The government’s multi-faceted set of market revival measures have cheered market analysts, who cannot be blamed at times for feeling ignored by apathetic investors, after having worked hard to uncover hidden gems.
“This time is different. And we like it,” says Shekhar Jaiswal of RHB Bank Singapore.
Calling the measures “definitely a move in the right direction”, he observes that there have been a series of “piecemeal” moves since 2018, but mainly focused on so-called supply-side measures, such as investment funds to support high-growth companies, grants to defray listing and research costs.
“This is the first time the demand side of the equation has been addressed. The announced measures do take a more holistic approach in addressing the issues that have been plaguing the Singapore equities markets,” he adds.
Besides requiring new single-family offices applying through the Global Investor Programme (GIP) with assets under management of at least $200 million to allocate at least $50 million of that to invest in local equities, the headline measure announced by the Equities Market Review Group was the $5 billion fund to be allocated to fund managers to deploy into counters outside the 30-strong blue chip Straits Times Index.
Following the Feb 21 announcement, teams of analysts have put forward their favoured names. Among the list of small and mid-cap favoured by RHB include real estate agency APAC Realty ; manufacturer Frencken Group ; dorm operator Centurion Corporation and glove maker Riverstone Holdings .
See also: Hong Leong Asia targets JS-SEZ growth and China recovery
CSE Global
Another stock highlighted by the analysts is construction player CSE Global . As at 9MFY2024, the group has a healthy orderbook of $634 million, while it continues to embark on its growth strategy through capitalising on emerging trends like electrification and decarbonisation, while pursuing acquisitions in the critical communications space in the Americas region.
As such, analysts John Cheong and Mo have a “buy” call on the stock at a TP of 59 cents, as CSE Global continues to see stable financial performances in the infrastructure and mining and minerals sectors, supported by a steady stream of projects in the fields of digitalisation as well as communications.
See also: Centurion Corp sees growth from strong construction demand
Moving forward, the group will also continue to focus on data centre and automation projects to seize emerging market prospects, while the divestment of its US facility for US$29.3 million ($39.1 million) will allow for further expansion.
“We expect a post-tax gain of US$9 million from the sale, which will be used to fund the new property purchase. CSE will also continue leasing the divested facility, with the lease terms yet to be finalised. This signals management’s positive outlook for its electrification business and its commitment to capitalising on the anticipated growth in the US market,” write Cheong and Mo.
China Sunsine Chemical
China Sunsine Chemical is another stock seen by Cheong and Mo as a beneficiary. They note that China’s latest stimulus measures have improved investor sentiment and may boost consumer confidence, which in turn, should see the demand for the group and average selling prices (ASPs) see an uptick in the coming years.
Furthermore, according to the China Association of Automobile Manufacturers, with new car sales hitting a record-high of 31.4 million vehicles in 2024, Cheong and Mo expect Sunsine to leverage its competitive advantages and meet the growing demand for its products.
With that, the analysts have maintained their “buy” call at a TP of 58 cents, noting that the stock provides an attractive yield of around 5%, supported by its robust cash balance of RMB1.75 billion ($322.8 million) as of 1HFY2024.
“This provides ample room for Sunsine to potentially raise its dividend and continue to perform share buybacks. Sunsine has bought back 3.8 million shares for 2024 since the start of its 2024 share buyback plan on Apr 26,” write Cheong and Mo.
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Overall, the analysts expect the group’s international sales volume to grow further, as more Chinese tyre manufacturers look to Southeast Asia to set up factories or beef up production. Catalysts include production commencement for new capacities, higher ASPs for rubber chemicals and higher-than-expected utilisation rates.
Marco Polo Marine
Offshore and marine player Marco Polo Marine is another stock pick of Cheong and Mo. They see the group as a beneficiary of higher charter rates and limited vessel supply. They point to data from Clarksons Research indicating that global offshore support vessel (OSV) utilisation stood at 73% in January, while day rates held steady after rising 16% y-o-y in 2024.
“With notable projects across both the traditional offshore and gas (O&G) and the renewable sectors in its operating markets like Taiwan and Korea, Marco Polo Marine (MPM) stands to benefit from higher demand for OSVs and sustained higher charter rates.”
Additionally, the group’s new commissioning service operation vessel (CSOV) is expected to be completed by February, and will be deployed over three years at an agreed utilisation rate per annum (p.a.) with Vestas.
The group has also announced its Asia-Pacific (APAC) crew transfer vessel (CTV) framework agreement with Siemens Gamesa for projects across Taiwan and Korea in March. “We think that this partnership will further boost Marco Polo Marine’s track record and provide more opportunities to accelerate its growth.”
