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Top 3 Rated Buys For 2014
Perspective | 03 January 2014
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By: Ong Qiuying
Articles (131) Profile
By: Nicholas Tan
Articles (71) Profile

Despite a turbulent ride last year, all of us are stepping ahead into the New Year with renewed hopes to find bright spots and opportunities in 2014! Before we jump right into the stock picks with top-rated buys, let us look into some of the major themes that would be surrounding the global markets in the coming year.

Global Outlook

As most major economies are set to improve this coming year, Singapore, being a small open economy would be a likely beneficiary to ride on the global recovery. While emerging economies have been powering ahead in the last few years with Indonesia, the Philippines and Thailand reaping in total gains of 72 to 103 percent between 2010 and 2013, Singapore’s strong dollar and high stability in the region should continue to attract foreign funds that have parked their money in other ASEAN markets. Singapore’s economic outlook is pointing up, with official estimates of 2 to 4 percent.

For this year, Shares Investment looks into some of the most researched stocks by brokerage houses and examines some of the key catalysts for these top “Buys”.

Table 2: Compilation Of Top Rated Buys

Source: FactSet

*Trading and target prices are in US$

Latest Developments
• Nam Cheong’s build-to-stock (BTS) programme is growing in tandem with the global push towards offshore exploration and production in the oil and gas industry, thus alleviating the key risk of the company being unable to sell off vessels under its BTS model.
• Year-to-date sales of 20 vessels worth approximately RM1.34 billion have surpassed 2012’s 21 vessel sales valued at approximately RM1.31 billion.
• The firm’s robust orders over the last 18 months have more than doubled its current orderbook to RM1.7 billion. At present, orderbook comprising 25 vessels to be delivered in 4Q13, FY14 and FY15 respectively provides good earnings visibility.
• Nam Cheong is estimated to deliver 19 vessels in FY13, and FY14 shipbuilding programme is well-balanced with different types of vessels. In addition, a total of 16 vessels out of the 28 deliveries due for 2014 have already been sold.

Key Catalysts
• Nam Cheong would be a key beneficiary under Petronas’ RM300 billion capital expenditure programme. Nam Cheong holds 75 percent of the Malaysian market and stands to reap the most benefits from the 80 percent increase in Petronas’ planned spending.
• Global trends point towards a buoyant offshore support vessel (OSV) market in the medium-term. Rig utilisation has reached a point where the day rates are facing upward pressure and rig owners are looking to buy more rigs. The increase in the number of rigs would directly translate into higher direct demand for OSVs.
• Further upside to earnings forecasts if Nam Cheong clinches built-to-order vessels, as these typically command higher margins. In addition, as Nam Cheong builds many of its vessels in China, attractive payment terms offered by Chinese shipyards remain a key factor.

Latest Development
• Star Cruises’ 1H13 revenue showed a healthy 22.9 percent increase from new routes based out of Shanghai, but it was not enough to offset the start-up costs involved and the added depreciation of the Gemini. 1H13, it does not seem that Resorts World Manila’s (RWM) business was affected by competition from the new Solaire Casino that opened in 2Q13, as it raked in healthy top and bottom line.
• Genting Hong Kong (GHK) is expected to receive at least US$375 million from the recent secondary share placement by its subsidiary, Norwegian Cruise Lines (NCL). GHK’s stake in NCL should fall from 37.5 percent to 32.2 percent.
• Following the US$150 million received in pre-initial public offering dividends from Travellers, the US$331 million from NCL’s secondary placement in August 2013 and an expected US$375 million from this placement, GHK is estimated to have about US$1.3 billion in cash. Currently, it has no new projects and intends to use the cash to shore up its balance sheet.

Key Catalysts
• As part of the third phase of RWM’s expansion project, two new global brand hotels, Sheraton Hotel and Hilton Hotels & Resorts are set to rise at Newport City, along with second phase extensions for Maxims Hotel and Marriott Hotel Manila as well as additional gaming area within the property.
• GHK ordered a new US$957 million mega ship for Star Cruises increasing its berth capacity in Asia by 44 percent. The ship will be the biggest cruise ship operating in Asia with 1,600 cabins and a carrying capacity of 4,500 passengers. It is estimated that the new cruise ship would have 200 to 300 gaming tables.
• The new cruise ship is effectively a floating integrated resort as it will also feature 1,000 square metres of duty free retail space – which is GHK’s new emphasis to boost ancillary income to complement gaming revenue.

