Small-cap jewels may offer good growth, returns: RHB

Moya Holdings Asia managing director Irwan Atmadja Dinata, seated with representatives from select SGX-listed small-cap firms, speaking to reporters at the RHB conference yesterday. The firms have a market cap of less than $2 billion.
Moya Holdings Asia managing director Irwan Atmadja Dinata, seated with representatives from select SGX-listed small-cap firms, speaking to reporters at the RHB conference yesterday. The firms have a market cap of less than $2 billion.ST PHOTO: LIM SIN THAI

Research house picks 25 counters on SGX, including those which offer good dividends

Research house RHB has offered some pointers to investors here looking for a slice of the action in the local bourse's region-beating run-up so far this year.

At a conference yesterday, RHB singled out some well-run companies offering good returns - often at bargain values - among firms with smaller capitalisations on the Singapore Exchange (SGX).

The 25 counters it identified include those in growth sectors such as healthcare firm TalkMed Group, while others such as Avi-Tech Electronics and Accordia Golf Trust are good picks for attractive dividends.

Management figures of the companies attended the RHB conference on small-cap firms - those with a market cap of less than $2 billion.

TalkMed provides oncology-related healthcare services with 13 doctors across nine clinics here. Chief financial officer Edwin Lee said management hopes to see its 30 per cent-owned Hong Kong Integrated Oncology Centre break even soon.

The loss-making investment was a drag to earnings last year when TalkMed was still able to generate $37 million in net profit. RHB believes earnings from TalkMed's associates will turn around next year, and gives it a $2.07 target price owing in part to its track record of paying more than 80 per cent of earnings as dividends.

Avi-Tech Electronics, which focuses mainly on burn-in services for automotive semiconductors, is also a good dividend stock, it said.

RHB noted that the company may pay out a special dividend to bring the financial year 2017 yield to 7.5 per cent to 10 per cent.

It has seen a quick turnaround since 2015 from heavy losses incurred by overseas investments outside its core business. In the year to June last year it reported $6 million of net profit.

"Today we focus on our core of semiconductor burn-in, and we've been profitable since 2015… We've been paying out an average 50 per cent (of earnings) dividend," chief executive Lim Eng Hoong said.

"Our outlook is one of steady growth in the next five to 10 years, as the automotive industry embraces disruptive technologies and electronics. Our balance sheet is also strong, meaning we can pay dividend and look at potential merger and acquisition opportunities."

Accordia Golf Trust, with a 9 per cent yield, is another hidden gem in the small-cap segment. The trust has 89 golf courses in Japan, trust management chief executive Yoshihiko Machida said.

"Our sponsor still owns 44 golf courses, and we have exclusive call option to acquire 18 of them when they are made available," he added.

These companies are part of the local market that has outperformed its regional peers, SGX client development and relationship head Lynn Gaspar said at the conference.

"As of mid-April this year, the FTSE ST Small Cap Index averaged a 8.5 per cent year-to-date total return, more than double that of the 3.4 per cent return on the regional FTSE Developed Asia Pacific Small Cap ex-Japan Index."

A version of this article appeared in the print edition of The Straits Times on April 19, 2017, with the headline 'Small-cap jewels may offer good growth, returns: RHB'. Print Edition | Subscribe