Of course, before the privatisation of Dyna-Mac, Lim was actively meeting the wider community. For Seet, he likes the easier access to company management over such casual settings, which makes his job more interesting as he sniffs out undervalued gems. “We get to know each other more on a personal level. I think that this closeness is something that also helped me enjoy this sector more,” says Seet, head of small- and mid-caps at the brokerage, in an interview with The Edge Singapore.
Indeed, the small- and mid-cap sector has become increasingly interesting after years of low liquidity and scant coverage. Thanks to the Equity Market Development Programme (EQDP), a flurry of activities is taking place among the smaller counters, after the Straits Times Index, which tracks the 30 largest stocks, reached record highs.
Seet, who has been in this industry since 2013 and was known for his coverage of first tech companies and then small- and mid-cap stocks, recalls that his very first report was on Centurion Corporation, which is today a market darling for delivering steady growth, immune from external risks of trade war and interest rates, which have been affecting other companies. Other stocks within his early coverage included pawnbroking firms such as MoneyMax and Maxi-Cash, as well as tech companies like Venture Corporation. All these years, covering this market segment has remained an area of interest as he finds it more satisfying and easier to uncover value instead of trying to compete for attention in the crowded large-cap space. “It allows you to go across different sectors… so every year or every two years, there’s a different flavour of the year,” he says.
Choosing stocks
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Besides looking for mispriced stocks, Seet also examines sector trends. In the case of Dyna-Mac, Seet, drawing from his coverage of Marco Polo Marine, observed that the oil & gas sector was already turning around, with charter rates trending up, which is a clear indication of growing demand. Seet’s hunch was affirmed after he made his channel checks, and when the bigger player Seatrium announced a slew of new order wins.
Seet initiated coverage on Dyna-Mac with a “buy” call and target price of 35 cents in April 2023, when the company was at 25 cents. Under ex-chairman Lim, Dyna-Mac experienced a series of positive developments, including winning new orders and reporting improved earnings. This success attracted a takeover offer from Korean conglomerate Hanwha Group, initially at 60 cents, which was eventually increased to 67 cents.
After examining the broader picture, Seet drills down into the company’s fundamentals, including assessing its strength, moat, margins, business model, and, of course, getting a read on the management team, whom Seet says he would want to meet at least three or four times before eventually initiating coverage.
See also: Fullerton launches first retail fund under EQDP to ‘value up’ SGX stocks
Upon initiation, the analyst will reevaluate at his calls quarterly, triggered by results, contract wins, site visits, or other event-driven reasons, where Seet will form and update his views accordingly. In the case of Singapore Post, Seet was initially bullish. In his note of Nov 25, 2024, he recommends a “buy”. He gives a target price of 74 cents, as he sees SingPost as “deeply undervalued”, with “significant potential value” from the monetisation and streamlining of its businesses, particularly its Australia-based units and SingPost Centre.
At the time, Seet estimated that SingPost could generate up to $1 billion from these divestments to reduce its debt. On Dec 3, 2024, he raised his target price to 77 cents after SingPost agreed to divest its business for A$1.02 billion to Pacific Equity Partners, as he estimated that the company could potentially return up to 86 cents per share in dividends to shareholders, assuming all assets were sold.
From the sale of the Australia business, SingPost paid out 9 cents per share when it declared its FY2025 results. However, by August, Seet downgraded his call to “hold” with a lower target price of 51 cents, from 63 cents previously, noting that the monetisation phase was “likely over” and that there was a lack of catalysts.
To Seet, the downgrade resulted from a “key change” in the company’s message regarding the disposal of the SingPost Centre. “My angle has always been that SingPost is undervalued because of the assets they own,” he explains. While SingPost still has a significant amount of cash on its balance sheet, Seet points out that if the company were to return all its cash on hand and sell the SingPost Centre, its shareholders would make a profit, which is closer to his previous target price.
“But they want to take a longer way,” he says, adding that the postal business in Singapore is not sustainable. And should SingPost rely on earnings from SingPost Centre, it will become a property company, in which investors would be better off investing elsewhere.
