Top Stocks for September 2019
We asked our writers to share their top stock picks for the month of September and here’s what they had to say:
Royston Yang: Singapore Exchange Limited
Singapore Exchange Limited (SGX: S68), or SGX, has been going from strength to strength under the leadership of CEO Loh Boon Chye. The bourse operator recently announced a new organisational structure to boost growth and build scale in multiple asset classes, in its ongoing evolution to become a multi-asset exchange.
The group had also announced a record level of revenue for its recent FY 2019 earnings, as well as an 11-year high for net profit. The main driver of this is SGX’s derivatives division, where revenue jumped 35% year-on-year to S$460 million, making up 51% of total revenue.
Moving forward, I believe SGX can continue to leverage on its derivatives division in order to power the group’s future growth.
Royston Yang owns shares in Singapore Exchange Limited.
Sudhan P: VICOM Limited
I’m picking Singapore’s leading provider of inspection and technical testing services, VICOM Limited (SGX: V01), as my top stock for September.
For its latest second quarter, revenue grew 3.7% year-on-year to S$25.6 million while net profit improved 4.9% to S$6.6 million. With the higher profitability, VICOM upped its interim dividend by 5.3%, from 13.46 Singapore cents last year to 14.11 Singapore cents in the latest quarter.
There’s a high chance that the inspection company will increase, or at least maintain, its 2019 full-year dividend. In its outlook statement for the 2019 second-quarter, it said that the “vehicle inspection business is expected to remain strong…”, but it warned that the “non-vehicle testing business will remain challenging, with the expected slowdown in the Singapore economy”. In my opinion, the higher demand for vehicle inspection services will more than offset any slowdown in the non-vehicle testing business.
With a trailing dividend yield of 5.2% (at the time of writing; excluding any special dividend), VICOM certainly looks enticing for dividend investors.
Sudhan P owns shares in VICOM Limited.
Lawrence Nga: Bumitama Agri Ltd
I think palm oil firm Bumitama Agri Ltd (SGX: P8Z) is an interesting company to explore for a number of reasons.
To begin with, the palm oil industry is currently going through a challenging time with the crude palm oil (CPO) price close to a multi-year low. Consequently, Bumitama has been hit twice, first on its financial performance, and then on its valuation multiples.
Moreover, despite all the naysayers, I think palm oil is here to stay for the long term since it’s by far the most efficient oil crop. With a young crop profile (weighted average age of 9.8 years), Bumitama is well-positioned to benefit when the CPO price recovers.
Lawrence Nga doesn’t own shares in Bumitama Agri Ltd.
Tim Phillips: Mapletree North Asia Commercial Trust
What can I say? I’m a contrarian at heart. That’s why I’m picking Mapletree North Asia Commercial Trust (SGX: RWOU), or MNACT for short, as my stock of the month for September. Its unit price has taken a beating and I had written about its reliance on the flagship Festival Walk Hong Kong property for net income. But it reminds me of that Warren Buffett saying…”be fearful when others are greedy and greedy when others are fearful”.
I’d subscribe to the latter part of that mantra – “fear” is reigning right now when investors look at Hong Kong opportunities but in fact, Festival Walk has not been anywhere near the hotspots of violence. What’s more, Festival Walk is also a commercial property with over 220,000 square feet of office space.
The focus on the retail portion of it can be misleading because what MNACT is benefitting from over the longer term is the “de-Centralisation” of office space as multinationals, including banks and law firms, start moving out of Central on Hong Kong island given the exorbitant rents. This will benefit Festival Walk and areas such as Tai Koo and West Kowloon as well. Given its Mapletree heritage, a solid portfolio and a trailing dividend yield of 5.9%, I feel MNACT’s shares are looking attractive at this price.
Tim Phillips owns shares in Mapletree North Asia Commercial Trust.
Jeremy Chia: Valuetronics Holdings Limited
Call me crazy but my top pick for September is a company that is directly impacted by the trade war, Valuetronics Holdings Limited (SGX: BN2). With 45% of the manufacturing company’s products shipped to the US and about half of that incurring a 25% tariff, it’s no surprise to see that investors have been scared off, causing its shares to fall nearly 25% off its 52-week high.
But, long-term investors could be licking their lips. Valuetronics shares now trade at just seven times trailing earnings and sports a juicy trailing yield of 7%. The company also has close to HK$1 billion in net cash, which makes up more than 60% of its entire market cap.
In addition, the Hong Kong-based firm has also looked to reduce the impact of the tariffs for its customers by shifting some of its production away from China and into Vietnam. It recently started mass production at a newly-leased Vietnam facility and is looking to purchase their own plot of land in Vietnam to build a production facility.
Valuetronics also has a great track record of growth, with its earnings per share doubling from 2008 to 2018. Despite the near-term challenges, Valuetronics with its cash reserve, nimble management, and low valuation, looks like a bargain for investors who are willing to play the long game.
Jeremy Chia doesn’t own shares in Valuetronics Holdings Limited.