Top Picks for 2H 2017

Bank stocks led the surge since the start of 2017, clocking about 20% return versus STI’s 15%. As we head into 2H 2017, which stocks will become the new top dogs? According to CIMB, the 2H top picks are: First Resources, Genting Singapore, UOL, Thai Beverage, Fraser Centrepoint, China Aviation Oil, AEM Holdings, Best World, Boustead Projects, CSE Global, mm2 Asia, HMI, Memtech and Valuetronics.

First Resources

  • First Resources trades at P/Es of 14x for FY17 and 11x for FY18, below the regional plantation sector average P/E of 18x for FY17.
  • First Resources is our top pick among the Singapore planters due to its superior operating efficiency compared to peers, strong FFB output growth prospects and attractive P/E valuations vs. peers.
  • A potential re-rating catalyst is stronger-than expected earnings. Key risks are lower CPO prices and production.

Genting Singapore

  • GENS trades at CY18F EV/EBITDA of 9.1x vs. its historical 6-year average of 11.3x and our target of 12x. It is still net cash (FY17F S$2.4bn) ex-perp redemption and committed to FY17F DPS of 3 Scts.
  • Forward adjusted EBITDA is now optimised following tight credit policies (lower forward trade receivable provisions). Its forward EPS will be relieved by S$118m p.a. post perp redemptions by 4Q17. RWS is being rebranded as a premier lifestyle-based integrated resort and redevelopment of RWS could lead to stabilised market share.
  • Dividends in 3Q/4Q and sustained CY17 EBITDA recovery are near-term catalysts. Positive updates on Japan Casino Bill are mid-long-term catalysts. Licence bidding could occur from mid-18 onwards.

UOL Group

  • UOL is trading at an attractive 30% discount to RNAV. The group is well levered to the Singapore property market recovery, with c.40% of its NAV exposed to this market.
  • UOL acquired two residential sites in late-2016 and this boosted its potential launch inventory to 915 units. This will enable the group to leverage on any uptick in residential prices.
  • Catalysts could come from its ability to increase its stake in associate UIC without being subject to the ‘creep up’ rule.

Thai Beverage

  • Thaibev’s investment thesis is about the company transforming into a truly regional beverage play, with catalysts to come from the potential corporate restructuring of F&N/FCL and inorganic opportunities in Vietnam.
  • Closer to home, Thaibev has done well to maintain its dominant market position (#1 in spirits, #2 in beer) in Thailand, even as consumption post the mourning period remains muted. Any market share gains for Chang will re-rate the stock, in our view.
  • Trading at 20x forward P/E, Thaibev is still below peers and we see room for positive re-rating upon corporate activity.

Fraser Centrepoint

  • FCL is one of the cheapest listed Singapore property developer stocks, trading at a 36% discount to RNAV with a high dividend yield of 4.6%.
  • It has a robust recurrent income profile, making up more than 75% of PBIT, and a strong growth profile as the group continues to deploy capital, such as the recent acquisition of Geneba Properties.
  • An additional catalyst for share price outperformance could materialise should the group’s free float be increased and trading liquidity improves.

China Aviation Oil

  • CAO trades at CY18F P/E of 10x vs. global peers’ c.16.4x and our target of 13x CY18F P/E. It is net cash (S$0.26/share) and has a committed dividend payout of 30% p.a., which implies CY18F yield of 3.0%.
  • Main exposure to two of the largest global aviation markets (China and US) underpins growth of jet fuel supply/trading and associate contributions (mainly SPIA). It is also a beneficiary of global trade opportunities with China’s “outward” policies (i.e. ‘One Belt, One Road’) via major shareholder CNAF.
  • Quality sustained CY17 net profit performance and dividend in 4Q are catalysts. The stock was admitted to the MSCI Singapore Small-Cap Index in May 17.

AEM Holdings

  • AEM trades at 9x FY17F and 7.6x FY18F P/Es. Earnings growth is expected to pick up in FY17F and FY18F due to rising contribution from its key customer.
  • There could be margin upside in 2H17 as AEM obtains better terms from its suppliers and begins production for its customer in lower-cost Penang.
  • A short-term catalyst could come from its quarterly earnings, which management projects will show both qoq and yoy growth. Its balance sheet is in a healthy net cash position and the company has a dividend policy of not less than 25% of profit after tax.

