PHILLIP ABSOLUTE 10 – Our top 10 picks for absolute returns
Source: Bloomberg, PSR. Phillip Absolute 10 performance assumes equal weightage to every stock in the portfolio. Any changes to Phillip portfolio is only conducted month end.
In our inaugural Phillip Absolute 10 Model portfolio, it was up 4.9% in January. It outperformed the STI by 1% point this month. Top 3 movers in January18 were Banyan Tree, CapitaLand, and Micro-Mechanics. Bottom 3 movers in January18 were Geo Energy, AsianPayTV, and Ascendas REIT. Below are some quick updates on some of the portfolio of companies. Asian PayTV: Our Accumulate recommendation is based on the attractive and stable dividends from the recurrent and monopolistic pay TV subscribers. Chunghwa Telecom reported strong 20% growth in IPTV subscribers. Will be looking if there is any impact to APTV subscriber base when the company reports results on 26February. Chip Eng Seng: CES remains our pick on present recovery in the Singapore residential market. All eyes will be on the take-up rates on upcoming launches across the island. CDL’s New Futura launch saw healthy take-up rates with c.39 units (out of 124) sold in the first two weeks. We will monitor the next big project launch, The Tapestry by CDL (c.820 units) in Tampines in March. Two weeks ago, CES also won an S$168mn contract from HDB, further bolstering their income from the construction arm, which is enough to sustain the 4c dividend. Dividend yield is attractive now at 4% with potential capital appreciation. Dairy Farm: We expect Dairy Farm to benefit on its store expansion and robust economic backdrop in China, Hong Kong, and Singapore. Its post-store rationalization exercise and realization of its various margin enhancement initiatives could lift its profitability in FY17/18e. In addition, the impressive growth from its fast-growing associates, i.e. Yonghui and Maxim’s, will further boost its earnings. Geo Energy: Coal prices continue to be on an uptrend. Indonesia coal price reference (HBA) is at US$95.5/tonne, a 1.6% MoM rise. China is encountering a shortage of coal supply and gencos demand the authority to increase coal imports. In Dec-17, Geo secured a new offtake agreement to provide 7.5mn tonnes of coal in FY18. Geo is expected to register organic growth in production with the commencement of TBR mine in 1Q18. Micro-Mechanics: We downgraded to Accumulate on 30Jan17 due to price performance and revenue was softer than expected. We maintained our target price. We still find the investment merits of Micro-Mechanics attractive: ROE of >30%, ~60% GP margins, net cash $22mn balance sheet and ~4% dividend yield. Banyan Tree: Recent share price weakness in February was likely compounded by the state of emergency declared in Maldives due to the political turmoil (2nd biggest market for BTH for Group-owned hotels, c.23% of FY16 revenue). Bigger picture for RevPAR recovery in Maldives in FY18 remains intact with hotel supply tapering off after 2018. Short-term drivers are continued momentum in Thai tourism, and mid-longer term catalysts are management contracts from partnerships with Accor and Vanke. |
CapitaLand: We continue to favour CAPL for its stable base of recurring income, which has been growing c.16% from 2013-2016 (operating EBIT level). Its office portfolio in Singapore continues to see a recovery in rents with Grade A office rents. It grew a further 3.3% QoQ in 4Q17 in the recent CCT results. Record 1m sqm of retail space opened in 2017 (mainly in China) should provide support for recurring income in 2018 as malls stabilise. Results to be released on 13 Feb. Our TP remains at $4.19, which is a 20% discount to RNAV.
Important Information
This report is prepared and/or distributed by Phillip Securities Research Pte Ltd ("Phillip Securities Research"), which is a holder of a financial adviser’s licence under the Financial Advisers Act, Chapter 110 in Singapore.
By receiving or reading this report, you agree to be bound by the terms and limitations set out below. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.
The information and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this report has been obtained from public sources which Phillip Securities Research believes to be reliable. However, Phillip Securities Research does not make any representation or warranty, express or implied that such information or Research is accurate, complete or appropriate or should be relied upon as such. Any such information or Research contained in this report is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith.
Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this report are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this report is not indicative of future results.
This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This report should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this report has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this report is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.
Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this report should take into account existing public information, including any registered prospectus in respect of such product.
Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this report, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this report.
Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment.
To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold an interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this report. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, which is not reflected in this report, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this report.
The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.
This report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.
This report is not intended for distribution, publication to or use by any person in any jurisdiction outside of Singapore or any other jurisdiction as Phillip Securities Research may determine in its absolute discretion.
IMPORTANT DISCLOSURES FOR INCLUDED RESEARCH ANALYSES OR REPORTS OF FOREIGN RESEARCH HOUSE
Where the report contains research analyses or reports from a foreign research house, please note:
Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.
He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.