Small Cap Offshore looking good

The offshore sector is looking good, with earnings expectations of up to 34% over the next 2 years, coupled with "efficiently priced" valuations of 7.8 times forward price-to-earnings ratio.

CIMB is bullish on the following counters:

Company	Price Target	Current PE
ASL Marine	0.85	8.7
Ezra	1.55	15.1
Swiber	0.84	10.0

Trading activity has increased lately, and I am very excited. ASL has gone 77% since Oct 2012, Ezra 36% since Nov 2012 and Swiber 21% since Nov 2012. ASL is in an established trend, whereas Ezra and Swiber are just breaking out into new uptrends. Watching closely.

DBS' picks for 2013

Themes to drive performance in 2013 : i) China offers the brightest spot,
urbanisation is the buzz word; ii) Hunting for yield + growth; iii)
Cyclicals trading on bombed out valuations

i)Beneficiaries riding on China's recovery are Midas, Capitamall Asia, Perennial China Retail Trust, Sound Global, United Envirotech and China Merchants.

ii)We focus on yield plays offering growth, either organically or via acquisitions - Mapletree Commercial Trust, Far East Hospitality Trust and China Merchants. Hutchison and
Religare offer the highest dividend yield with upside growth potential. Ezion stands out among the highest 3-year EPS CAGR of 41% in our coverage, yet trading on undemanding PE of 10x. Petra should be re-rated as a pure consumer play with a leading market position in fast growing Indonesia,
after divesting its cocoa ingredients business.

iii)Bomb out cyclicals. Higher risk appetite will drive capital inflows intocyclical stocks, ahead of recovery. NOL and Jaya are cyclical recovery plays, riding on improved freight rates, cost control measures and strategic repositioning. The worst is over for Wilmar, earnings recovering
on capacity expansion in Indonesia, improved refining margins in Malaysiawhile crushing margins have stabilised in China. Noble's earnings will rebound on healthier commodity demand and margin normalisation.

My take:
i)I am vested in Midas. The rest are too high now, while China Merchant does not look attractive.

ii)Ezion is too high. The rest, I'm not too keen.

iii)NOL, Wilmar and Noble looking good. I am watching closely.

UBS Singapore Stock Pick 2013

 

UBS has identified the following list of stocks to buy in 2013 based on at least 2 of the following criteria:

 

1)Benefits from a global cyclical recovery;

 

2)Has credible and generous dividends;

 

3)can avoid the worst of tighter domestic conditions;

 

4)can tap demand growth via operations outside Singapore.

 

Stock	Remarks	Target Price
CapitaCommercialTrust	Our pick for pure play into office exposure. We expect Grade A rents to trough in H113; +5% YOY by H213. We expect leasing-related news flow to surprise on upside.	1.71
CapitaLand	Attractive valuations: 19% discount to RNAV. New CEO from Jan 2013. If CAPL could show renewed focused on core businesses, more aggressive asset turn, less dependence on non-cash income. This could spark rerating of residential franchise. China exposure (40% of RNAV)	3.92
DBS	Attractive valuations, offers the most upside among the 3 Singapore banks in our view. While NIM margin compression remains an issue, flipside of this is benign asset quality. Greater China drag on revenue growth mostly over. Yield should offer support.	16
Keppel Corp	Strong earnings visibility: Offshore order book is robust S$14bn. Industry conditions strong, good order momentum in 2013 expected. Attractive yield. Likelihood of positive DPS surprise is high; we currently forecast 2012 DPS forecast of S$0.46.	13
Genting Singapore	Our pick of 2012 index laggards. We expect major investment negatives in 2012 to turn more positive. Benefits from cyclical recovery in Chinese economy. Pick up in stock market, easier monetary conditions are also catalysts.	1.63
Noble Group	Is the most cyclical among the Singapore-listed commodities traders. Expansionary fiscal and monetary policies are the primary catalysts for the stock.	1.6
SingTel	Singapore: Stable business environment; India and Australia fundamentals improving. Offers decent yield at reasonable valuations.	3.41
Suntec REIT	Expected to be key beneficiary for office exposure. Retail offers room for upside surprise. Well on track to achieve 10.1% ROI on Suntec City AEIs. Main risk is high gearing, but manager’s track record is good.	1.76
Tiger Airways	Turnaround story, our pick of small cap names. Recent deal to sell Tiger Australia transforms EPS outlook. Street EPS revisions have not kept up; high likelihood of consensus upgrades, market has not factored this into prices	0.88

I have done a scan of the stocks on this list, and here is my conclusion:

Stock	Remarks
CapitaCommercialTrust	Too high.
CapitaLand	Too high.
DBS	Too high.
Keppel Corp	Too high.
Genting Singapore	Nicely breaking out of base. In my watch list.
Noble Group	Nicely breaking out of base. In my watch list.
SingTel	Too stable.
Suntec REIT	Too high.
Tiger Airways	Nicely forming a base. In my watch list.

Building my 2013 Portfolio

2013 will be here soon, and I am excited, because each year, different themes come into play. For 2013, I definitely believe China will be the theme. Therefore, I will be building a portfolio mainly around China. Even Noble and Wilmar, I consider them as China plays, since commodities demand are fuelled by the Chinese.

My current portfolio:

Counter	Buy Price	Price Now	Gain (Unrealised)
Midas	0.37	0.42	13.5%

I will try adding more if stock market corrects. Of course, my portfolio will not be limited to China shares. If I spot a good opportunity in the rest of the sectors, rest assured I will jump to trigger the Buy button.

2013 Candidate # 4: Pan Utd

The fundamentals:

Recently, a brokerage recommended this stock for its good fundamentals. Although I couldn't agree less, is this stock still a good buy? Let us look at its technicals.


The technicals:

This is what I call, the "developed beautiful chart", red line (50d MA), above blue (150d MA) above green (200d MA). What a nice uptrend!

But should we buy? Too late to the party.

2013 Candidate # 3: China Minzhong

The Fundamentals:

1. Olympus Capital, a private equity fund, has sold its entire stake of 57m shares in China Minzhong through a private placement last Thursday at SGD0.80 per share. In our view, this placement is a positive for Minzhong as it removes a long-term share overhang on the company without adding too much selling pressure in the open market.

2. Management took advantage of the vendor share placement to increase personal stakeholdings. This clearly signals management’s confidence in the company’s fundamentals and the attractiveness of its share price.

3. We are looking at an average of 15% EPS growth for the next three years. As it stands, Minzhong’s share price is deeply undervalued at the current 2.9x FY13F PER. Reiterate BUY with the target price unchanged at SGD1.16.

(Source: Kim Eng)

The Technicals:As with other China stocks, I am positive on this stock. The recent selldown certainly represents a buying opportunity.

                                                                

 

However, between this and Midas,I prefer Midas. Furthermore, I was already considering buying this stock back when it was in the 50s. I will give this a miss.

 

 

 

 

 

 

2013 Potential Candidate #2: Swiber

The fundamentals:

1. The stock is trading below peer average valuations at only 5.8x FY13F PER and 0.6x P/B.
2. Orderbook in 2012 reached a high of USD1.7b YTD. Management believes it would get even better in 2013.
3. With enlarged fleet, Swiber is poised to benefit from the robust offshore sector. EPS should grow by CAGR of 18% over FY12-14.

(Source: Kim Eng)

The technicals:

A gentle but nicely developing uptrend formed by higher highs and higher lows.

Verdict: Can buy, but I would wait for correction. Note that RSI now in overbought zone.