Business

Brokers' take

Compiled by Cai Haoxiang

SINGAPORE MARKET STRATEGY

UOB Kay Hian Research, July 6

The Straits Times Index (STI) had posted modest gains in June 2017, rising marginally by 0.49 per cent month on month to 3,226.48 points.

Mergers and acquisitions (M&A) continued to grip the attention of investors with the potential acquisition of Croesus Retail Trust.

Technology (-6.8 per cent) and land transport (-4.2 per cent) reversed their gains in May with the former affected by the tech sell-down in the US market. Similar to the US, Singapore also saw sector rotation from technology to the banks.

STI was therefore supported by telecoms (+3.1 per cent) and finance (1.6 per cent) with rapid shifts of money looking for a bargain where yesterday's hot hands are today's also-rans.

We have a 2017 forecast year end target of 3,250 points based on a discount to long term mean price-earnings and price-to-book ratios. We believe the market is likely to range trade as expectations of an earnings recovery have been priced in.

Investors should look to buy quality blue chips with earnings visibility and yield on dips.

Investment themes we like include: Companies with potential earnings surprises, restructuring or M&A plays, strong performing exporters, and quality sector laggards.

Key buys include OCBC, DBS, CapitaLand, Ascendas Reit, Frasers Logistics and Industrial Trust, CapitaLand Commercial Trust and Sembcorp Industries.

Mid cap stocks we favour include Citic Envirotech, Hotung and ISDN. Sell SIA Engineering and Singapore Press Holdings.

CITIC ENVIROTECH | BUY

JULY 6 CLOSE: $0.76

TARGET PRICE: $1.10

UOB Kay Hian Research, July 6

Citic Envirotech's share price has dipped, opening up an opportunity for investors to acquire shares close to the strategic shareholder's entry levels.

The company is on track to delivering its ambitious internal target of securing $1 billion in new project wins. Also, with shareholders approving a share purchase mandate in May, share buybacks could support share price. Key risks include a delay in project construction and a weakening of the renminbi.

Maintain "buy" and discounted cash flow-based target price of $1.10.

Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.