The Edge Investment Forum 22nd July 2017

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On a bright and sunny Saturday morning, Terence joined a crowd of more than 250 people to share his views of the local stock market in 2H17 as well as specific stock picks.

 

The local stock market was on a roll in the first quarter with the STI Index and the Catalist Index up by 10% and 19% respectively amid a flush of liquidity.  However, the second quarter was somewhat subdued.  Overall, the local market was still up in 1H17. While sceptics of the local market could remain sceptical, we believe the 3% or so growth in the global economy forward coupled with measured pace of  interest rate increase in the US and gradual QE withdrawal in Euro and Japan should still provide a favourable backdrop for asset prices.  That said, still valuations for the overall market in terms of P/E and P/B remain lower than historical average but we believe the valuations of certain counters have ran ahead of its fundamentals and we advocate investors to be more selective in 2H17 and focus on fundamentals.

 

We suggest investors pay attention to the local high-tech industry which has gone through a few rounds of M&As and the survivors which have cashed-up balance sheets and solid clientele could receive attention from international private equity players. We recommend Avi-Tech Electronics.

 

Investors could also look at selected property plays such as Chip Eng Seng and Sing Holdings which are still trading at a huge discount to their NAVs.  We noted from our discussions with property developers that are currently building up their landbanks which could be an indication that they see a recovery of the market going ahead.  The recent aggressive bidding for sites bodes well for developers which purchased land 6-12 months back at much lower prices. For privatisation plays in this sector, we are staking our bets on Wheelock Properties.

 

Other counters we are keen on include hospitality plays such as Amara Holdings and Banyan Tree Holdings. For the former, we believe a tapering of hotel room supplies going forward and the opening of the new Terminal 4 could buoy counters in this segment. For the latter, we see its partnership with the Accor Hotels Group and China’s leading property company Vanke as positive and could enhance Banyan’s brand equity. On the industrials front, we like Moya Holdings Asia, which is Indonesia’s largest municipal water treatment company.  Indonesia is one of the fastest growing countries in Asia in terms of economic growth, but yet less than 50% of its population gets to enjoy clean drinking water.

 

From: Investment team of Azure Capital