Five other notable stocks to watch this year

Analysts have identified Chinese tourists as the key to a full recovery of the tourism sector in Asean, including Singapore. As China rolls back its Covid-19 restrictions, retail properties along the Orchard Road belt, including LREIT’s 313@somerset, stand to benefit. LREIT is also invested in developing a multifunctional event space on a site close to 313@somerset.

On a portfolio basis, LREIT’s tenant sales continued to surpass pre-Covid levels for its 1QFY2023 ended September 2022, with sales at 313@somerset surging to about 125% of pre-pandemic levels during the quarter.

With the 100% acquisition of Jem in February last year, LREIT’s exposure to the resilient suburban retail sector has increased. Jem is located on Jurong Gateway Road, close to Jurong East MRT Station on the North-South and EastWest Lines, and Jurong East Bus Interchange. Jem has a committed occupancy of 100% and has a well-balanced tenant mix with quality tenants such as Ikea, FairPrice Xtra, Don Don Donki and Cathay Cineplexes.

Since adding this property to its portfolio, LREIT has expanded its presence in the suburban retail market, which showed resilience even during the pandemic when shoppers frequented malls closer to their homes for necessities. With hybrid working arrangements becoming the norm, this resilience will continue through 2023.

See also: Why Genting Singapore and Q&M Dental are undervalued

On the environmental, social and governance (ESG) front, LREIT has achieved its net-zero carbon target ahead of its original target. It is expected to meet its sustainability performance targets under its $960 million in sustainability-linked loans and $216 million of sustainability-linked derivatives. This is expected to generate net interest savings for LREIT’s unitholders.

LREIT was also recognised among the top Asean Asset Class publicly listed companies in the 2021 Asean Corporate Governance Scorecard (ACGS), turning in an outstanding scorecard for its robust and exemplary corporate governance practices. Recipients in this category scored 97.5 or more points out of a maximum of 130 points.

Yangzijiang Shipbuilding (Holdings)

See also: High time for telcos Singtel, StarHub and M1 to consolidate?

Yangzijiang Shipbuilding (Holdings) or YZJ was beaten down in the first week of the year, following news of a winding up of the application on one of its subsidiaries. The company later clarified that the claim was for just US$4.8 million ($6.3 million) and is contesting the claim. As a result, analysts have flagged that the share price’s weakness could present a buying opportunity, given how the long-term prospects remain bright with a sizeable order book and the company’s ability to diversify into building new vessels.

Operationally, the company’s vessel construction and delivery are on schedule, while margin improvement trends should sustain in 2023 with the delivery of higher margin orders secured from 2021. YZJ also boasts a record-high order backlog of over US$10 billion, which will boost earnings visibility through 2025, putting off concerns of shipbuilding orders tapering off.

In September last year, YZJ entered a technical assistance and licence agreement with French naval engineering company GTT, enabling the company to start building large liquefied natural gas (LNG) carriers. It became China’s first active private shipyard to obtain the GTT license to construct vessels using GTT Mark III membrane technologies.

As a result, the company’s continued headway into the LNG carrier market with its order win for two units of 175,000 cubic metres of LNG carriers in October 2022 could also be poised to rerate higher.

The order win also marks a significant breakthrough in accelerating YZJ’s clean vessel transformation, with ESG advancements a possible growth driver. YZJ has made notable progress, with around 40% of its order book coming from clean energy vessels. Meanwhile, an ESG committee, comprising senior management and external advisors, has been set up to build a more structured ESG management system.

Emperador

Less than two months after Emperador’s secondary listing on the Singapore Exchange (SGX) on July 14 last year, the leading brandy and whisky group from the Philippines displaced homegrown land transport giant ComfortDelGro as a constituent of the benchmark Straits
Times Index (STI).

To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section

Emperador has performed better than Nio, the Chinese electric vehicle manufacturer that similarly listed by introduction on the SGX last year. Emperador’s share price has increased 10% from its opening price of 43.5 cents.

