RHB Group Research analyst Jarick Seet has maintained “overweight” on the small and mid-cap sectors in Singapore.

Within the sector, Seet has identified his top picks as Food Empire, HRnetGroup, Marco Polo Marine and Frencken.

On Food Empire, Seet deems the current rising costs as just “temporary” and that the costs should taper down in FY2022.

Food Empire has also increased its prices to mitigate the cost hike, which should sustain margins in the 4QFY2021.

That said, Seet believes that FY2022’s results will better reflect Food Empire’s potential with expectations of a strong rebound in earnings.

See: From 'lockdown losers' to 'vaccine winners', small-mid caps to play catch up in 2021: DBS

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HRnetGroup is seen as a proxy for the global recruitment recovery, as hiring activities are pegged to ramp up in the next few quarters.

“We expect professional and flexible staffing to rebound strongly in FY2021. As such, the company should record a solid performance in FY2021,” Seet writes.

Marco Polo Marine’s revenue for the 9MFY2021 ended September has already exceeded its revenue for the FY2020. This, says Seet, is driven by strong growth in both its ship chartering as well as repair activities.

“Average utilisation and charter rates have already recovered to above pre-Covid-19 levels, and we remain confident about a turnaround to profitability by the end of FY2021,” he writes.

“We do expect this company to secure more contracts in the renewable energy sector (which it is pivoting towards), and believe it will also likely benefit from the increase in oil prices – which may lead to more activities in this sector,” he adds.

Amid the recovery in the economy, as well as the resumption in global travel, Seet expects consumer spending to rebound.

As such, he prefers counters that are currently trading at attractive valuations, as he anticipates fund inflows into the sector.

While not his top picks, Seet has indicated his preference for Kimly as well as UnUsUaL. With the latter, Seet estimates that its numbers should pick up when events return to Singapore.

Finally, Seet says semiconductor stocks are still viewed positively despite the recent pullback.

“Technology stocks have performed quite well in general, and the sector’s outperformance will likely continue, given the lack of chips as well as some parts across the supply chain,” he says.

“About 29 new fabrication facilities (fabs) have been planned for construction in the next few years, which should ensure high demand for equipment,” he adds.

As such, he remains upbeat on semiconductor supply chain beneficiaries such as Frencken.

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On the counter, Seet estimates Frencken’s new acquisition will see revenue contributions grow over the next few years from a semiconductor customer that is a major player in the US, but has operations in Singapore.

Photo: Bloomberg