We asked our writers to share their top stock picks for the month of August and here’s what they had to say:
Royston Yang: BreadTalk Group Limited
BreadTalk Group Limited (SGX: CTN) has been ramping up its efforts to penetrate into countries such as Taiwan, Thailand and China. Din Tai Fung added two new outlets this year – one in Singapore and the other in Thailand, while Song Fa Bak Kut Teh, in a joint venture with BreadTalk signed in July 2017, opened its first restaurant in Beijing, China in January.
In May and June, the group entered into a franchise agreement with Song Fa for its Taiwan expansion, and opened Singapore’s first Wu Pao Chun Bakery, respectively. Though capital expenditure may be elevated in the next few quarters due to this rapid pace of expansion, the group will reap the rewards in later years as these new brands penetrate into their respective territories.
Royston Yang doesn’t own shares in BreadTalk Group Limited
Sudhan P: iFAST Corporation Ltd
The contrarian in me likes iFAST Corporation Ltd (SGX: AIY) as the top pick for August. The company just reported its second quarter numbers. Even though net revenue rose 9.5% year-on-year to S$16.4 million, net profit tumbled 16.5% to S$2.5 million for the latest quarter. Having said that, iFAST’s assets under administration (AUA) climbed 12.2%, from S$8.05 billion at the beginning of this year to a record high of S$9.04 billion, as of 30 June 2019. iFAST’s business model mainly involves growing the size of its AUA; higher AUA generally leads to higher revenue.
iFAST’s business scalability is a trait to admire. As the company’s AUA grows, its operating costs should be further spread out on a per unit basis, leading to potentially higher earnings over time.
In the latest quarterly earnings, the company said that it “believes that growth opportunities in Asia’s wealth management still remain very substantial, and it is well-positioned to benefit from these opportunities in the medium to long term”. iFAST has a goal of reaching an AUA of S$100 billion by the end of 2028. Even though the targeted AUA is more than 10 times current AUA of S$9 billion, I believe the company has what it takes to at least get close to its aim.
At iFAST’s share price of S$1.11 at the time of writing, it has a trailing price-to-earnings ratio of around 21 (excluding its loss-making China business) and a dividend yield of 2.8%.
Sudhan P owns shares in iFAST Corporation Ltd.
Lawrence Nga: Riverstone Holdings Limited
I think investors can give Riverstone Holdings Limited (SGX: AP4) a closer look for two reasons. Firstly, the company’s share price has declined by more than 20% recently, mainly due to concerns about weakening margins.
Digging further into its 2019 second-quarter results, however, shows that its net profit is down by only “2.8%” year-on-year. Thus, the market might have overreacted with the recent decline in its stock price. Moreover, Riverstone will continue to grow in the next few years due to the ever-rising demand for gloves globally. It already has a clear and well-thought-out expansion plan in the near future to capitalise on such a trend.
In all, investors with a longer time horizon might find Riverstone a solid candidate to study further in August.
Lawrence Nga doesn’t own shares in Riverstone Holdings Limited
Tim Phillips: CapitaLand Limited
For August, my top pick is leading real estate property giant CapitaLand Limited (SGX: C31). I don’t feel investors have given the company enough recognition of the long-term benefits the Ascendas-Singbridge monster acquisition will deliver to the company. The S$11 billion takeover was actually only officially completed at the end of June so the numbers aren’t going to feed through to CapitaLand’s earnings until Q3 at the earliest.
In this increasingly uncertain world, scale (and heft) is going to benefit companies and this is exactly what CapitaLand has achieved via its acquisition, with the combined group boasting S$123 billion of assets under management. Furthermore, the reliable, revenue-generating assets of Ascendas-Singbridge – which is the sponsor of three well-recognised REITs in Singapore – provide the added boon of recurring income. Meanwhile, the industrial and business park properties Ascendas own also complement CapitaLand’s focus on the residential, retail and commercial segments of the market.
Sure, there’s the increased gearing CapitaLand has to deal with but with this giant’s solid track record and interest rates globally coming down, I feel like this could be a great time for investors to have a closer look at the “creme-de-la-creme” of property players in Singapore.
Tim Phillips doesn’t own shares in CapitaLand Limited
Jeremy Chia: DBS Group Holdings Ltd
My top pick for August is DBS Group Holdings Ltd (SGX: D05). Despite a recent run-up in its share price, Singapore’s largest bank still sports an attractive annualised dividend yield of around 4.4%. More importantly, DBS can easily sustain its dividend as it’s backed by robust core earnings. In the first three months of 2019, the 30 cents per share it paid out in dividends represented just under half of its earnings per share.
DBS also has plenty of liquidity to see it through any financial distress. The common equity tier 1 capital adequacy ratio, a metric used to assess a bank’s financial health stood at 14.1%, well above the 6.5% regulatory requirement.
The bank’s fee income has also grown substantially over the years. Together with its push for digital transformation, the bank’s return on equity has now risen to multi-year highs, demonstrating the its efficiency in maximising shareholder value.
Jeremy Chia owns shares in DBS Group Holdings Limited
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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 iFAST Corporation Ltd, Riverstone Holdings Limited, CapitaLand Limited, and DBS Group Holdings Limited.