Last December, the group increased its public float to 20.1%, up from the 15.7% reflected at the end of September, in view of the robus investor appetite for shares in the company, which it attributes to its dual listing on the SGX.

Emperador’s bid to build a global portfolio with a clear brand-focused strategy has seen it emerge as a fast-growing global disruptor in spirits in more than 100 countries across six continents. Since 2014, the company has made international acquisitions such as those of the fifth-largest scotch whisky maker Whyte & Mackay, and Bodegas Fundador, the biggest and oldest brandy maker in Spain.

With the group’s offerings already well received in Europe, Emperador is also seeing progress in its expansion into the Middle East and China, thanks to its Asian identity. Meanwhile, its own label has also seen success, with the sales of Emperador Brandy growing by 28% y-o-y in North America last year due to the increased distribution, visibility and availability of the group’s products.

We expect Emperador’s internationalisation in high-growth markets to continue improving the company’s margins in 2023.

Banyan Tree Holdings

The imminent return of Chinese tourists this year will surely be a shot in the arm for Banyan Tree Holdings, which had already reversed into the black for its 1HFY2022 ended June 2022, by refocusing its efforts on a global expansion.

Having lost out on its previously steady stream of Chinese visitors to its hotel brands over the past three years, Banyan Tree took the lull in tourism to double down on increasing its operating footprint over the next few years. Across the eight brands and two brand extensions in its portfolio, Banyan Tree operates 62 properties globally. It is expected to cross the 100-hotel mark in the next three to four years based on the number of signed contracts in its pipeline.

Most of these properties will be part of the company’s asset-light model through which the company manages hotels owned by other investors, which means that the capital required for hotel development will come from its owner, not Banyan Tree. For example, CDL Hospitality Trusts (CDLHT) recently announced that Sanctuary Sands Maldives, a wholly-owned subsidiary of CDLHT, had renewed its lease agreement with Maldives Bay, a subsidiary of Banyan Tree Holdings, for its Angsana Velavaru resort, until 2032.

Banyan Tree’s asset-light model could prove to be a prudent expansion method given the current economic climate of expensive money. The possibilities of asset write-downs and soaring debt costs will help the company scale its operations up more quickly without incurring high capital costs.

Meanwhile, the company’s flagship property in Singapore, whose opening was initially slated for this year but postponed to 2025 due to the pandemic, should also drum up investor interest. First announced in 2019, the 338-room resort is meant to be part of Mandai Wildlife Reserve, providing visitors to the new eco-tourism hub “unprecedented yet sensitive access to nature”. The reserve will include the Singapore Zoo, Night Safari, River Wonders, Bird Paradise and Rainforest Wild when completed.

Raffles Medical Group

In the healthcare sector, we expect to see Raffles Medical Group continue the earnings improvement shown over the past year as travel flows recover to pre-pandemic levels and medical tourism makes a comeback.

In its 3QFY2022 ended September last year, the company reported that foreign patients had started to return to Singapore to seek treatment at Raffles facilities, including the RafflesHospital, RafflesMedical and RafflesDental branches. Singapore residents who had earlier postponed their elective surgeries also returned for treatment. Meanwhile, RafflesChinaHealthcare will benefit from the relaxation of travel restrictions in China as its borders reopen.

For the period, Raffles Medical posted revenue of $199.5 million, up 6.5% y-o-y. Better cost control and deployment of manpower, lower inventories and consumables used, and a reduction in purchased and contracted services resulted in a significant earnings growth of $38.3 million, 62.1% up y-o-y. As at September, its year-to-date earnings had grown 57.3% to $98.2 million.

Since reporting consecutive record sets of earnings that beat analyst expectations over the last half year, Raffles Medical has seen share price growth of around 25%.

As the pandemic situation improves, Raffles Medical anticipates that Covid-19-related services will be tapering off. Based on current conditions and barring unforeseen circumstances and the emergence of more virulent or infectious strains of the Covid-19 virus, we expect the company to maintain its streak of profitability.