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4 Small-Mid Caps To Achieve Higher Growth For Your Portfolio
DBS Research has been looking at several small-mid-cap stocks due to the positive results announced in the latest quarter. In fact, according to DBS, there are “at least 16 Small-mid Caps… offering more than 10 percent earnings growth” in the FY18.
These stocks are good for investors to include in their portfolio given the upside potential, as well as limited downside risks due to their constant dividend payouts. The key to profiting from such investments is to select stocks with “clear growth catalysts”.
Another key to take note when picking stocks is to identify those that constantly pay out dividends; the dividend yield serves as a safety net for investors when stock price does not perform as well as expected. Further, according to historical trends, small-mid cap firms that pay out a steady dividend are also likely to be more resilient. Therefore, the four stocks selected below are, as DBS dubbed, “growth stocks with a dividend sweetener”.
BreadTalk Group
BreadTalk Group’s (BreadTalk) prospects remain positive due to its “continued consolidation of underperforming outlets” which has helped to improve margins in the future. Furthermore, the group can simply unlock shareholder value selling its ownership in properties CHIJMES and AXA Tower.
With its focus on driving cost down through better costs controls, rising profitability from existing stores coupled with growth driven from the opening of the new stores, BreadTalk is likely to be able to grow its profits in the long run.
DBS has given BreadTalk a Buy call, ascribing it a target price of $2.05. BreadTalk is trading at $1.91 currently.
Cityneon Holdings
The inclusion of VHE Entertainment in September 2015 was a breath of new life for Cityneon Holdings (Cityneon). The changes brought about by this change has been significant as Cityneon began focusing on innovation and interactive exhibitions, especially regarding being at the forefront of the creation of newest content. Furthermore, their exhibitions have become much more engaging as their exhibits displayed more interactive elements.
Having attained another two Intellectual Property rights for Transformer and Jurassic World, coupled with the existing Marvel Avengers, the firm now has much room for growth. As a standout in the entertainment industry, DBS expects significant growth from Cityneon in the next two years, while at the same time still trading at low valuations.
DBS has a Buy call on Cityneon with target price of $1.45. The stock is current trading at $1.09.
mm2 Asia
mm2 Asia continues to be the leader in the entertainment industry due to its extensive presence in the entire value chain. The firm has expanded from being only a producer of films and TV/online content to becoming a full-service provider, from content creation and post-production to developing distribution channels.
The firm has 18 cinemas in Malaysia and eight in Singapore, owned majority stakes in UnUsUal (concert promotion company) and Vividthree (post-production company), in mere three years since it listed in 2014.
DBS expects mm2 to reap synergistic benefits by taking advantage of the entire value chain, owing to its much larger and stronger scale. DBS expects mm2 Asia’s earnings to grow at a compound annual growth rate of 28 percent all through till FY20, and believe that growth is underpinned by growth in productions as well as its expansion into China.
DBS gave a BUY call on mm2 Asia and a TP of $0.75. The stock is trading at $0.53 per share.
Riverstone Holdings
Riverstone Holdings (Riverstone) is a market leader, focusing on the production of niche cleanroom glove. This gives the firm an edge over its bigger competitors, evident from its consistently higher margins.
In 2Q18, Riverstone will add new cleanroom facilities and production capacity is expected to grow 33 percent to produce 2 billion gloves per year. Ramping up of these new capacities should drive higher growth in cleanroom segment, allowing Riverstone to deliver earnings growth of an estimated 16 percent.
Overall, DBS has a Buy call on the stock with a target price of $1.27. Riverstone is currently trading at $1.07.
