UOB Kay Hian's Stock Picks: PACIFIC RADIANCE, RIVERSTONE, SILVERLAKE, etc

STRATEGY: We stick to our year-end target of 3,400 for the FSSTI. With an expected upside of only 2%, we remain selective and focus on stock-picking to outperform.

Valuation-wise, at 15.6x 2014F PE, the market is trading at a 4% discount to its long-term mean of 16.2x. 

Therefore, even if valuations mean-revert, upside could be moderate, re-affirming our selective stance.

Investment themes we favour include: a) asset monetisation/M&A, b) energy proxies, c) regional growth plays, and d) easing regulatory environment. 

Our top picks in the big-cap space include DBS, OCBC, CapitaLand, Keppel Land, CCT, M1 and Ezion. 

In the mid-cap space, we like Pacific Radiance, Riverstone, Silverlake, Kris Energy and Halcyon. 

SELL Tiger Airways, SIA Engineering and Mewah.

Covering analyst's views:

Mr Lim Boon Kheng, the recently-appointed CEO, joined CSE in 1999 as group financial controller. NextInsight file photo• CSE Global: 1H14 results trail estimates but management is confident of a strong 2H14 that will enable it to achieve its full-year net profit growth guidance of 10-15%. Actual orderbook is closer to S$290m with contract win momentum expected to be sustained.  

• Halcyon Agri Corp: 2014 is shaping out to be a year of transition with a flurry of M&As that will build HACL into a force to be reckoned with.  

• KrisEnergy: Since its establishment as an independent exploration & production company in 2009, Kris has rapidly expanded its asset base with interests in 19 licences across Asia and is realising the value from its assets via development over the next 12-15 months.  

• Osim International: The 5-year S$170m CB bears no interest but will be redeemed at 110.46% of its principal amount on maturity on 18 Sep 19. We think the money raised will strengthen its balance sheet for further brand acquisitions, product development or acceleration of the growth of TWG Tea.

• Riverstone: 1H14 net profit growth of 22% yoy after another quarter of record revenue and earnings. ASP was stable while healthcare margin was slightly lower.

• Silverlake Axis: A stellar FY14. Strong performance to continue with a higher orderbook of RM280m, rising recurring M&E services revenue, and business expansion in insurance, credit and card processing.