Big Ticket Picks For Alpha Returns (Part 1)

If you are looking for some alpha performance this year, then here are four alpha picks from UOB-Kay Hian (UOBKH) you cannot miss.

Investors Takeaway: UOBKH’s Four SG Alpha Picks For 2018

1. City Developments

City Developments is UOBKH’s top pick to ride on the Singapore residential recovery. City Development has more than 40 percent of its assets in residential properties. Right now, City Developments has the largest residential landbank of 2,090 attributable units.

Another possible catalyst is the rotational interest following Global Logistic Properties’ (GLP) privatisation. Upon GLP’s privatisation, City Developments could see its standing in the STI raised.

BUY, TP $14.03 (Current share price: $13.29)

1. CDL Hospitality Trusts

cdl htrusts

Recovery in corporate travel, Chinese visitor growth and tight supply pipeline of hotels are the underlying fundamentals that will drive CDL Hospitality Trusts’ hotel operations. UOBKH notes that hotel room supply is limited beyond 2017, with only 1,139, 1,465 and 392 rooms coming on stream in 2018, 2019 and 2020 respectively. This is compared to 1,532 new rooms in 4Q17 alone. As such, UOBKH is positive on CDL Hospitality Trusts.

BUY, TP $1.88 (Current share price: $1.82)

1. Keppel Corporation

Keppel Corporation (KepCorp) has been embroiled in the corruption scandal in Brazil, which led to a series of legal actions. KepCorp eventually reached a global resolution with criminal authorities in the United States, Brazil, and Singapore. This led to a fine of US$422 million to the authorities.

However, UOBKH argues that the financial impact on Keppel Corp would be limited, given that it would be substantially offset by KepCorp’s disposal gains. UOBKH believes that net gearing is expected to fall to 45 percent in 2018 despite the large cash outflow from the fine. This is due to the substantial cash inflow from its Keppel Cove divestment.

BUY, TP $8.75 (Current share price: $8.59)

1. Singapore Airlines

sia

Singapore Airlines (SIA) is showing early signs of passenger yield improvement, according to UOBKH. While SIA has yet to release data on yields, Taiwanese carriers have reported 5 to 9 percent year-on-year increase in passenger yields for October and November. This is a sign that yield environment for Asia Pacific carriers is improving. In addition, SIA’s load factors in October and November were the highest in eight years, which showed that demand is strong.

UOBKH also notes that ongoing cargo recovery will aid profitability. Cargo load factors in October and November last year were at the highest levels in the past 12 years. Coupled with a recovery in cargo yields, UOBKH is confident that this should lead to a strong 3Q18 earnings.

BUY, TP $11.90 (Current share price: $11.34)