Bulls And Bears

STI down but cash-rich small caps in focus

SunMoon Food among top active counters as investors lay low ahead of US presidential poll

Singapore joined most of South-east Asian markets to end the day on a low note although Chinese bourses resumed trading with a bang after a long Golden Week holiday.

The benchmark Straits Times Index closed down five points or 0.17 per cent at 2,870.24 while Kuala Lumpur ended flat and Jakarta shed 0.3 per cent.

In Thailand, news that the Thai King's health was unstable stirred concern, sending the SET Index down 3.15 per cent. The falls followed the 0.15 per cent drop on Wall Street last Friday. Investors are turning cautious ahead of the United States presidential election on Nov 8, an event that has historically induced volatility.

Shanghai, however, rose 1.45 per cent after the break in China. Hong Kong and Tokyo were both closed for holidays.

On the STI, 15 of the 30 constituents dropped yesterday. Thai Beverage was the top loser, down two cents or 2.01 per cent to 97.5 cents, likely due to profit-taking on the 8 per cent gain ThaiBev saw over the past month.

Property firm UOL Group closed down five cents or 0.85 per cent at $5.80, and City Developments eased six cents or 0.66 per cent to $9.07. City Developments launched Forest Woods on the weekend with buyers snapping up 337 units out of the 519 units. The project is jointly developed by City Developments, Hong Leong Holdings and TID.

There were only seven STI gainers yesterday, with Ascendas Real Estate Investment Trust leading the pack after rising one cent or 0.4 per cent to $2.49. ComfortDelGro added one cent or 0.36 per cent to $2.80.

Away from the benchmark segment, there was considerably more buzz among the small and mid-cap counters. This was partly reflected by the total market volume - about 2.21 billion shares were traded but they were worth only $610.9 million.

Among the top active counters was SunMoon Food, which shot up 3.7 cents or 54.41 per cent to 10.5 cents on 122.02 million shares transacted. The fresh fruit and dehydrated produce company is now on DBS analyst Paul Yong's radar, as the local investment community increasingly looks for safety among the cash-rich, undervalued small and mid-cap counters.

"(SunMoon) has an asset-light, consumer-centric and brand-focused business model. The proposed entry of Yiguo E-commerce, which has a strategic partnership with Alibaba, not only provides working capital for SunMoon but also fast-tracks its expansion plan in China," said Mr Yong.

SunMoon Food announced last Friday that it will place $15 million worth of new shares to Yiguo, a Chinese fresh food retailer.

On top of their low valuations and strong cash positions, counters such as Hock Lian Seng Holdings and Hai Leck Holdings are also good dividend plays, Mr Yong added.

A version of this article appeared in the print edition of The Straits Times on October 11, 2016, with the headline 'STI down but cash-rich small caps in focus'. Print Edition | Subscribe