Meanwhile, Tan also expects ThaiBev’s spirits segment to continue its strong performance moving into 2HFY2023, as anticipated government handouts from a newly-elected government would spur consumption.
Conversely, UOBKH analysts have dropped Singtel , Food Empire and Aztech Global from its portfolio due to the absence of catalysts.
In their market review, the analysts note that global market sentiment was generally weak in May as resilient economic data, cooling inflation and strong US jobs report on June 1 decreased the likelihood of a hard landing.
While a robust conclusion to the US corporate earnings season in mid-May gave global markets a temporary boost, several rounds of inconclusive talks to the US government’s debt ceiling dragged market sentiment towards the tail end of May, with the Straits Times Index (STI) ending 3.4% lower m-o-m.
Amid this, UOBKH’s alpha picks portfolio continued its outperformance, the analysts highlight. The portfolio was up 1.5% m-o-m in May on an equal-weighted basis, beating the STI by 4.9 percentage points. This is the fifth consecutive month that the alpha picks portfolio has beaten the STI, they add.
The portfolio’s top performers were driven by both large and small caps, primarily Delfi (up 18.7% m-o-m), Sembcorp Industries (up 17.5% m-o-m) and Civmec (up 3.6% m-o-m).
Delfi’s outperformance was driven by record-high 1QFY2023 revenue and strong margin expansion from robust growth in Indonesian and regional markets. The analysts expect Delfi to register healthy growth in 2023 to 2025, driven by an increase in product volume and average selling prices; Indonesia’s post-pandemic growth; and gradual improvement in gross margin as it continues to gain traction in its premiumisation strategy.
See also: UOBKH raises TP on SIA to $6.22, FY2026 earnings to see lift on fuel cost savings
Sembcorp rose higher on the back of sustained market interest in its renewables exposure, now the best performer in UOBKH’s alpha picks portfolio (up 71% since its inclusion). Although its current share price is higher than UOBKH’s target price, the analysts are maintaining the company in its portfolio as they believe an upcoming MSCI review as well as the enunciation of the new renewables target could be share price catalysts.
Civmec benefited from higher earnings, several contract wins and robust outlook. UOBKH expects Civmec to deliver record earnings growth of 11% y-o-y in FY2023 and a potential dividend surprise given its strong balance sheet, which is backed by a strong order book.
The alpha picks underperformers are Aztech (down 12.3% m-o-m), Lendlease Global Commercial REIT (down 5% m-o-m) and Mapletree Logistics Trust (down 4.6% m-o-m). Aztech was affected by falling margins due to higher costs, while the latter two suffered from overall market weakness in REITs.
Currently, other stocks in the portfolio are CapitaLand Ascott Trust , OCBC , Seatrium , Yangzijiang Shipbuilding and Keppel Corp .
