on the stock with a target price of $1.15.

The global positive outlook on hiring is an impetus to the favourable rating of the stock.

“Employers in HRNET’s key markets of Singapore and North Asia are expected to raise their salary budgets in FY21F-22F (Fig. 1) on the back of 1) improving hiring sentiments as economies gradually recover, 2) growing pressure on employers to raise salaries amid rising employee attrition rates, and 3) increasing challenges to retain and attract talent, according to a survey by Willis Tower Watson on 30 Aug 2021.

Potential new hires in healthcare life sciences, banking and financial services and manufacturing can expect a salary bump of up to 14-15%; and up to 20% in technology, according to Michael Page’s 2021 Salary Guide. With a c.62% exposure to those sectors as of 1H21, we expect tailwinds from 1) higher compensation packages to drive HRNET’s professional recruitment business (c.100% GPM), and 2) shortage of foreign labour from ongoing border restrictions to drive volumes for its flexible staffing business for FY21F-22F.”

>> Read more about the company here.

#2 Yangzijiang Shipbuilding Holdings

UOB Kay Hian has maintained its BUY rating of the company with a target price of $2.00.

The downstream good demand and upstream cost stabilising are good news for the company. “On YZJ’s input side, steel prices have stabilised since April after having risen by c.50% in the first four months of 2021 (see chart overleaf).

We also note that iron ore prices on the Dalian Commodity Exchange have tumbled >40% since mid-Jul 21 taking heat off the high steel prices. Yangzijiang’s (YZJ) management believes that steel prices should remain stable for the remainder of 2021 and potentially decline in 2022 which would bolster the company’s margins given that steel costs are nearly one-third of its normalised cost structure.”

“New orders on the horizon. According to industry sources, YZJ has US$565m in containership and bulk carrier orders from Seaspan and Mitsui & Co that it has yet to announce as these contracts are not active yet.

Once active, this would bring its total number of orders won this year to 118 vessels totalling US$7.21b”

>> Read more about the company here.

#3 City Developments Limited

Phillip Capital has maintained its Buy rating on the company with a target price of $9.19.

The strong development pipeline coupled with catching the strong uptrend for the Singapore properties brought it its favourable valuation.” CDL picked up two plots of land YTD – the Northumberland Road GLS and the Tengah Gardens EC site.

Residential units from its redevelopment projects, Canninghill Piers (Liang Court) and Fuji Xerox, brings CDL’s unlaunched pipeline to 1,121 units, which will be launch over the next two years.

Based on our forecasts, these two redevelopment projects should yield CDL respectable margins above 30%. Including the unsold units from earlier launches, we estimate that CDL has 1,746 units to be monetised, translating to FY22e/23e GDV of S$2.1b/S$1.0bn.”

>> Read more about the company here.

#4 Keppel Corporation

CGS CIMB has maintained its ADD rating on the stock with a target price of $6.90.

The green initiative pushed forth by the company and actively capturing market share provides good growth for the company. ”

● Keppel Electric (KEP), a subsidiary of KI, has signed an exclusive framework agreement with Electricite Du Laos (EDL) as part of the Lao PDR- Thailand-MalaysiaSingapore Power Integration Project (LTMS-PIP).

● KEP will import up to 100MW of renewable hydropower from Lao PDR to Singapore via Thailand and Malaysia using existing interconnectors under an import trial.

● This is in line with Keppel’s Vision 2030 to provide innovative solutions for sustainable urbanisation, which enhances its ESG component. Since 2020, KEP has scored AAA, as rated by MSCI, and is a leader among global industrial conglomerates, being ranked among the top 8% in the MSCI All Country World Index.

● In the bigger picture, this contributes to Singapore’s climate goals to halve its 2030 peak greenhouse gas emissions by 2050 and to achieve net zero emissions. In 2020, Singapore started talks with Malaysia to import 100MW of solar electricity over a trial of 2 years.”

>> Read more about the company here.

#5 Ascott Residence Trust

UOB Kay Hian has upgraded to BUY rating on the stock and with its target price at $1.16.

The recovery of the European market will bring forth better days ahead for the company. “Member states of the EU have eased COVID-19 restrictions since May 21, while the UK dropped all COVID-19 restrictions during “Freedom Day” on 1 Jul 21.

Ascott Residence Trust (ART) has presence in Belgium and Spain, which have the highest vaccination rates in EU of 71.0% and 75.5% respectively as of Sep 21, as well as in France and Germany which have vaccination rates of 63.1% and 61.6% respectively. 64.6% of the UK’s population is fully vaccinated against COVID-19.

Economic activities have been unaffected by the outbreak of the Delta variant because the high vaccination rates have prevented a rise in serious cases and deaths. ”

>> Read more about the company here.

#6 ST Engineering

UOB Kay Hian has maintained its BUY rating on the company with a target price of $4.25.

The resilience of the defense sector and possible growth in view of geopolitics will drive the company’s growth.

“Defence and public security (DPS) business is more resilient and is also a growth area. This division accounted for 68% of revenue in 1H21 and accounted for the highest improvement in base operating earnings among the other divisions in 1H21.

Aside from naval contracts (berthing barges, polar security cutters, and oceanographic survey vessels) for the US Navy, STE is a key contractor for Singapore’s public security and is also involved in the deployment of security robotics at key infrastructure installations.

Given the early and successful adoption in Singapore, we believe that STE will be able to expand such robotics solutions outside Singapore.

The DPS segment could also receive a boost if STE and its US defence partner, Oskosh Defence are selected to produce 200 Cold Weather all-terrain vehicle (CATV) for the US army. Two prototypes are currently being evaluated and an outcome is expected by 4Q21 or early-22”

>> Read more about the company here.

#7 Delfi Ltd

CGS CIMB has initiated its ADD rating on the company with a target price of $1.02.

The dominance in the chocolatier market in Indonesia is one main driver of the sentiment.

“According to Euromonitor, Delfi commands c.40% of Indonesia’s chocolate confectionery market based on retail value in 2020. Its flagship brand, SilverQueen, is also the leading brand in the nation.

Indonesia is a key driver to Delfi’s profitability, generating c.70% of its sales and more than c.90% of its EBITDA over the past five years (FY15-20). Despite Covid-19, Delfi’s sales recovered from the trough of US$70.5m in 2Q20 to a normalised level of US$119.4m in 1Q21.

Given Delfi’s established presence in Indonesia, we expect sales momentum to grow beyond pre-Covid-19 levels by FY22F, supporting EPS growth of 15%/16%/4% for FY21F/FY22F/FY23F.”

>> Read more about the company here.

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