SINGAPORE (Dec 19): SAC Advisors says it remains “cautiously optimistic” about the Singapore market in 2019, despite volatile market conditions on the back of global geo-political risks.
“While lingering issues in 2018 like the collapse of the Argentine peso, the crisis in Turkey, the weakness of the Indonesian rupiah and Italy’s debt-driven deficit are likely to persist in 2019, we see the US-China trade war as the single greatest uncertainty to the local and global markets moving forward,” say analysts Terence Chua, Jaime Lo and Lam Wang Kwan in SAC’s year-end review report for 2018.
Amid widespread selling in the second half of 2018, the analysts say value has emerged in selected beaten down sectors, particularly in the telecommunications, banking and consumer goods sectors.
Backed by attractive valuations and positive industry outlook, SAC’s top picks for 2019 are Interra Resources, Hong Lai Huat Group, Advancer Global and Sanli Environmental.
SAC has a “buy” call on petroleum exploration and production firm Interra with a target price of 8.9 cents, implying an upside of 162% from its current trading price.
“We believe Interra Resources is at a key inflexion point,” says Chua in a November report. “Firmer oil prices and contract extensions have led to a turnaround in profitability which we have already seen in their last two quarters, and this has already exceeded our FY18 forecast.”
Chua notes that Interra trades at 0.7 times of its book value, and sits on net cash of US$5.3 million as at Sept 2018.
As at 4.40pm, shares in Interra are trading 0.2 cent lower at 3.4 cents.
SAC has a “buy” recommendation on Hong Lai Huat Group with a target price of 51 cents, implying an upside of 137% from its current trading price.
The group owns a property development business in Singapore and Cambodia, and also owns one of the largest cassava plantations in Cambodia.
Hong Lai Huat saw it revenue more than double in 3Q18, on the back of stronger property sales at the group’s D’Seaview project development in Sihanoukville, Cambodia. The surge in revenue helped the group to earnings of $1.5 million during the quarter, reversing out of losses of $0.9 million a year ago.
“We are forecasting Hong Lai Huat to post a strong recovery in 2018 and 2019 as it recognises higher sales from D’Seaview,” Chua says in a November report.
“Despite jumping over 23% since our initiation of coverage on June 29, 2018, we see the company as deeply undervalued,” he adds.
As at 4.40pm, shares in Hong Lai Huat are trading half a cent down at 21.5 cents.
SAC has a “buy” call on workforce solutions provider Advancer Global with a target price of 36 cents, implying an upside of 57% from its current trading price.
In Sept, the group announced it had entered into a strategic partnership with Japanese human resource firm Fullcast Holdings.
“Ultimately, we see the move as positive given the recent macro developments in Japan,” Chua says in a September report.
In particular, Chua says he likes Advancer Global for its “defensive business and solid mergers and acquisition track record”.
As at 4.40pm, shares in Advancer Global are trading flat at 23 cents.
SAC has a “buy” call on water and waste management firm Sanli Environmental with a target price of 36 cents, implying an upside of 63% from its current trading price.
Sanli saw its revenue grow 12.9% to $37.4 million for 1H19, on the back of higher contribution from its engineering, procurement and construction (EPC) segment.
“Sanli has achieved its objective in securing a contract for the landmark land reclamation project, which will put the group in a favourable position in securing similar projects in the future,” say Lam and Chua in a November report.
“The group is also sticking to its strategy and steadily growing to become a top water player,” they add.
As at 4.40pm, shares of Sanli are trading flat at 22 cents.
