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JP Morgan: 3 SG Stocks to Buy in 2016 Amidst Low Growth
Aspire | 07 December 2015
By: Raymond Leung
Articles (142) Profile

JP Morgan Securities (JPM) recently released their 2016 outlook for Singapore market. Compared to the consensus estimates, analysts from JPM expect a smaller growth for Singapore (5.7 percent versus 4.5 percent). The less than optimistic outlook was attributed to the negative sentiments towards banks, real estate and telecommunications.

Despite the declining growth, they have picked a few shares which they believe have space for growth. Their reasons for the stock picks include stabilising oil prices, steady revenue, dividend and higher palm oil prices.

1. Ezion

Source: YTD Chart of Ezion, Google Finance

Investors have been extremely bearish towards the oil and gas industry after witnessing the fall of crude oil. Last month, US crude oil prices dipped below US$ 40, which is the first time since 2009. Being in the oil and gas industry, Ezion tanked a huge loss of 47.8 percent year-to-date (YTD) as negative outlook for the industry floods the market.

The huge fall in price of Ezion is making the share attractive to investors. Ezion stands out from its peers as one of the cheapest shares around. Analysts from JPM are bullish to the share as they expect a strong demand for liftboat as platforms age and offshore construction activities increase.

They gave Ezion a “Buy” call with a potential upside of 190.6 percent upside from the current trading price of $0.585.

2. First Resource

Source: YTD Chart of First Resource, Google Finance

First Resource (FR) looks poised to gain from the potential higher crude palm oil (CPO) prices due to El Nino (ocean warming). If the El Nino is more severe than estimated, it will significantly affect the supply, driving prices higher.

The group has 54 percent of its planted areas that are immature and young estates (higher CPO yield). FR’s low gearing ratio of 26 percent allows it to be well positioned financially to expand upstream via acquisitions.

Analysts from JPM are overweight on FR and gave it a price target of $2.00.

3. Singapore Exchange

Source: YTD Chart of Singapore Exchange, Google Finance

Singapore Exchange (SGX) is the star buy of JPM in their 2016 Singapore’s outlook report. This is due to the healthy balance sheet, steady revenue and dividend that the stock has. They have a good mixture of major contracts (A50, Nifty, Nikkei etc.) that are expected to remain stable.

Analysts from JPM reiterated their “Buy” call for SGX with a potential upside of 5.4 percent. The share also brings to the table a secure distribution of $0.28 per share.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

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