Latest Developments
• OSIM International achieved consistent growth with 19 consecutive quarters profit growth backed by product innovation and productivity. New products such as uAngel and uInfinity continue to drive positive earnings given their good take-up rates.
• With 596 OSIM outlets, and currently in 45 cities with 266 OSIM outlets in China, it is targeting to open another 20 to 30 OSIM outlets in the coming year. OSIM’s strong positioning is also on track to creating long-term demand and brand loyalty.
• OSIM is planning on expanding its network of TWG Tea outlets in Singapore, Korea, Thailand and Malaysia, and has recently incorporated three new subsidiaries in Shanghai, Taiwan and Macau, reflecting its growth plans in these places.

Key Catalysts
• OSIM can ride on the region’s growing consumption patterns, especially with the number of households with high annual disposable income expected to rise to 18 million by 2020 from 11 million in 2010 (China accounting for most of the gain).
• Its marketing strategy with tier pricing for different market segments while riding on celebrity appeal will help OSIM capture existing and new opportunities.
• OSIM’s increased stake in TWG Tea Company to 53.7 percent may become a meaningful earnings contributor in the medium term as each TWG outlet is profitable with annual 3-5 percent yoy same-store sales.
• Strong cash flow and low working capital needs enable OSIM to pay out healthy dividends, undertake share buybacks and be on the lookout for potential brand acquisitions.

This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

Nam Cheong  0.007 -- --   
Business: An offshore marine group specialising in the building of offshore support vessels. [FY18 Turnover] Shipbuilding (59.2%), vessel chartering (40.8%).

Insight: May-19, 1Q19 revenue jumped multiple times to RM29... Read More
Del Monte Pacific  -- -- --   
Business: Co produces processed & non-processed fruit & food pdts, beverages & food ingredients.

Insight: Mar-19, 9M19 turnover fell 10.4% to US$1.5b largel... Read More
Ezion Hldgs  -- -- --   
Business: Co develops, owns, and charters offshore assets to support the offshore energy markets. [FY17 Turnover] Liftboats (49.7%), Jack-up Rigs (39.5%), Offshore Support Logistic Services (10.8%).

Insight: Aug-18, 1H18, Co returned to the black with a net ... Read More
UOL Group  7.530 -0.03 -0.40%   
Business: Co engages in property development, property investments, and hotel businesses. [FY17 Turnover] Ppty devt (52.2%), hotel ops (23.6%), ppty invs (14.9%), invs & others (9.3%).

Insight: Aug-18, 1H18 revenue jumped 72.9% to $1.3b attribu... Read More
DBS Group Hldgs  25.520 -0.04 -0.16%   
Business: [FY18 Total Income] Institutional banking (43.7%), consumer banking/wealth management (42.9%), treasury markets and others (13.4%).

Insight: Apr-19, 1Q19 net profit rose 9% to a record $1.7b.... Read More
First Resources  1.600 +0.030 +1.91%   
Business: Co engages in the cultivation and maintenance of oil palm plantations. [FY18 Turnover] Refinery and processing (95.5%), plantations & palm oil mill (4.5%).

Insight: Feb-19, FY18 revenue dipped 2.1% due to lower aver... Read More
CapitaLand Mall Trust  2.620 -- --   
Business: Co owns and invests in quality income-producing assets which are used, or predominantly used, for retail purposes primarily in Singapore.

Insight: Apr-19, 1Q19 gross revenue and NPI rose 10% and 11... Read More
CapitaLand  3.630 -- --   
Business: Co develops, owns, and manages real estate properties. [FY18 Geographical] China (41.2%), S'pore (38.5%), Europe & others (18.6%), Vietnam & Others (1.7%).

Insight: Apr-19, 1Q19 revenue fell 23.8% while net profit d... Read More


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The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

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