Six research houses, 69 EQDP stock picks and ‘big potential’ in small-mid caps

A bout of exuberance in July caught even experienced local analysts by surprise. No chart better represents this than the Straits Times Index (STI), whose constituents are the top 30 Singapore-listed stocks by market capitalisation.

After briefly surpassing the 4,000-point mark for the first time on March 28, the STI fell to a 2025 low of 3,370.31 points on April 9 owing to US President Donald Trump’s threat of global tariffs.

The bellwether index quickly rebounded and burst beyond 4,000 points in late June, just after OCBC Investment Research’s Singapore strategist Carmen Lee shared her 12-month target of around 4,060 to 4,280 points with The Edge Singapore.

The basket of Singapore’s largest companies neared Lee’s upper bound in July, reaching an all-time high of 4,273.05 points before approaching that peak again in mid-August.

The Singapore market still has “a lot more to run”, said Maybank Securities’ head of research Thilan Wickramasinghe to The Edge Singapore earlier this month. Fund managers who have long overlooked the Singapore market are starting to return, and Wickramasinghe thinks Singapore’s “baby bull” market could send the STI to 4,685 points.

Over at JP Morgan, analysts are even more upbeat; they raised in July their end-2025 base and bull targets to 4,500 points and 5,000 points, respectively.

But enthusiasm has not been confined to the large-caps; the Monetary Authority of Singapore (MAS) revealed on July 21 the first three asset managers chosen to launch fund strategies under its $5 billion Equity Market Development Programme (EQDP), which must have a “significant” allocation to local small- and mid-cap stocks.

While Avanda Investment Management, Fullerton Fund Management and JP Morgan Asset Management have declined to comment on their asset allocations so far, that has not stopped local research houses from making their own calculated guesses.

DBS Group Research’s Foo Fang Boon and Yeo Kee Yan see “big potential” in small- and mid-caps (SMID), saying in an Aug 1 note that MAS’s EQDP “signals to the market that smalland mid-caps are no longer an afterthought”.

Meanwhile, International (CGSI) analysts Chua Wei Ren, Lim Siew Khee and William Tng anticipate “improving trading liquidity” and a “narrowing of valuation discounts” for Singapore’s equity market versus its peers.

That said, the analysts have some vested interest in keeping a close watch on smaller firms and issuing reports. Alongside the fund manager picks, MAS pledged on July 21 another $50 million to enhance the Grant for Equity Market Singapore (GEMS) scheme, promising additional funding of $1,000 for each research report, with a further $1,000 for initiation reports and research on pre-public firms and newly-listed companies.

This takes the maximum funding from $4,000 previously to $6,000 per research report today.

Launched in 2019, the GEMS Scheme currently funds equity research reports using a two-tiered approach. Eligible houses must produce a minimum of 20 reports in a year to qualify for the Basic Tier, which provides funding of $3,000 per report for the first 39 reports. Houses that produce 40 or more reports per year may progress to the Enhanced Tier, which provides higher funding of $4,000 per report from the 40th to 80th report.

Selection criteria

The Edge Singapore has compiled the latest reports from six local houses to create a list of 69 potential EQDP beneficiaries. The majority of the brokers’ picks are SMIDs, though some STI constituent stocks also make an appearance.

The six houses adopted different approaches in designing their selection criteria, with RHB Bank Singapore issuing the most picks (30) and UOB Kay Hian choosing the least number of stocks (10).

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In an Aug 6 report, RHB’s Shekhar Jaiswal screened for “high-quality” SMIDs that are excluded from the STI with a market cap of between $300 million and $3 billion and a free float of at least 20%.

Jaiswal also screened for SMIDs with average daily trading volume (ADTV) of at least US$1 million over 20 trading days till July 25, and “recent trading momentum” — defined as the past 20-day ADTV exceeding the threemonth ADTV.

This gave rise to names like UMS Integration and Frencken Group. The two semiconductor-related firms top the list of 69 listed companies, as they also appear in the picks of DBS, UOB Kay Hian and Maybank Securities.

CGSI’s criteria, meanwhile, identify Singapore-listed stocks that are below 10 times price-to-earnings (P/E) or trading below their book value (P/BV) “as a general rule of thumb”. CGSI then examined share price performance to evaluate the “threshold for potential upside” from a technical perspective.

According to CGSI, the 23 stocks it highlighted “have seen strong bullish rebounds from the bottom and have started to form early- to mid-uptrends over one to three months. Uptrend momentum over the longer term, from six to 12 months, could be sustained”.