While he notes that privatisation is the only viable option for the company at this point, he acknowledges that only one party — the government — can implement it.
Bullish picks
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For now, Seet is more bullish on other small- and mid-cap companies such as Sanli Environmental, which he started covering on Aug 18 with a “buy” call and a target price of 38 cents. The water treatment and maintenance provider, according to Seet, is in a “sweet spot”, due to an expected rebound in its margins, especially in its engineering, procurement and construction (EPC) segment, as new contracts with higher margins begin in FY2026.
In a follow-up report on Sept 29, Seet expects Sanli to secure an additional $200 million to $300 million in projects by the end of November, bringing its order book to $500 million to $600 million.
Sanli, a contractor of PUB, will ride on the latter’s growth, given that Singapore aims to be 100% self-reliant. “The pipeline for PUB is very clear. You have more water treatment plants coming up; the older plants have to be maintained, and the parts have to be changed,” he says. He adds that the budget for PUB is also continuously increasing every year, with a current budget of $1 billion. This does not include the ad-hoc jobs Sanli receives.
Sanli will also benefit from the 800-hectare “Long Island” reclamation project off East Coast Park, estimated to be worth tens of billions of dollars. “From now to 2028, 2029, it’ll be water treatment plants and maintenance and growth. From 2030 onwards, the Long Island [project] will start, and that’s where the big bulk of projects will come in for them again.”
Another stock Seet likes is CSE Global, which has direct exposure to the US and will benefit from US President Donald Trump’s initiatives to bring things — including manufacturing and data centres — back to the US. “CSE is at the epicentre of that. They do electrical solutions for the government, power distribution centres, utilities, airports, trains, and now, if factories are returning to the US, CSE also does automation and electrical for those parts as well,” he says.
CSE, previously in the oil & gas sector, also stands to benefit if US policies revive the sector. Its data centre business is also poised to gain from the growing reliance on tech. “Three years ago, the US was only about 10% to 20% of the business. Now, even with revenue growing by 10% to 20% per year, the US accounts for 50% of the business. That shows you how big the growth is,” he says. “Going forward, we think that growth will continue to come from the US, especially in data centres. So if you want exposure to US data centres, [in terms of proxies], CSE is the only one.”
Other opportunities include Sing Investments & Finance. Seet likes the company’s management risk profile, which enabled its net interest margins (NIMs) to remain resilient even in times of lowered interest rates. More importantly, the company’s market capitalisation of about $373.6 million as at Oct 2, is lower than its net cash position of around $474 million as at the six months ended June 30, which means investors are practically “buying the business for free”.
Seet also likes AddValue Technologies, a rare locally listed company with direct exposure to satellites. The company, which had been loss-making for a “very long time,” turned profitable only last year, generating US$1.5 million for the 12 months ended March 31. He adds that the company looks set to enjoy a growing recurring revenue stream from monthly maintenance fees from the accelerated number of satellite launches into space.
Overall markets
When it comes to the current bullish sentiment, Seet believes fundamentals remain essential. Metrics such as earnings and projection wins, as well as promises delivered, will be key in the growth of these companies’ shares.
The recent surge in interest in small- and mid-cap stocks has often resulted in some penny stocks appearing in the top active lists. Is Seet worried about a potential bubble? He points out that the Singapore market came from “a very depressed valuation” and is only now reaching fair valuations. “I wouldn’t say it’s heated up … If you compare to Malaysia, for example, like its tech stocks, Singapore came from a single digit of about seven to 10 times to 15 to 20 times, but Malaysia is still at 20 times to 30 times.” Singapore’s construction stocks also remain reasonably priced, rising from two to three times to about five to seven times, compared to other countries’ 10 times, he adds.
“In Singapore, there are a lot of excellent and cheap companies… Now all these are coming through because of the government’s effort, investors are seeing value and bringing [these companies] to a good, reasonable valuation, so I’m glad this happened.”
Seet maintains his bullish stance. The EQDP has just started, and there may be “a lot more” IPOs in the pipeline. “A lot of EQDP funds are not deployed yet. I think this could last for another six months to a year, barring unforeseen circumstances. I think the Singapore market still has legs to run.”
