SINGAPORE (Oct 7): Property group Hongkong Land has climbed into KGI Securities' high dividend watchlist after a recent sell-off, as the research house made "key changes" to its watchlist.

“[Hongkong Land’s] current price is too cheap to ignore,” says analyst Joel Ng in a report on Monday. “HKL offers a 4.1% forward dividend yield and trades at a massive 66% discount to its book value, the cheapest valuation it has traded at in more than 10 years.”


A member of the Jardine group, Hongkong Land’s latest 1H19 earnings came in 63% lower at US$411 million ($568 million) from US$1.1 billion in 1H18, while revenue fell 46% y-o-y to US$803.9 million. An interim dividend of 6 US cents was declared.

See: Will Hongkong Land be able to withstand weakening office space demand?

Apart from Hongkong Land, KGI believes that United Overseas Bank (UOB) is one to watch among the local banks.

“Among the three banks, UOB offers the best combination of 4.9% dividend yield and reasonable valuations compared to its peers. Although the banks are likely to see limited upside given the twin headwinds of slowing economic growth and declining interest rates, we expect their share prices to be well supported at current levels by their dividend yields,” Ng says.

DBS, however, has the highest dividend yield forecast of 5.0%, while OCBC has a dividend yield forecast of 4.7%.

In the telecommunications industry, KGI likes NetLink NBN Trust. “NetLink NBN Trust is perhaps the most defensive among the telco-related companies while still offering growth potential from StarHub’s migration to fibre and participation in Singapore’s Smart Nation initiatives,” says Ng.

To be sure, UOB Kay Hian also has a “buy” recommendation on NetLink NBN Trust, with an increased target price of $1.01.

In a Monday report, UOB Kay Hian lead analyst Chong Lee Len says, “NetLink is a clear beneficiary as Singapore races towards 5G roll-out. We prefer NetLink over incumbent telcos in this technology race. Good earnings visibility and cashflow prowess pave the way for a sustainable dividend yield of 5.6% for FY20-21.”

Meanwhile, KGI likes ST Engineering in the industrial space for its diverse business segments spanning defence, aerospace, marine and electronics.

Currently, ST Engineering is trading about 11% lower than its 52-week high of $4.32. And KGI believes that this offers an attractive opportunity to “accumulate”. The stock has a dividend yield forecast of 4.0%.

In its latest 2Q19 results, the group saw earnings of $138.2 million, or 4.43 cents per share, some 18% higher than earnings of $117.5 million a year ago, mainly attributable to the contribution of the group’s newly-acquired MRA Systems (MRAS) as well as the absence of MTN redemption related costs incurred last year.

See: New acquisition boosts ST Engineering's 2Q earnings to $138 mil as order book hits record high

2Q19 revenue climbed 8% to $1.78 billion, led by contributions from MRAS, which was consolidated under its Aerospace sector’s Engineering & Material Services business group from mid-April.

Additionally, the group’s order book as at end-June stood at a record high of $15.6 billion.

Overall, Singapore Press Holdings (SPH) and Singtel holds the top spot for highest dividend yield forecast of 5.8% on KGI’s high dividend watchlist, followed by NetLink NBN Trust at 5.5% and DBS at 5.0%.