Alpha Picks: Add Sembcorp Industries And BRC Asia, Remove Keppel Corp And MM2
Our Alpha Picks outperformed the STI in Jul 22, increasing by 5.4% on a market cap weighted basis vs the market’s 3.5% increase. For Aug 22, we add Sembcorp Industries as we believe it will continue to re-rate on the back of its green energy expansion and BRC Asia to ride on the upturn in the construction industry. We have taken out Keppel Corp following a positive share price rally after 1H22 results. We have also removed MM2 due to a lack of near-term catalysts.
• Market review. We saw a broad-based outperformance in Jul 22, where the gaming, tech manufacturing, banks and industrial sectors were clear outperformers. This was attributable to the recovery in the overall market sentiment after the US Fed hiked its interest rate by 75bp, consistent with market expectations and removal of market uncertainty. In addition, the starting of results reporting season has also lifted sentiment as most of the corporates continue to deliver yoy growth, in line with market expectations. The STI’s increase of 3.5% in Jul 22 was a reversal of poor performance in Jun 22 which saw a 4.0% decline.
• Outperforming in Jul 22. Our Alpha Picks portfolio outperformed during Jul 22, increasing by 5.4% on a market cap weighted basis vs the STI’s 3.5% increase. Six stocks in our Alpha Picks recorded positive absolute returns of more than 5%: Genting Singapore (+11.8% mom), Frencken (+9.9%), Venture Corp (+5.7%), DBS (+6%) and Keppel Corp (+6%). The stock which saw a weak month was MM2 (-7.1% mom), where its auditors issued an audit opinion with a material uncertainty related to going concern for its financial statements ended Mar 22.
• Switching out of KEP for SCI and out of MM2 for BRC. We switch out of KEP after a positive share price rally after its 1H22 results, and add SCI as we believe that it will continue to re-rate on the back of its green energy expansion. We also add BRC Asia to ride on the upturn in the construction industry, and remove MM2 due to a lack of near-term share price catalysts.