4 Investment Themes for the 2nd Half Of 2016

We’re only a few days into the month of June and so it could be a good time to look at investment themes for the second half of 2016.

A recent article from The Edge had touched on brokerage firm UOB Kay Hian’s June 2016 Singapore Strategy report in which four investment themes were shared.

The first was mergers & acquisitions (or M&A). UOB Kay Hian’s report had mentioned that there have already been 15 M&A deals in Singapore this year. Companies picked out by the brokerage firm as having the potential for M&A deals include Innovalues Limited (SGX: 591) and Global Logistic Properties Ltd (SGX: MC0).

But, investors might want to note that trying to “anticipate” potential M&A deals with any company would involve an element of speculation.

The next theme highlighted by UOB Kay Hian was dividend stocks. The article from The Edge had pointed out companies such as Nera Telecommunications Ltd (SGX: N01) as picks by UOB Kay Hian for dividend yields.

When looking at income stocks, it’s important to focus on the sustainability of the company’s dividend. The strength of the balance sheet is one area to study (out of many other crucial areas!) in this regard.

A third theme would be tourism-related stocks. UOB Kay Hian had singled out Genting Singapore PLC (SGX: G13) as one of its picks to benefit from recovering tourist arrivals to Singapore. Our Garden City saw 4.1 million visitor arrivals in the first-quarter of 2016, an increase of 13.8% from the same period a year ago.

Genting Singapore’s shares are down by over 16% in price over the last 12 months and currently have a price-to-book ratio of 0.93. For perspective, the SPDR STI ETF (SGX: ES3) – an exchange-traded fund tracking Singapore’s market barometer, the Straits Times Index (SGX: ^STI) – is valued at 1.2 times its book value at the moment.

The last theme offered by UOB Kay Hian would be Singapore-listed companies that have global businesses. The brokerage thinks that such companies are in a stronger position given Singapore’s lacklustre growth outlook. Some stocks in this category that UOB Kay Hian had mentioned in its report included Singapore Telecommunications Limited (SGX: Z74) and Singapore Technologies Engineering Ltd (SGX: S63).

One of the possible benefits of investing in a company with a global business is the diversity found in its income base. But, diversity does not necessarily equate to lower risk – the business model of the company matters too.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.