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UOBKH adds Centurion, Civmec, SIA Engineering to June’s alpha picks; removes CDG, MPACT, YZJ, Riverstone

Ashley Lo
Ashley Lo • 4 min read
UOBKH adds Centurion, Civmec, SIA Engineering to June’s alpha picks; removes CDG, MPACT, YZJ, Riverstone
SIA Engineering as a good proxy to ride the Changi Airport flight activity recovery and benefits. Photo: Bloomberg
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UOB Kay Hian’s (UOBKH) alpha picks portfolio for the month of May has outperformed the benchmark Straits Times Index (STI). The brokerage’s portfolio rose by 3.8% m-o-m on an equal-weighted basis, beating the STI by 2.5 percentage points (ppts). On a market-weighted basis, the alpha picks portfolio increased by 4.6% m-o-m, beating the benchmark index by 3.3 ppts. 

The STI grew by 1.3% m-o-m in May due to the strong conclusion from the US corporate earnings season. This may have resulted in “positive” investor sentiment, which drove the markets to record highs in the early half of May, note the UOBKH analysts. That said, further gains were offset by sticky inflation data and stronger-than-expected economic data, increasing the likelihood of delayed interest rate cuts. 

May’s results mark an outperformance for four out of the past five months for UOBKH’s alpha picks portfolio.

In its June 3 report, UOBKH attributes its overall outperformance in May to its top performers, Yangzijiang Shipbuilding (YZJ) and Riverstone. Due to positive order book momentum, shares in YZJ saw a sharp increase of 29.5% m-o-m. Additionally, shares in Riverstone increased by 20.1% resulting from its declaration of a surprise interim dividend and better sequential earnings. 

At the same time, Sembcorp Industries U96 -

(Sembcorp)  and ComfortDelGro C52 - (CDG) underperformed. Shares in Sembcorp fell by 5.2% m-o-m due to profit-taking while CDG’s shares fell by 4.2% m-o-m from a “soft” business update for the 1QFY2024 ended March 31.

However, Sembcorp and CDG have performed well to date since their additions within UOBKH’s alpha picks portfolio. Sembcorp shares have risen by 73.0% while shares in CDG have improved by 10.3%.

See also: Brokers' Digest: Marco Polo Marine, APAC Realty, ComfortDelGro, MPACT, First REIT, ThaiBev,

Add Centurion Corp, Civmec P9D -

and SIA Engineering

For its June 2024 portfolio, UOBKH has added Centurion Corp following its potential to continue seeing upward rental reversions this year backed by positive industry trends. The team has also included Civmec for its possible stronger earnings from increased order wins and expects SIA Engineering to benefit from an improved outlook and earnings recovery. 

Analyst Adrian Loh has kept his “buy” call on Centurion Corp with a target price of 77 cents with the company’s positive 1QFY2024 business update which saw a 31% y-o-y revenue increase in its key purpose-built workers’ accommodation (PBWA) segment. This resulted from its Singapore assets which saw slightly higher occupancy rates. Additionally, Centurion Corp saw stronger accretion from healthy rental reversions achieved in 4QFY2023. 

See also: Haw Par trading below historical book value, CGSI highlights in unrated report

“With its ability to pass on inflation and higher costs, it would appear that profit margins have easily been maintained or even expanded, in our view,” says Loh. 

Analysts John Cheong and Heidi Mo have also kept their “buy” call on Civmec with a target price of $1.23 following the company seeing increasing opportunities for maintenance works due to new maintenance facilities which translates to more recurring earnings. In May 2024, Civmec announced a significant increase in maintenance projects which include notable clients such as Iron Bridge JV with their new Port Hedland maintenance and workshop facility. This new project enables the company to better serve existing clients and capitalise on the higher activity levels in the west coast, add the UOBKH analysts. 

Cheong and Mo also note the Civmec’s ongoing expansion of a new Queensland maintenance hub in Gladstone which could bring about more maintenance growth opportunities in the east coast. 

Additionally, analyst Roy Chen has kept his “buy” call on SIA Engineering with a target price of $2.70 with the company’s positive outlook and earnings recovery. The analyst views SIA Engineering as a good proxy to ride the Changi Airport flight activity recovery and benefits following an increased MRO service demand. This is attributed to the post-pandemic recovery of flight activities and the potential of airlines keeping their older fleets for longer due to expected delays in new aircraft deliveries by Airbus and Boeing related to supply chain issues, says Chen. 

Furthermore, the analyst notes that SIA Engineering’s 49%-owned Eagle Services Asia, a JV with engine OEM Pratt & Whitney (P&W), is set to benefit from P&W’s recall of 3,000 geared turbofan (GTF) engines for earlier-than-expected inspections for possible defects. 

Taking these factors into consideration, Chen anticipates a 68% y-o-y earnings growth for the company in FY2025.

CDG, MPACT, YZJ and Riverstone removed

The team’s June 2024 portfolio also marks the removal of CDG, Mapletree Pan Asia Commercial Trust N2IU -

(MPACT), YZJ and Riverstone. However, the team takes profit on CDG, YZJ and Riverstone which increased by 10.3%, 35.7% and 35.6% as these picks have performed well since their additions. 

As at 3pm, the STI is trading at 10.22 points higher or 0.31% higher at 3,346.81 points. 

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