As a result, the analysts have kept their “buy” call on the stock at a TP of 7.2 cents.
Riverstone
Glove-maker Riverstone is another beneficiary identified by Cheong and Mo. “We expect Riverstone’s cleanroom segment to continue seeing sales volume growth in FY2025, with the electronics and pharmaceuticals sectors being growth drivers.”
They add that the group’s blended ASP was also healthy at around US$94 per carton in 3QFY2024. On Riverstone’s healthcare segment, the analysts expect sales volume to further increase due to greater demand from US customers, while ASP should increase slightly to about US$28.50 per carton.
“During 3QFY2024, we note that the US had increased its contributions from about 40% of healthcare gloves revenue to around 70% because of the upcoming US tariffs on China-made gloves,” write Cheong and Mo.
Backed by its healthy 9MDFY2024 cash balance of RM790 million ($239.9 million) and strong operating cash flow of RM266 million, the analysts expect the group’s FY2025 to FY2026 payout ratio to exceed 100% to reward shareholders.
With a “buy” call and TP of $1.16, the analysts note that Riverstone offers the most attractive valuation in the glove industry with an above 200% discount in terms of P/E multiple and 5 times higher dividend yield vs peers.
“We think Riverstone is a good proxy to the recovery in the healthcare gloves industry while offering downside protection given its dominant position in the cleanroom gloves sector.”
Valuetronics Holdings
In the electronics sector, Cheong and Mo see that Valuetronics ’ healthy 1HFY2025 results were supported by new projects and customer acquisitions. Net profit in the period grew 17% h-o-h and 10% y-o-y to HK$91 million $15.6 million, on the back of new customer contributions offsetting the softer demand from existing customers.
Gross margin expanded for the fourth consecutive half-year on higher-margin new products, lower labour costs and lower material costs from improved supply chain.
The analysts have a “buy” call with a TP of 78 cents on the stock, partly due to the group’s recent joint-venture (JV) called Trio AI with a Hong Kong graphics processing unit (GPU) and artificial intelligence (AI) solutions provider SinnetCloud Group.
Trio AI will provide GPU and AI-related cloud services in Hong Kong to tap on the rising computational needs and growing AI demand while Valuetronics will also enjoy additional income from leasing GPU servers and hardware to Trio AI over 60 months, at a rate that will cover the acquisition cost. Management has guided for Trio AI to start making positive contributions to revenue and profitability from FY2026.
Valuetronics’ Vietnam campus will also be a driving force for the group. As at end 1HFY2025, the plant is operating at around 40% utilisation rate, with Cheong and Mo noting that this excess capacity allows room for production ramp-up, whether for existing customers or to add more new customers.
Centurion Corporation
Meanwhile, analyst Adrian Loh notes that Ceturion Corporation should see around 16% volume growth in both its purpose-built workers accommodation (PBWA) and purpose-built student accommodation (PBSA) segments during the 2HFY2024 to 2HFY2026.
In the 9MFY2024, the group reported a revenue of $187 million, forming over 82% of Loh’s full-year revenue estimate. In its 1HFY2024 results, revenue in the group’s PBWA and PBSA assets grew 27% and 20% y-o-y respectively.
With this, Loh has a “buy” rating with a TP of $1.11, noting that he has upgraded Centurion’s FY2024 to FY2026 earnings per share (EPS) estimates by 2% to 11%.
“We have maintained our current forecast dividend of $0.03 for the full year, but we believe that there is a high likelihood of an upside to $0.035 given the better-than-expected earnings, implying a FY2024 yield of 3.6%.”
PropNex
Another stock highlighted by Loh is PropNex, with its sequentially strong earnings in 2HFY2024 and into FY2026. “We expect new-home launches to sequentially increase in 2HFY2024 and into 1HFY2025, thus contributing to better reported earnings for the company in the near to medium term.”
He adds: “Given the timing of revenue recognition, we expect stronger sequential profits to be reported for 2HFY2024, 1HFY2025 and 2HFY2025.” With this, Loh has a “buy” call on the stock at a TP of $1.18. As at end1HFY2024, PropNex has retained earnings of $78 million, and net cash of $116 million which excludes another $18 million in long-term deposits.
In 2025, the group will also be celebrating its 25th anniversary, to which Loh notes could result in a special dividend to reward shareholders. “We forecast $0.06 a share in ordinary dividends for FY2024 with $0.0225 paid in 1HFY24.”
He concludes: “In our view, the company could potentially trade at higher multiples given its asset-light business model which on our estimates generates 37% to 38% ROE in FY2025 to FY2026.”
