RHB Group Research analyst Jarick Seet has maintained his ‘overweight’ rating for small-cap and mid-cap Singapore stocks on the back of continued recovery prospects and a strong outlook for the semiconductor sector.

His top picks for small- and mid-cap stocks are Food Empire Holdings and HRnetGroup. Both stocks are rated ‘buy’ with target prices of $1.27 and 72 cents respectively.

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Food Empire remains a top pick as an undervalued consumer play. Seet points out that the stock is one of the cheapest in consumer staples, with Food Empire currently trading at 11 times FY2021 P/E, well below peers that are trading between 20 - 30 times P/E. He also points out that privatisation may be a possibility given that the stock is undervalued, along with more share buybacks by management.

For HRnet, Seet sees the company’s performance tied to expected global economic recovery. Seet believes that the downtrend in economic growth will bottom out by 1H2021, in tandem with vaccine rollouts and a subsequent improvement in employment.

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Seet highlights that HRnet has continued generating positive cash flow throughout the tough Covid-19 environment and has $333 million of net cash, equivalent to 50% of its market cap. He sees the company run more efficiently to its global peers, many of which are running at a loss.

For the semiconductor sector, Seet’s top picks are Frencken Group and Fu Yu Corporation. Both stocks are rated ‘buy’ with target prices of $1.52 and 33 cents respectively.

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Seet expects the semiconductor industry to continue outperforming estimates this year, driven by economic recovery and growth in the automotive sector. 

“Our top picks are Frencken and Fu Yu Corp, as we turn more selective on the technology space,” he says.

As at 9.36am, shares in Food Empire, HRnet, Frencken and Fu Yu Corp are trading at 90 cents, 67 cents, $1.54 and 30.5 cents respectively.