UOB Kay Hian (UOBKH) analysts have added Marco Polo Marine 5LY and RH Petrogas T13 to its alpha picks portfolio for October 2023, in anticipation of higher utilisation rates and near-term drilling upside potential for each respective stock pick.
The brokerage firm has also removed Delfi and LHN Group due to a lack of near-term catalysts. Yangzijiang Shipbuilding is also off the list as UOBKH’s analysts expect a quiet period for new orders.
UOBKH’s alpha picks portfolio “overcame weak investor sentiment in September”, beating the Straits Times Index (STI) by 4.7 percentage points (ppt) on a market cap-weighted basis and 0.4 ppt on an equal-weighted basis. According to the report dated Oct 2, the portfolio has outperformed the STI in 17 out of the past 19 months.
The analysts note that the weakness in near-term investor sentiment resulted from hawkish US Fed comments regarding a final interest rate hike in 4Q2023 and “higher for longer” rates to combat inflation.
“An impending US government shutdown did not help risk sentiment, especially with Singapore’s industrial production contracting sharply in August, which led to downgrades to Singapore’s gross domestic product (GDP) outlook and the STI falling 0.5% m-o-m in September,” they add.
This broad-based outperformance is driven primarily by Sea, Bumitama and ComfortDelGro C52 , in which the stocks saw m-o-m growths of 14.6%, 3.6% and 2.4% respectively.
The analysts explain that Sea recovered from a massive selldown in August, after the announcement of its decision to accelerate ecommerce investments in growth, which was later backed by several positive developments in key markets. Bumitama benefitted from the official news of El Nino in Australia that may lead to higher crude palm oil prices, while ComfortDelgro was supported by better sequential earnings performance.
On the other hand, UOBKH’s “underperformers” were mainly industrial picks, which suffered from heavy profit taking, say the analysts. These include Seatrium (-7.6% m-o-m), CSE Global 544 (-6.2% m-o-m), and Sembcorp Industries U96 (-4.9% m-o-m).
“However, all of our industrial picks have still outperformed since their additions to our alpha picks portfolio and remain our best performers to date,” they add.
UOBKH’s analysts have named 14 companies for their October Alpha picks. This includes Bumitama, Sea, Civmec P9D , CSE Global, CapitaLand Ascott Trust HMN , OCBC, Mapletree Industrial Trust ME8U , Keppel Corp, Sembcorp Industries, Seatrium, RH Petrogas, Thai Beverage Y92 , ComfortDelGro and Marco Polo Marine.
