Singapore Stocks: Navigating the Changing Tides with UOB Kay Hian’s Insights
UOB Kay Hian, 3 April 2025
Alpha Picks: Reshuffling the Portfolio for Maximum Potential
Our Alpha Picks portfolio outperformed the Straits Times Index (STI) in March 2025, rising 3.4% month-on-month (mom) on an equal-weighted basis and beating the STI by 1.4 percentage points (ppt). However, on a market cap-weighted basis, our Alpha Picks portfolio was bested by the STI by 0.4ppt, though it still managed a respectable 1.6% mom increase. For the first quarter of 2025, the STI rose 4.9% quarter-on-quarter (qoq), outperforming our Alpha Picks portfolio by 5.1ppt on an equal-weighted basis.
Broad-based Outperformance from Small-Mid Cap Picks
Our small-mid cap picks were the standout performers, led by Centurion (+26.3% mom), China Sunsine (+14.7% mom), and UMS Integration (+8.8% mom). Stronger-than-expected 2024 results and higher dividends positively impacted Centurion and China Sunsine, while UMS Integration rose on the back of a better-than-expected outlook for 2025. On the flip side, our underperformers included SIA Engineering (-8.8% mom), which was hurt by weak investor interest, Marco Polo Marine (-5.9% mom), which was impacted by shaky oil price sentiment, and Riverstone (-5.5% mom), which faced a fragile outlook for the glove industry.
Portfolio Adjustments: Adding New Potential, Taking Profits
To reposition our Alpha Picks portfolio, we are making the following changes:
Additions:
– Oiltek: Upcoming transfer to the SGX mainboard and new recurring revenue from a partnership with Pertamina – Valuetronics: New customer contributions and potentially better-than-expected results – DFI Retail: Earnings uplift from higher-margin businesses after the sale of its Singapore food business
Removals:
– ComfortDelGro, Centurion, and UMS Integration: Taking profits after their strong performance since being added to the Alpha Picks portfolio – Riverstone: Lack of near-term share price catalysts
Key Recommendations
PropNex (BUY)
– Missed 2024 estimates, but investors should focus on the bright 2025 outlook – Expect strong sell-through of new property launches in the first half of 2025, which should boost second-half earnings – Potential for another special dividend from robust 2025 results
Yangzijiang Shipbuilding (BUY)
– Unconcerned about proposed U.S. port fees for Chinese-built vessels – Expect the company to maintain robust shipbuilding margins in 2025 – Target price of S\$3.50, based on a PE multiple of 9.5x
Sembcorp Industries (BUY)
– Reported better-than-expected 2024 results, highlighting the resilience of its business model – Acquired an additional 40% stake in Senoko Energy, a value-accretive move – Maintain BUY rating with a target price of S\$8.00, using a target PE multiple of 12.6x
Seatrium (BUY)
– Remains a strong contender in Brazil’s offshore oil and gas market – Growing its maintenance, repair, and overhaul (MRO) business, a steady source of recurring revenue – Target price of S\$2.96, based on a P/B multiple of 1.5x
DFI Retail (BUY)
– Jettisoned its underperforming Singapore food business to focus on higher-margin segments – Positioned for growth in 2025, with a projected 14-34% underlying profit increase – Target price of US\$2.80, based on a PE multiple of 16.3x
SIA Engineering (BUY)
– Earnings recovery continues, with a lion’s 85% share of the Changi Airport line maintenance business – Undemanding valuation with decent dividend yields – Target price of S\$2.70
Valuetronics (BUY)
– Capturing the AI boom with a new joint venture in Hong Kong – Room for expansion with its Vietnam plant, which is operating at 40% utilization – Maintain BUY with a target price of S\$0.78, based on a PE multiple of 10.8x
China Sunsine Chemical (BUY)
– Expect volumes to maintain an upward trajectory, driven by robust domestic and international demand – Chinese tyre makers continue to offshore production, benefiting Sunsine – Attractive dividend yield of around 6%, backed by a strong balance sheet – Target price of S\$0.63, based on a PE multiple of 7.5x
CSE Global (BUY)
– Healthy order win momentum supports revenue growth – Divestment of a U.S. facility to pave the way for further expansion – Target price of S\$0.61, based on a PE multiple of 11x
Marco Polo Marine (BUY)
– Beneficiary of higher charter rates and limited vessel supply – New vessels expected to contribute in the second half of 2025 – Target price of S\$0.072, based on a PE multiple of 9.5x
Oiltek International (BUY)
– Transfer of listing to the SGX mainboard to enhance image and attract a wider investor base – Partnership with Pertamina to provide recurring revenue – Target price of S\$1.44, based on a PE multiple of 20x
Oversea-Chinese Banking Corp (BUY)
– Announced a comprehensive capital management plan, including special dividends and share buybacks – Strategic initiatives to deliver S\$3 billion in incremental revenue by 2025 – Target price of S\$21.10, based on a P/B ratio of 1.57x
CapitaLand Integrated Commercial Trust (BUY)
– Resilient Singapore portfolio, with positive rental reversions and improving occupancy – Positive contributions expected from asset enhancement initiatives – Target price of S\$2.37, based on a dividend discount model
