We asked our writers to share their top stock picks for the month of July and here’s what they had to say:
Royston Yang: Kingsmen Creatives Limited
My pick would be Kingsmen Creatives Limited (SGX: 5MZ) and here’s why. It made two announcements in June regarding business developments relating to its Intellectual Property (IP) division. The group has expanded its license for its NERF Family Entertainment Centre (FEC) attractions to the US market, with the first US location to be opened by late 2020. Recall that the first-ever NERF FEC is slated to begin operations in Marina Square on 1 October 2019.
The second announcement relates to Kingsmen expanding their relationship with Hasbro Inc (NASDAQ: HAS) and entering into a new licensing agreement to operate new edutainment-inspired FEC attractions across Asia-Pacific, which would involve a suite of Hasbro brands including PLAY-DOH, LITE-BRITE, and TINKERTOY. Prospects look positive for their IP division (though financial details are not yet known at this point) and I would strongly recommend looking at it as brokers and news outlets have not really picked up on these corporate developments yet.
Royston Yang owns shares in Kingsmen Creatives Limited.
Sudhan P: Oversea-Chinese Banking Corp Limited
My top stock pick for July is Oversea-Chinese Banking Corp Limited (SGX: O39), or OCBC for short. The bank had a great start to 2019. Total income for the first quarter of 2019 improved 15% year-on-year to a new-high of S$2.68 billion.
Meanwhile, net profit grew 11% year-on-year to S$1.23 billion and was up 33% on a quarter-on-quarter basis. The year-on-year bottom-line growth was “driven by record operating profit before allowances, which was underpinned by strong income growth across the Group’s banking, wealth management, and insurance franchise”. OCBC’s annualised return on equity for the 2019 first-quarter rose to 12%, as compared to 11.8% in the 2018 first-quarter and 11.5% for the full year of 2018. Again, a commendable performance.
At a share price of S$11.28, it is the cheapest local bank in terms of price-to-book ratio at 1.13, which is also below OCBC’s five-year average. The current dividend yield of 3.8% is not the highest among the local banks, but has the potential to grow the most since OCBC has the lowest dividend payout ratio among the trio of Singapore banks.
Sudhan P doesn’t own shares in OCBC.
Lawrence Nga: First REIT
One of the more interesting ideas now is First Real Estate Investment Trust (SGX: AW9U). Normally, income investors might be interested in this idea. This time, however, even value investors might want to give the REIT a closer look.
First REIT is an interesting candidate now because the market appears to be quite pessimistic on it. This is evident in its low valuation with a price-to-book (PB) ratio and distribution yield of 0.9 and 8.3%, respectively. Comparatively, the market average’s PB and distribution yield are at 1.1 and 6.3%, respectively.
Clearly, it’s a solid candidate for investors to look deeper into, especially given its impressive financial track record and attractive assets (hospitals).
Lawrence Nga doesn’t own shares in First REIT.
Tim Phillips: NetLink NBN Trust
If you’re nervous, as I am, about any sort of trade deal being struck between the US and China, then NetLink NBN Trust (SGX: CJLU), or Netlink, could be a great place to tap into local growth here in Singapore while also getting paid a solid dividend. Netlink, spun off in an IPO by Singtel a few years ago, is Singapore’s sole operator and installer of the country’s fibre broadband network – providing essential connectivity to residential homes and commercial businesses.
I personally don’t see growth slowing substantially for it, even if the global economy does get hit on the back of increased trade tensions. For its financial year 2019 (ending 31 March 2019), the company posted EBITDA and profits after tax that exceeded its IPO projections by 1.6% and 11.7%, respectively. The group also managed to beat FY19 expectations on revenue and the number of residential connections. Based on the current unit price of S$0.88 and its distribution per unit (DPU) of 4.88 cents, Netlink is yielding a rather attractive 5.5%.
Tim Phillips doesn’t own shares in NetLink NBN Trust.
Jeremy Chia: HRnetGroup Ltd
My top stock for the month is the recruitment firm HRnetGroup Ltd (SGX: CHZ). The professional and flexible staffing firm’s stock has fallen hard from its recent peak of S$0.90 to its current price of S$0.69. The reason for the sell-off was likely it’s poor first quarter showing, where it recorded a 2.8% drop in both revenue and gross profit.
However, in my view, its long-term prospects remain cheery. The group has made strategic acquisitions to expand its operations in North Asia where the market is expanding at a faster tick than in Singapore. Its poor first-quarter results was mostly due to the harsh economic environment, which resulted in companies holding off expansion plans. This seems to be a short- to middle-term problem and the market for professional recruitment and flexible staffing will likely return to growth over the longer term.
On top of that, HRnet’s balance sheet is flush with cash. As of 31 March it had a net cash position of S$242 million and it also generates consistent cash flow from operations. At its current price of S$0.68, HRnet sports an inexpensive price-to-earnings multiple of 13.6 and a decent dividend yield of 4.1% – a good entry point for bargain hunters.
Jeremy Chia owns shares in HRnetGroup Ltd.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Oversea-Chinese Banking Corp Limited, First Real Estate Investment Trust, and HRnetGroup Ltd.