Some stock idea for 2008

At the time of writing, the stock market outlook has never been so bleak compare to the past few years. I remain calm. Be it a short bear or long bear, it is better for fundamental investor to pick up strong company at discount. I re read some of the research document published by broker from Dec to Jan and compile the following list.

Sino Env

The core VOC business remains intact and the desulphurization business would take sometime to take off/mature. Dust elimination business also started to contribute to the bottom line. Once the desulphurization takes off, then the earning growth could be accelerated. Forecast EPS by CIMB for 2008 is 16.2 cts.

Sino Techfibre

The stock has fallen quite a bit following the announcement for the delay of PMP equipment again. Obviously some confidence has been shaken. The PMP contribution would come late in 2H of 2008. Currently, China import all the PMP (pattern molding paper) from outside. Once the production line is on stream, the contribution could be quite significant. At the forecast 2008 EPS of 14.4 cts, the stock is unreasonably cheap.

The two beaten Sino

Coincidentally, the two companies with name of Sino had a bad run. From the excess optimism, market has turned to excess pessimisms. Depends on your risk tolerance level, I would say they are very good buy.

China Hongxing

Key expansion strategies are to increase the outlet, production capacity tremendously and increase the brand visibility. Forecast EPS by CIMB for 2008 is 4.7 cts. As the strong growth is expected to continue, the current valuation is relatively low compare to historical standard.

China Sports International

Their targeted market is low to mid end segment. The key expansion plans are increasing the A&P to increase brand visibility and doubling production capacity. The YELI brand is positioned as fashion sports brand. This is a good strategy as to avoid direct competition with other players. Forecast 2008 EPS by CIMB is 12.4 cts. As mentioned in CIMB report,

“YELI trails listed peers in China. There are six listed sports companies with a retail
presence in China: Hongxing (Erke), Li Ning (LI-NING), Anta (ANTA), China Sports
(YELI), Belle (multi-brand) and Yue Yuen (YY Sports). Among the six, we consider
Hongxing, Li Ning, Anta and China Sports to be competing in the same space, given
that: 1) retailing sports shoes is their main business; 2) they are all brand owners; and
3) their target market is middle-class consumers in second and third-tier cities.
However, Li Ning, Hongxing and Anta appear to be a step ahead of China Sports, in
terms of brand visibility and product pricing. We consider Belle and Yue Yuen to
compete in a different space as they retail mostly foreign brands like Puma, Kappa
and Mizuno (Belle) and Nike, Reebok and Adidas (Yue Yuen), respectively.”

The two sprinting players

For the only two sports player listed on SGX, both have embarked on aggressive expansion strategy to capitalize on the future sports good demand. The recent measure announced by china government might have cool the interest and cause investor concern on the sector outlook. But I still believe in the theme. I would pick China Hongxing as it is the stronger brand of two.

Swiber

Contract extension from Brunei Shell should be a strong vote of confidence, everything still going according to plan. Following the aggressive expansion strategy and continuous high oil price, this is another stock to watch in coming years. Analyst forecast that even oil price is at $50 per barrel, the new investment by oil company would still be viable. Forecast 2008 EPS by DBS is 24.6 cts.

Oil & Gas sector

DBS vicker mentioned that the outlook remains positive with strong contract flow. The mid tier oil and gas stock is expected to outperform peers. The picks are Cosco, Keppel Corp, Ezra Holdings, KS Energy, Jaya Holdings, and Swiber Holdings. As it is mentioned in the report –

“We believe that the impending strong orders for floating production units and FPSOs and high capex for fixed platforms are harbingers of more offshore EPIC projects, as oil majors increasingly move into the development phase of offshore oil fields for production and delivery of oil to the market. The beneficiaries of this trend are Swiber, Ezra, Keppel Corp, SembCorp Marine, and See Hup Seng.”

I remain confident that the FPSO story would continue this year.

“Three potential risks may emerge to dampen the optimism. We believe that there exist three potential risks in 2008 that may dampen an otherwise overwhelming bullish outlook for the oil and gas sector; namely unsustainably high oil prices, potential currency hedging issues, and rising equity market risk premium.”

I think the rising of risk premium or de-rating would be the biggest risk this year. Since the exploration activities would still have to continue despite any fall of the oil price.

DBS Vicker small cap pick

Hsu Fu Chi, China Sky, The Hour Glass, Boustead, Ferro China, Raffles Medical

I am more convinced on the first four. The steel business is hard for me to understand and the defensive medical sector is not for me at this stage.

Kim Eng 2008 Market outlook

In Kim Eng 2008 Market outlook, construction, tourism and retail are key investment theme this year.

The recommended portfolio is

Lian Beng
LC Development
FJ Benjamin
Kingsmen
Breaktalk
Cosco
Venture
Singapore Press Holding

I like FJ Benjamin and Kingsmen, because they are the key beneficiaries to the upcoming IR and the future Singapore tourism boom.