Catalysts noted by Loh includes continued strong sell-through of new property launches in 1HFY2025 which would impact 2HFY2025 earnings, higher-than-expected price increments for private residential and HDB resale flats and lastly, higher-than-expected final dividend for 2024 indicating the company’s willingness to return cash to shareholders.
Digital Core REIT
Analyst Jonathan Koh sees Digital Core REIT (DCREIT) as a beneficiary, noting that the REIT has signed new and renewal leases representing US$74 million of annualised rent and generated a positive rental reversion of 4.3% in FY2024.
DCREIT’s portfolio weighted average lease expiry (WALE) has also been extended by two years to 4.8 years. “With many embedded renewal options already exercised, management expects the positive rental reversion to improve to double-digits in FY2025.”
As a result, Koh has maintained his “buy” call at a TP of US$0.88 cents. He writes: “DCREIT is a pure play on data centres and all its data centres are freehold. It provides an attractive distribution yield of 6.7% for FY2025. Price-to-net asset value (P/NAV) is 0.68 times, a rarity for data centre REITs.”
The analyst sees the data centre market to ride on the back of continued investments in AI. “Google will accelerate investment in AI data centres to US$75 billion, both for its own usage and its cloud computing customers. Meta plans to invest US$60 billion to $70 billion. It uses AI to improve targeting for advertisements on Facebook and Instagram.”
Share price catalysts noted by him include yield-accretive acquisitions tapping on the sponsor’s extensive data centre pipeline and organic growth from cash rental escalation of 1% to 3%.
Singapore Post
Finally, analyst Llelleythan Tan selects Singapore Post (SingPost) as his stock pick, with a “buy” call and sum-of-the-parts (SOTP) based TP of 72 cents.
On Dec 2 2024, the group announced the sale of its Australia business for $898 million, which will lead to a $312 million gain on disposal. “The $312 million disposal gain translates into 14 cents per share and SingPost will consider a special dividend,” writes Tan.
“We see potentially more value-unlocking activities from the disposal of Famous Holdings, a smaller Australia subsidiary estimated to be worth more than $100 million, SingPost Centre property, valued at around $1 billion, and other properties that are occupied by the post office currently.”
He adds: “The change in top management is unlikely to impact the group’s divestment strategy which could potentially lead to higher-than-expected special dividends. Also, further clarity on the group’s strategy moving forward would be a re-rating catalyst for the stock, in our view.”
Singapore Exchange Group
Naturally, a key beneficiary of the market review measures ought to be Singapore Exchange Group itself, on the expectation that new IPOs will start coming, bringing along greater investors’ interest and overall liquidity.
Jaiswal of RHB has slightly revised his earnings estimates for SGX.
“Despite the earnings upgrade, its valuation is looking stretched amidst a still moderating growth outlook,” cautions Jaiswal in his Feb 24 note, as he keeps his “neutral” call on the counter.
“While more clarity is needed on some measures, SGX should benefit from increased listings and higher trading in stocks beyond the Straits Times Index components,” writes Jaiswal.
He now expects SGX to see between 9 and 12 net new listings between FY2026 ended June 30, 2026, and FY2027, up from an earlier projection of 6 to 8.
As the implementation of the new measures will be “progressive”, the improvements in trading turnover will only be visible in FY2026 to FY2027, leading to a 2% increase in his estimates for SGX’s earnings for these two financial years.
Jaiswal, acknowledging the “optimism” from the measures, believes that investors will accord a higher valuation multiple on SGX as a counter.
As such, he has raised his target P/E multiple to 22x from 21x. SGX is now trading at 20.6x FY26F earnings, which is in line with its historical average forward P/E of 21x.
Jaiswal says his target P/E is now within SGX’s historical average forward P/E and its +1SD.
His target price of $13.60, along with a “neutral” call, is based on blended earnings for the current FY2025 and coming FY2026. Similarly, CGS International analysts Lock Mun Yee and Lim Siew Khee see SGX to be a beneficiary of the stronger market volumes to come in the medium term.
Presently, Lock and Lim have a “hold” call and TP of $13.20 on the stock. On this end, they note that a $5 billion increase in Singapore’s cash equities turnover represents around 2% of SGX’s $300 billion cash equities total market turnover by value in 2024.
They write: “With the potential multiplier effect from the $5 billion trading value increase, we think SGX could trade up towards about 26 times P/E as investors price in the overall positive sentiment from the review.”
Outside of REITS, Lock and Lim see UOL Group, with which they have an “add” call and TP of $8.20; SingPost, for its potential of value unlocking of properties and portfolio, similarly with an “add” call and TP of 74 cents; and lastly, Yangzijiang Shipbuilding, on improving sentiment in the Chinese market
