CIMB Research is highlighting its most preferred stocks from various sectors which it thinks could benefit from the strategies set by the Singapore government for the long term, following yesterday’s release of the long-awaited Committed on the Future Economy (CFE) report.
In a Thursday note, CIMB analyst Lim Siew Khee notes that most of the recommendations are already in the midst of being implemented, and the only new thing gleaned by the research house was a review of the tax structure’s competitiveness.
The tax system should remain broad-based, progressive, and fair. It should be more competitive and pro-growth. Having one of the lowest corporate tax rates (17%) in Asia (average: 22%), we doubt there will be significant tax cuts for the corporates but we expect more tax breaks to tide us over the challenging environment in the short-term,” says Lim.
The research house’s top “add” picks comprise SingPost, ST Engineering and Venture Corporation at target prices of $1.76, $3.75 and $10.29 respectively Lim is optimistic on SingPost given its intentions to expand and enhance its e-commerce logistics capabilities in the ASEAN region, Australia, and New Zealand. The analyst also believes the stock’s partnerships Alibaba and Lazada should also help to increase volumes quickly.
Logistics is a key sector to tap on Asia’s rising middle class and the growth of e-commerce… Conversely, retail sector and industrials need to acquire new capabilities and upgrade skills. We have a ‘neutral’ call on the capital goods and retail REITs,” explains Lim.
On the other hand, she highlights ST Engineering as a key beneficiary of the government’s Smart Nation vision, which the research house is convinced will give way to heightened demand for data centres, data analytics, ICT and cybersecurity.
This is particularly applicable to ST Engineering’s subsidiary ST Electronics, which makes up about 30% of the group’s CY17F profit before tax (PBT), while noting that the group’s net cash stood at $262 million including investments in bonds.
Lastly, Venture has been chosen as it is in the midst of pursuing new opportunities in the medical technology, life sciences and 3D printing fields, which is also in line with the overall Smart Nation approach. While CFE guided for 2-3% average growth over the next 10 years, Lim believes this is “nothing new” and thinks the upside of this guidance is still “very much dependent on the global economy”.
As at 11.25am, shares of SingPost, ST Engineering and Venture are trading at the respective prices of $1.48, $3.39 and $10.29.
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