SAVE & INVEST PORTFOLIO SERIES

Panellists' rationale for stocks selection

Tomorrow, these shares will be "bought" for Ms Chee's simulated portfolio:

COMFORTDELGRO

There has been a reduction in bus and train fares by up to 1.9 per cent from the end of last year for a one-year period to reflect lower energy costs.

The fare cut will have a negative impact on ComfortDelGro's near-term growth, at least this year, mainly through its approximately 75 per cent exposure in SBS Transit and as the operator of the Downtown Line.

But the fare cut will have marginal impact on ComfortDelGro due to its diversified revenue generated across multiple geographical locations.

Sats has raised productivity by adopting new technologies and driving economies of scale. It is also growing into adjacent businesses and geographies.

The target price is $2.99. We like the company for its stability and diversified revenue stream.

OCBC

 Traditionally, banks and financial firm stocks rise in tandem with increased interest rates.

This is because higher rates allow financial institutions to earn from the interest spread, which is their core business. 

Local banks DBS, OCBC and UOB are all fundamentally strong stocks that stand to gain from the rate hikes.  

OCBC looks the best of the three with its higher liquidity and excellent contribution from Great Eastern and Bank of Singapore. 

Fee and commission income was $408 million for the third quarter of last year, with wealth management, loan and trade fees being the largest contributors.

Net trading income, primarily treasury-related income from customer flows, increased to $196 million from $113 million in the same period a year earlier.

RAFFLES MEDICAL

There is a positive long-term growth outlook for Raffles Medical on the back of its new Singapore projects - Holland Village Medical Centre and the new hospital extension which is expected to be operational next year.

It is believed that the group has the potential to transform into a strong regional competitor, given that it is in the process of finalising two hospital investments in China.

Raffles Medical also announced it had acquired a 55 per cent stake in International SOS (MC Holdings) through a joint venture for US$24.5 million (S$35.3 million). There are 10 clinics in this joint venture - six in China, three in Vietnam and one in Cambodia.

Sales growth for the third quarter of last year came in lower at 7.4 per cent year-on-year while it expanded 8 per cent in the first six months ended June 2015.

Raffles Medical offset the tapering in international patient volume from Indonesia by expanding services as well as focusing on higher revenue intensive procedures.

We expect revenue growth in the fourth quarter to improve to 12 per cent year-on-year on new capacity/services.

SATS

Flight service provider Singapore Airport Terminal Services (Sats) offers value and it continues to remain Asia's leading provider of gateway services and food solutions. Its latest quarterly results showed that net profit was 26.8 per cent higher year-on-year, while earnings per share rose 28.6 per cent, attributed to favourable operating expenditure and growth in revenue from the gateway services segment.

It maintains strong free-cash flow and distributes more than 3.5 per cent annual dividends.

Long-term growth prospect remains favourable in the aviation and food services in Asia.

Sats has raised productivity by adopting new technologies and driving economies of scale. It is also growing into adjacent businesses and geographies, for example, in its latest offer to buy a 49 per cent equity stake in Brahim's Airline Catering Holdings.

SINGAPORE EXCHANGE

The company reported a 3 per cent quarter-on-quarter increase in net income and a 28 per cent surge year-on-year in its latest results. Derivatives such as Nikkei 225 and iron ore contracts were strong, although securities revenue rose marginally amid a decline in average clearing fees.

SGX offers a value proposition with steady dividends and stable revenues with low balance sheet risks. The good mix of major contracts such as Nikkei, Nifty and FTSE A50 should continue to contribute to the stability of the top line.

In addition, the company is positioned structurally well to benefit from the development of the Asian capital market.

SINGAPORE TELECOMMUNICATIONS (SINGTEL)

Singtel reported group revenue of $4.18 billion, down about 3 per cent year on year, and an underlying net profit of $974 million, down 0.5 per cent, in the three months to Sept 30 last year.

The main cause of the decline was due to forex and not business operations. Core operations were stable, with growth in mobile data services and higher revenue from digital services.

With the potential entry of a fourth operator in Singapore, Singtel is more resilient compared with its two peers in defending market share. 

Singtel introduced "SIM Only" plans in September last year. Enterprise revenue rose 3 per cent year on year, supported by higher infocomm technologies and Internet revenue.

 
A version of this article appeared in the print edition of The Sunday Times on January 17, 2016, with the headline 'Panellists' rationale for stocks selection'. Print Edition | Subscribe