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UOB KAYHIAN |
UOB KAYHIAN |
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Strategy – SMID-Cap Outlook SMID-Cap Retail Webinar Takeaway: Identifying Opportunities Amid Market Weakness
Highlights • We hosted a SMID-cap retail webinar on 8 Oct 26, attracting more than 100 retail investors. • Key questions focused on buying opportunities amid the recent weakness in Singapore banks, preferred large cap names, SMID-cap stocks, sector rotation and the impact of rising interest rates. • We highlighted BKM, OTEK, FEH & RSTON as our top SMID-cap picks.
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Tech Manufacturers Stay Selective On Stocks With High Yields And Strong Balance Sheets
Highlights • Semiconductor-related stocks are expected to report stronger earnings in 3Q26, while the others are expected to show decent growth. • We recommend staying selective on stocks with strong balance sheets and offer attractive yields given that valuation of the semiconductor stocks are relatively rich at above +1SD above mean PE for 2026. • Our top picks are Valuetronics (7% yield), Riverstone (8% yield) and Venture (5% yield) given their attractive yield, valuation and growth prospects. Maintain MARKET WEIGHT.
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| LIM & TAN | LIM & TAN |
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Skylink Holdings (S$0.178, unchanged), one of the largest commercial vehicle leasing companies in Singapore with one-stop solutions as a trusted mobility service provider, is pleased to announce that it has successfully completed its issuance of the S$5.0 million Hire Purchase Bonds, as fully subscribed. Skylink Holdings’ market cap stands at S$46.5mln and currently trades at 6.6x forward PE, with a dividend yield of 3.1%. The S$5mln bond issuance highlights its commitment to expanding its fast-growing Credit Business, with its hire purchase loan book potentially exceeding S$100mln by FY2028. Although the 8.0% coupon represents a relatively high cost of debt, we believe it remains a sensible financing option given Skylink’s historically attractive returns from its Credit Business, which have exceeded 30% on capital deployed. As long as the incremental returns comfortably exceed borrowing costs, debt financing could enhance profitability and ROE without diluting existing shareholders. Furthermore, given the potentially high cost of equity at current depressed share price levels, raising equity may not be an attractive option, particularly as the CEO himself has been buying back shares. We view this combination of debt-funded expansion and insider purchases positively, reflecting management’s confidence in both its growth prospects and underlying share valuation. We thus recommend a BUY on Skylink Holdings.
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Keppel Ltd (S$10.07, down 3 cts) through its Real Estate Division (“Keppel”), has entered into an agreement to divest a 51% interest in K-Commercial Pte. Ltd., which owns Keppel South Central, a premium Grade A commercial building at 10 Hoe Chiang Road, to Keppel REIT for approximately S$611 million. Keppel’s market cap stands at S$18.0bln and currently trades at 22x forward PE and 1.8x PB, with a dividend yield of 3.4%. Consensus target price stands at S$13.10, representing 30% upside from current share price. The partial divestment of Keppel South Central (newly built early 2025) is in-line with Keppel’s asset monetisation strategy, bringing its total announced asset monetisation to S$3.7 billion since the start of the year. Keppel’s growing asset management platform, recurring infrastructure income and ongoing portfolio transformation continue to strengthen its earnings profile. We maintain our BUY recommendation. |
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