Investor conference highlights small cap firms with big promise

SINGAPORE - The local stock market has a range of good choices in the small cap segment that can give investors exposure to well-run companies and good returns often at bargain values.

These include companies in growth sectors such as healthcare company TalkMed and water treatment company Moya Holdings Asia, while counters like Avi-Tech Electronics and Accordia Golf Trust are expected to table attractive dividend yield.

Management figures of these companies gathered on Tuesday (Apr 18) at a RHB conference highlighting 25 small cap firms. These are all companies with a market cap of less than S$2 billion.

TalkMed is a provider of oncology-related healthcare services with 13 doctors across nine clinics in Singapore. Chief financial officer Edwin Lee said that the management hopes to see its 30 per cent joint venture Hong Kong Integrated Oncology Centre break even soon.

The loss making investment was a drag to earnings in 2016 when TalkMed was still able to generate S$37 million in net profit. RHB believes TalkMed's associate earnings will turn around by 2018, and gives it a S$2.07 target price due partly to its track record of paying over 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 pick, RHB said, noting that the company may pay out a special dividend of 7.5 - 10 per cent in the current financial year. Burn-in is a process that tests semiconductors for defects.

The company has seen a quick turnaround since 2015 from the heavy losses incurred by overseas investments outside its core business. In the 12 months to June last year it reported S$6 million of net profit, and over S$30 million in net cash.

"Today we focus on our core of semiconductor burn-in, and we've been profitable since 2015… We've 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, which means we can pay dividend and look at potential merger and acquisition opportunities."

Accordia Golf Trust, with its 9 per cent dividend yield, is another hidden gem in the small cap segment. The trust has a portfolio of 89 gold courses in Japan, the world's second biggest golfing country, 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," Mr Machida added.

These companies are part of the local market that has outperformed its regional peers, Singapore Exchange 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."