A sizeable number of CGSI’s picks are involved in construction and engineering, namely: Hock Lian Seng, Huationg Global, King Wan, Ley Choon Group, Nam Lee Pressed Metal Industries and OKP Holdings.

OCBC Investment Research, meanwhile, has a more conservative view of EQDP beneficiaries, only choosing from companies under its coverage with a market cap below a relatively lofty $10 billion. This gave rise to names like ComfortDelGro and StarHub, which were each picked by three houses, and even STI constituents like Mapletree Logistics Trust.

Although Phillip Securities did not clearly set out a list of EQDP beneficiaries in its reports, its analysts note that the programme has “a meaningful impact on the market”. “On a free float and volume-adjusted market cap, the $5 billion is equivalent to 18% of the $27.5 billion universe of stocks (excluding REITs).”

Odd picks

There are 43 odd picks from the total list of 69 stocks. These are companies that have only been selected by one house each.

On the one hand, unique selections may highlight lesser-known firms with greater potential upside. On the other hand, a lack of consensus among analysts could hint at a lack of interest and liquidity, which could make trading difficult.

At 15, CGSI has the longest list of odd picks. More than half of CGSI’s 23 picks are unique: Asian Pay Television Trust, Aztech Global, Beng Kuang Marine, Bumitama Agri, Duty Free International, Hock Lian Seng, Huationg Global, ISOTeam, King Wan, Ley Choon Group, MoneyMax Financial Services, Nam Lee Pressed Metal Industries, OKP Holdings, Thakral Corp and ValueMax.

Mainboard-listed mechanical and electrical engineering services firm King Wan is the smallest company by market cap on CGSI’s list, at around $31 million. Besides the engineering services, King Wan owns, rents and operates mobile lavatories; manufactures pipes and fittings; and sells paints, varnishes and painting inks.

CGSI likes King Wan’s $152.3 million order book as of March, and analysts point to recent contract wins at a Beach Road/Nicoll Highway project, landed housing at Luxus Hill Road and a proposed food factory development at Kallang Way.

King Wan has also been in a net cash position since FY2022. The company has a March 31 financial year-end, and its net cash position as of March was $3.5 million.

While King Wan is unrated by CGSI, the analysts have a target price of 7 cents. “Major support at 3.4 cents will be a good level to accumulate should there be any correction.”

RHB has the next-highest number of odd picks, at 11 out of its 30 picks in total. They are: COSCO Shipping, AIMS APAC REIT, UOBKay Hian Holdings, Yanlord Land, Wee Hur, Keppel Infrastructure Trust, CapitaLand China Trust, Hong Leong Asia, Singapore Post, Hutchison Port Holdings Trust and CDL Hospitality Trusts (CDLHT).

Nearly two decades have passed since the glory days of former STI constituent COSCO Shipping, which traded above $7 in 2007. COSCO Shipping, whose shares have declined since 2012 to around 12 cents, recently reported earnings of $2.63 million for 1HFY2025 ended June 30, up 15% y-o-y, as its logistics business becomes the mainstay after a multi-year restructuring.

Of RHB’s list of 30 stocks, seven are under its coverage: AIMS APAC REIT, Frencken Group, StarHub, CSE Global, Centurion Corporation, Raffles Medical and CDLHT.

OCBC has six odd picks out of 13 names, and they are REIT-heavy: Mapletree Logistics Trust, Keppel DC REIT, Frasers Centrepoint Trust, UOL Group, OUE REIT and Parkway Life REIT. Note that the first four of these names are STI constituents.

Meanwhile, DBS has five — GuocoLand, F&N, ESR REIT, Starhill Global REIT and Haw Par — and Maybank has four: Golden Agri-Resources, Riverstone Holdings, SIA Engineering and Yangzijiang Financial.

UOBKH has the fewest number of odd picks; just two of its 10 SMID picks are unique: Oiltek and Lum Chang Creations. UOBKH has an 86-cent target price on the former and a 39-cent target price on the latter, which was only listed on the Catalist board in July.

Shares in Lum Chang Creations have climbed nearly 36% since the IPO and are already trading above UOBKH’s target price, issued on July 23.

UOBKH’s Cheong and Mo think Lum Chang Creations, the interior contracting and urban revitalisation arm of Mainboard-listed Lum Chang Holdings, will enjoy “strong earnings growth” in 2025 from a “robust” orderbook and more contract wins for conservation works. The firm has $122 million in contracts locked in as of May 31.

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