UOB Kay Hian analysts have added Raffles Medical BSL and Thai Beverage (ThaiBev) Y92 to its alpha picks portfolio amid favourable tailwinds and upcoming near-term catalysts.
Raffles Medical is set to benefit from the Transitional Care Facilities (TCF) inclusion into Singapore’s healthcare ecosystem. With healthy margins due to its asset-light nature, contributing nearly 40% of the company’s operating profit, the TCF will help support Raffles Medical’s profit for 2023 and 2024, analyst Llelleythan Tan point out.
Meanwhile, Tan also expects ThaiBev’s spirits segment to continue its strong performance moving into 2HFY2023, as anticipated government handouts from a newly-elected government would spur consumption.
Conversely, UOBKH analysts have dropped Singtel Z74 , Food Empire F03 and Aztech Global 8AZ from its portfolio due to the absence of catalysts.
In their market review, the analysts note that global market sentiment was generally weak in May as resilient economic data, cooling inflation and strong US jobs report on June 1 decreased the likelihood of a hard landing.
While a robust conclusion to the US corporate earnings season in mid-May gave global markets a temporary boost, several rounds of inconclusive talks to the US government’s debt ceiling dragged market sentiment towards the tail end of May, with the Straits Times Index (STI) ending 3.4% lower m-o-m.
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Amid this, UOBKH’s alpha picks portfolio continued its outperformance, the analysts highlight. The portfolio was up 1.5% m-o-m in May on an equal-weighted basis, beating the STI by 4.9 percentage points. This is the fifth consecutive month that the alpha picks portfolio has beaten the STI, they add.
The portfolio’s top performers were driven by both large and small caps, primarily Delfi P34 (up 18.7% m-o-m), Sembcorp Industries U96 (up 17.5% m-o-m) and Civmec P9D (up 3.6% m-o-m).
Delfi’s outperformance was driven by record-high 1QFY2023 revenue and strong margin expansion from robust growth in Indonesian and regional markets. The analysts expect Delfi to register healthy growth in 2023 to 2025, driven by an increase in product volume and average selling prices; Indonesia’s post-pandemic growth; and gradual improvement in gross margin as it continues to gain traction in its premiumisation strategy.
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Sembcorp rose higher on the back of sustained market interest in its renewables exposure, now the best performer in UOBKH’s alpha picks portfolio (up 71% since its inclusion). Although its current share price is higher than UOBKH’s target price, the analysts are maintaining the company in its portfolio as they believe an upcoming MSCI review as well as the enunciation of the new renewables target could be share price catalysts.
Civmec benefited from higher earnings, several contract wins and robust outlook. UOBKH expects Civmec to deliver record earnings growth of 11% y-o-y in FY2023 and a potential dividend surprise given its strong balance sheet, which is backed by a strong order book.
