atans1

A broker who almost got it right

In Economy, Investments on 12/08/2011 at 9:21 am

In late January 2011, I posted this giving the views of UOB Kay Hian. It argued investors will be best served by having a balanced portfolio comprising firstly of counters that promise high and sustainable dividend yields.

S’pore equities: Can’t argue with this safety first approach

In Economy, Investments on 20/01/2011 at 5:31 am

UOB Kay Hian says that with the prospect of slowing economic growth and reasonable stock market valuations in 2011, investors should balance their portfolio with a combination of high-yielding large-cap and mid-cap counters that offer a higher margin for growth.

Despite the moderate earnings [8%} outlook for Singapore compared with its regional peers, we think Singapore’s safe haven status will continue to attract selective investor interest amid the uncertain external outlook.

Investors will be best served by having a balanced portfolio comprising firstly of counters that promise high and sustainable dividend yields.

These would be local telcos StarHub and M1, along with real-estate investment trusts K-Reit, Sabana Reit and CapitaCommercial Trust.

And’laggard’ large-cap stocks that offer good growth prospects eg. the banks. Its top pick in this segment is OCBC, followed by DBS. (I prefer Haw Par because of its stake in UOB).

Investors should also be on the lookout for the so-called Garp (growth at a reasonable price) stocks in both the mid-cap, like  Ezra and Ezion, CDL Hospitality Trusts, First Resources and Super Group, and large-cap space.

Its ‘sell’ calls include Keppel Corporation, SingTel, Tiger Airways and CapitaLand. Surprised abt Keppel call because the offshore marine sector is looking gd, what with firm oil prices and offshore projects in Brazilian waters.

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  1. Singapore shipyards are a little stuck and I fear they may be at the end of their run after this upcycle. They may have to return to their staple diet of providing ship-repair services which takes advantage of our geographical location. Historically, our yards have only been rig builders back in the late’70s/early ’80s after which they went into the doldrums. Only around 2003 did they start getting back into the market in earnest.
    At the lower end of the rig newbuilding market, you have jack-up rigs. Keppel have good, proven designs, but the Chinese and MidEast yards are already in this game, and are offering good prices and very very good financing (one Chinese yard recently won a JU order on the back of 1/99 payment terms!). At the top-end of the market you have drillships, and this cycle has cemented these as the deepwater rig of choice over semis (which our yards can build). The Korean yards have an absolute monopoly on drillships, and our yards simply dont have the steel production capacity to compete cost effectively. Sure there are other “high-end” offshore units such as FPSOs, but the shipyard scope of work for this is very limited and decidedly low-end (no engrg, no procurement, just supply manpower and materials). Others like seismic/installation vessels are a much smaller market. Keppel and SembMar have expanded overseas, but those Brazilian contracts for newbulds are very very tricky – the client (essentially Petrobras) are asking for lumpsum, turnkey contracts, with stringent local-content requirements, so all the risk is on the yard if they are overbudget/late/cant meet requirements. Inflation in the offshore industry in Brazil is rampant, so very very difficult to control prices.

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