Best World

  • The stock continues to defy gravity even after two consecutive years of >100% EPS growth. 1Q17’s net profit grew an incredible 63% yoy and this is likely to accelerate.
  • FY17F is poised to be another record-year as Best World converts its distribution in China to its core direct selling model. This is set to propel the group to a new level of profitability. Further, sales growth momentum in Taiwan remains strong on the back of increased product acceptance. The stock also offers a 2% yield.
  • Risks include regulatory changes or poor execution in China.

Boustead Projects

  • We like Boustead Projects for its market leadership in the niche industrial property design & build (D&B) space. The group also owns a medium-sized leasehold portfolio to counter the construction cyclicality.
  • BP trades at 0.5x FY18F RNAV vs. Singapore industrial REITs’ average of 1.05x. BP had S$25m net cash (c.9% of market cap) as at end-FY17.
  • Key re-rating catalysts include more D&B project wins and possible utilisation of its balance sheet for M&As to accelerate its progress towards an eventual REIT listing.

CSE Global

  • Currently trading at 10.3x CY18F P/E vs. our target of 12x (based on historical 5-year mean). It is net cash (1Q17: S$0.11/share), with a committed FY17F DPS of 2.75 Scts, implying 5.7% dividend yield.
  • 1Q17 contract intake spiked to S$117.9m, driven by a large S$42m O&G contract in Mar, which trumped the order intake rate of the past eight quarters (c.S$57.7m-98.4m). Large order backlog by end-18F implies better CY18F net profit.
  • Large contract wins by mid-CY17F and improvement in headline earnings in 2H17F are catalysts. 2Q17F results are guided to still be sluggish.

mm2 Asia

  • Cinema expansion will be the key catalyst. It is in talks to possibly purchase Village Cinemas’ entire 50% stake in Golden Village (GV) cinemas in Singapore, which owns 11 cinemas and 91 screens, with 44% market share. If this materialises, we estimate this could add c.S$11m to its bottomline (c.40% of FY18F net profit).
  • We also believe that Unusual is on track to double its earnings in FY18F, with more concerts to be carried out in North Asia. The recently-announced two soldout nights for Jacky Cheung’s “A Classic Tour” to Zhongshan, China, is a case in point.
  • mm2 is trading at c.20x CY18F P/E vs. peers’ 27x. Our target price, based on SOP, has not factored in the potential acquisition of GV cinemas.


  • We like HMI for its quality hospital assets (MMC and RSH) in Malaysia, which are well positioned to ride the increase in patient load, the higher revenue intensity and the medical tourism boom.
  • HMI is also a cheaper regional healthcare play at 24x CY18F P/E and 13x CY18F EV/EBITDA vs. peers’ average of 40x CY18F P/E and 19x CY18F EV/EBITDA.
  • Full consolidation of substantial minority interests with effect in 4QFY6/17 should remove stock overhang while potential M&As and better-than expected earnings could catalyse the stock.


  • Memtech’s 1Q17 core net profit of US$1.7m and gross margin of 18.1% were a vast improvement over 1Q16’s US$0.4m and GPM of 15.9%, possibly signaling a better outlook ahead.
  • We believe this earnings momentum could be sustained into FY17-18F, led by strong growth in both automotive and consumer electronics segments, which could re-rate the stock. The
    company is also poised for more customer wins in these segments.
  • Our Add rating and target price of S$1.09 is pegged to 10x CY18F P/E, lower than Singapore peers’ average of 12x. The stock also offers 4-6% dividend yield.


  • FY3/17 core net profit of HK$151m (+25.1% yoy) surpassed ours/consensus expectations, thanks to strong sales growth in both ICE (+14.1% yoy) and CE (+19.7% yoy) segments respectively.
  • Such double-digit sales momentum could sustain into FY18F, in our view, as the automotive connectivity modules and smart lighting are still at early stages of their product lifecycle.
  • Our Add rating and TP of S$0.89 is pegged to 11x CY18 P/E (10% discount to peers’ average), backed by 4-5% dividend yield and 3-year EPS CAGR of 13.5%. The stock currently trades at 11.2x FY18 P/E (6.3x ex-cash).