Here are some more of the top Singapore stock picks for 2020, by local experts

Still looking for stock picks for 2020? Thought our earlier list was not as comprehensive as you would have liked? Here are some more stock recommendations from local experts.

Koufu Group

Recommendation: Buy
Target Price: S$0.95
Analysis from: UOB Kay Hian

Defensive cash cow backed by strong brands and leading market position. Koufu runs highly defensive food court and coffee shop businesses, and is focused on providing competitively priced meals transacted in cash terms. Its outlet and mall management business has seen consistently high occupancy of at least 93% in the last three years. Koufu intends to distribute at least 50% of its profits for 2019, which is sustainable given strong cash-flow generation. This could translate into a potential dividend yield of 3.5% for 2019.

We forecast double-digit net profit growth for 2019 with completed enhancement initiatives of Rasapura Masters, a pipeline of five new food courts and faster roll-out of R&B and Super Tea which are popular with the younger crowds. Beyond Singapore, Macau will be its overseas expansion springboard which is already contributing 9% of group revenue.

Disposal of central kitchens should unlock S$10m in value. Koufu owns two central kitchens at 18 and 20 Woodlands Terrace, Singapore. We estimate the eventual sale of these properties could bring in S$10m and unlock gains of up to S$8m, which could translate into higher dividends.

Share Price Catalyst: Sale of its two central kitchens, better-than-expected contribution from R&B Tea, and better-than-expected performance from Rasapura.
Timeline: 3-6 months.

Mapletree Logistics Trust

Recommendation: Buy
Target Price: S$1.90
Analysis from: DBS Group Research

We believe that all growth engines are firing and Mapletree Logistics Trust (MLT) remains firmly on the acquisition growth path to be a leading logistics player in ASEAN. Opportunities will likely come from its Sponsor which has an extensive pipeline of acquisition opportunities. Well-timed acquisitions and ongoing asset reconstitution strategy is projected to augment a steady DPU growth profile of c.4.0% CAGR over FY21-22F with upside from potential gains from divestments that the manager typically shares when it happens. In addition, organic growth momentum is also picking up with the tightening supply in MLT’s key markets of Hong Kong and Singapore where earnings visibility is strong.

SIA Engineering

Recommendation: Buy
Target Price: S$3.30
Analysis from: DBS Group Research

We see several promising earnings drivers like: i) further expansion in SIE’s core operating margin, bolstered by cost-cutting initiatives and progress in its transformation programme, ii) increased workload at its engine shops owing to persistent problems with the Trent-1000 engines, iii) recovery in associate/JV profits from the low in 1HFY20 as start-up costs related to new engine capabilities have mostly been accounted for, and iv) a boost in maintenance work volumes due to delays in retiring older aircraft following the protracted global grounding of the B737 MAX aircraft. While privatisation remains a crucial catalyst for the stock, the current valuation for SIE is attractive at close to multi-year lows at about 17x forward PE and dividend yield is healthy at 4.3%.

ST Engineering

Recommendation: Buy
Target Price: S$4.34
Analysis from: UOB Kay Hian

S$1.3b M&As in the aerospace and electronics division is expected to be earnings accretive and enable STE to move up the value chain. The acquisition of Nacelle Manufacturer MRA System (MRAS) will provide a steady pipeline of OEM aerospace work for the next 10 years. Meanwhile, the acquisition of Satcom firm, Newtec, and Glowlink will enhance STE’s Satcom capabilities for applications in the aerospace, defence and maritime segments.

Orderbook at S$15.9b stood at a record high (+2% from 2Q19), and STE expects to recognise S$2.2b (S$1.6b previously). STE expects its robust orderbook to “continue to provide revenue visibility for the next few years.”

We have valued STE on an EV/Invested Capital basis with ROIC at 13.4%, WACC at 5.9% and long-term growth rate of 2.3%. At our fair value of S$4.32, STE trades at 21.5x 2020F PE.

Share Price Catalyst: New contract wins for the marine division.
Timeline: 3-6 months.

Thai Beverage

Recommendation: Buy
Target Price: S$1.04
Analysis from: DBS Group Research

We maintain our BUY recommendation with sum-of-the-parts (SOTP) based TP of S$1.04, premised on; (i) steady 11% growth in net earnings in FY20F, (ii) improved contributions from Sabeco and lower losses from Non-Alcoholic Beverages (NAB), (iii) continued deleveraging from its strong and stable cash flow, as well as potential monetisation of assets. We believe the deleveraging strategy remains among the top priorities of its management. Valuation is reasonable at 19.1x FY20F PE, below its historical 5-year forward average PE of 22x.

Yangzijiang Shipbuilding (Holdings)

Recommendation: Buy
Target Price: S$1.46
Analysis from: UOB Kay Hian

We believe that Yangzijiang’s (YZJ) share price weakness in August regarding its chairman assisting investigations in China is unwarranted given that it does not involve the company or its funds. More importantly, the medium-term shipbuilding outlook appears positive and the company is trading at an inexpensive valuation of 0.56x P/B (-2SD below 5-year average). We have a BUY recommendation on the stock and a P/B-based price target of S$1.46.

Management has the experience and expertise to run the company while the chairman is away. In particular, Mr Ren Letian, the CEO of YZJ for the past five years and the son of Chairman Ren Yuanlin, have been with the company since 2006 in various roles. With his detailed knowledge of shipyard and shipbuilding operations, the core business will not be affected in the absence of the company’s chairman, in our view.

Positive shipbuilding outlook in the medium term. On 1 Nov 19, YZJ announced a small order for six bulk carriers. While no value was attributed to the order by YZJ, we estimate that it would be at c.US$50m, thus bringing ytd order wins to US$650m vs our 2019 order-win estimate of US$1b which we still believe is achievable. Notably, this new order complies with IMO 2020 fuel regulations, so perhaps this is the first trickle of orders coming in from owners that need to replace their non-compliant fleet.

Share Price Catalyst: New ship-building order announcements, specifically from Japanese shipowners due to the positive synergistic effects of the Mitsui JV, and news that the chairman is no longer assisting in the Chinese authorities’ investigations.
Timeline: 2-3 months.