In shrinking Singapore stock market, award-winning analyst sees gems

The list features some relatively well-known names, including seafood eatery Jumbo Group, property developer Oxley Holdings, and UnUsUal Ltd, which organizes concerts.
The list features some relatively well-known names, including seafood eatery Jumbo Group, property developer Oxley Holdings, and UnUsUal Ltd, which organizes concerts. ST PHOTO: KELVIN CHNG

SINGAPORE (BLOOMBERG) - Singapore's market may be shrinking, but one award-winning stock analyst says there are still plenty of hidden jewels.

Jarick Seet, ranked Singapore's top researcher of small-cap shares by Asiamoney Brokers Poll every year since 2015, published a list this week that highlights 20 of the country's most promising smaller firms. As if to prove his point, nine of the companies he selected are as yet uncovered by his team at RHB Securities Singapore Pte.

Seet's call comes as delistings outnumber listings in the Singapore stock market for the past five years through 2018, trading volumes slump and the Catalist market for smaller shares fails to deliver returns. But he's unperturbed, saying stock-picking strategies still work for investors who are on the ground and prepared to do the research.

"There are undervalued gems around in the Singapore market" even as it shrinks, Seet, 31, said in an interview in the city-state. Good returns will come to "those who are willing to put in the time and effort."

Seet, the head of small and mid-cap research at RHB Securities, and his team picked the stocks through interviews with senior managers, company visits and fact checks. The list features some relatively well-known names, including seafood eatery Jumbo Group, property developer Oxley Holdings, and UnUsUal Ltd, which organizes concerts. Half of Seet's picks have more than S$500 million in market capitalization, with six of those surpassing S$1 billion.

LITTLE KNOWN

But he also chose some stocks that may be less familiar to investors, such as Vividthree Holdings Ltd, which produces visual effects for film-making, and UG Healthcare Corp, a maker of disposable gloves. Both have market values of less than S$75 million and few to no institutional investors.

"Big companies start from a small base" and if invested in early can deliver exponential returns, Seet said.

RHB's past stock picks include Singapore Medical Group Ltd in 2016, which tripled amid a turnaround after the brokerage picked the stock, according to Seet. Another example is precision-mold maker Fu Yu Corp in 2015, which has paid out almost all of its profit in dividends for the last four years, he said.

Seet also cited Croesus Retail Trust, which was later acquired at a premium by Blackstone Group. The trend of delisting, far from being an issue, can help stock pickers, he said.

Not all selections have been successful. For example, shares in concrete-products maker Pan-United Corp have halved since Seet mentioned the firm in his report for 2017.

This is the ninth year that RHB has issued its list. This year's picks differ, Seet said, in that the sell-off in 2018 has more than halved valuations for many companies and raised the odds of privatizations. "We also weighted more towards tech/manufacturing stocks due to expectations of a trade deal between the US and China," Seet said.

CATALIST MARKET

Singapore's Catalist market contained just under 220 companies, with an average market value of S$46 million, as of March 27. But broad investing strategies would have been disastrous. The FTSE Straits Times Catalist Index has delivered a more than 75 percent loss from a high in September 2013, while the FTSE Straits Times Small Cap Index touched its lowest in almost a decade in December.

Still, Seet is undeterred by the market's general underperformance. There are still good businesses, compelling valuations and rising privatizations, he said.