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5 Dividend Plays In A Volatile Year
The upcoming months are going to see heightened volatility as US and China both ratchet up their trade war rhetoric. Meanwhile, prospects of the Fed’s interest rate hike are also keeping the market on its feet as it prepares for the possibility of a total of four hikes this year. According to UOBKH, investors should be turning their focus towards mid-large cap picks that are cash generative and provide decent dividend yield to help protect any price downside.
Investors Takeaway: 5 Dividend Plays In A Volatile Year
City Developments
With the largest residential landbank in Singapore, UOBKH highlights and recommends City Developments as the best proxy to Singapore residential recovery. Residential properties make up almost 40 percent of City Developments’ gross asset value. With rising asset prices, revalued net asset value (RNAV) of City Developments could be re-rated, especially when positive data points to rising residential property prices.
BUY, TP $14.03; Current Share Price $11.30
Sunningdale Tech (Sunningdale)
Since peaking at an all-time high of $2.36 late last year, Sunningdale’s share price has been on a downtrend, correcting more than 50 percent from the top. UOBKH opines that investors have been shaken by its weak 1Q18 performance that was further exacerbated by forex losses. However, moving forward, UOBKH expects a seasonally better 2Q18 and potential forex gains arising from the 1.9 percent appreciation of the US Dollar against the Singapore Dollar.
UOBKH notes that Sunningdale is currently trading at 0.7 times forward-FY18 price-to-book and at 8.3 times forward-FY18 price-to-earnings. Its current valuation means that it is significantly cheaper than its peers, including Memtech International. Sunningdale’s current share price is also discounted to the Chairman’s last acquisition price of $1.71.
BUY, TP $2.00; Current Share Price $1.26
CSE Global
UOBKH has identified CSE Global as a good proxy to recovering oil prices given that two-third of its existing $175 million order book come from the oil & gas (O&G) sector. CSE Global is one of the few qualified system integrator in O&G communication infrastructure in the region with a 32-year track record in a business that has high entry barriers. UOBKH notes that Serba Dinamik recently bought a 25 percent stake in CSE Global, which could open up new markets, such as Malaysia and Middle East, for CSE Global. All these puts CSE Global in a position to generate a long-term sustainable yield of 6 percent to investors at the current share price.
BUY, TP $0.61; Current Share Price $0.435
Keppel Corporation (Keppel Corp)
Among the offshore and marine sector stocks, Keppel Corp is touted to be the purest proxy to the recovery in the offshore and marine sector. UOBKH notes that Keppel Corp’s solid financials and keen interest to invest in future growth will underpin its performance. According to UOBKH, infrastructure and investments are expected to drive growth in the next few quarters. Recurring profits will also be underpinned by rising assets under management at Keppel Capital.
BUY, TP $9.00; Current Share Price $7.03
DBS Group Holdings (DBS)
DBS had a stellar 1Q18 performance with net profit exceeding consensus expectations by 12 percent. The performance was largely driven by steady growth in corporate loans and wealth management. Looking ahead, DBS management has guided for loan growth of eight percent and remains confident of attaining a return of 12.5 percent on equity in 2018. DBS remains a core holding as a growth proxy for UOBKH’s alpha picks, especially with the bank’s generous yield of more than three percent.
BUY, TP $35.50; Current Share Price $26.93
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