Top 3 Singapore technology stocks to watch in June 2020
An in-depth look at the share price fundamentals of Venture Corporation, CSE Global and Valuetronics Holdings.
The three Singapore technology companies highlighted in this article have a combined market capitalisation of S$4.86 billion.
Amid changing investor sentiments, we examine below why these three tech stocks are worth a look for investors in the coming months, based on the latest analyst rating and reports.
Before committing to a bullish or a bearish position, here are some key fundamentals that you should pay attention to for each stock.
1. Venture share price
Average 12-month share price target: S$15.38
Upside from latest price: 1.6%
Singapore-headquartered Venture Corporation, a 12,000-person strong company with more than 30 subsidiaries and affiliates spread across Southeast Asia, Northeast Asia, America and Europe – was one of the few SGX stocks that managed to fend off the downward price pressure of March 2020.
The stock received a consensus 12-month share price target of S$15.38 a share, based on five analyst reports from last month. This represents an upside of 1.6% from the stock’s most recent bid price.
DBS researchers noted that while the first quarter performance of Venture Corporation was affected by Covid-19 lockdown measures – net profit was down 33.6% on the back of the 27.5% drop in revenue, the group appears well-positioned for longer term growth and recovery.
This is because of the company’s expertise and established position in the technology sector, as well as its strong balance sheet strength, they added.
However, they did warn that in the near term, the damage to the supply and demand side of the entire technology value chain would take time to heal. As such, they cut their FY2020 and FY2021 full-year earnings by 12% and 7%.
As such, the analysts have maintained a ‘hold’ rating for the stock, due to its limited target price upside.
Venture Corporation’s share price is up 26% from its trough in March. Shares are trading at S$15.15 per share as at 12:30 SGT on Friday 12 June 2020.
2. CSE Global share price
Average 12-month share price target: S$0.57
Upside from latest price: 25.3%
CSE Global has a current consensus 12-month share price target of S$0.57 a share, according to three analysts. This represents an investment upside of 25.3% from the latest bid price.
According to a UOB research note, CSE Global shares are worth buying, as the stock possesses an attractive dividend yield at 5.7%, backed by strong cash flow and balance sheet.
The company’s board has adopted an absolute dividend per share payout of S$0.0275 per share since 2014, and analysts are expecting the same level for 2020. This translates into a ‘generous ‘dividend yield of 5.7%.
‘We believe this is sustainable, given CSE’s strong operating cash flow and low net gearing at 18% as at 1Q20 (vs 25% for 4Q20),’ the analysts wrote.
Additionally, they noted that a stronger orderbook backed by flow orders, as well as an increasingly diversified business, give the group a stronger footing than it did in previous crises. Furthermore, more than 90% of the group’s revenue comes from the flow business (brownfield or small green field projects), which are recurring in nature.
Although the group has some exposure to oil and gas (forming 65% of 2019 earnings), UOB does not expect a severe impact from the oil price slump given that most of the revenue is recurring in nature, relying more on customer’s operating expenditure rather than its own capital expenditure budget.
CSE Global experienced a 15.6% growth in share price in the month of May. Shares are trading at S$0.455 per share as of Friday 12 June 2020.
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3. Valuetronics share price
Average 12-month share price target: S$0.58
Upside from latest price: 3.6%
In the last one month, a total of three analysts have given the Valuetronics Holdings stock a consensus 12-month share price target of S$0.58 a share. This represents an upside of 3.6% from the most recent bid price.
In the most recent research note - posted by CIMB on 04 June, analysts had downgraded the Valuetronics stock from a ‘hold’ to a ‘reduce’ rating.
This stance was based on expectations for near-term earnings weakness and lack of catalysts.
The analysts noted that while production has resumed in Valuetronic’s China factories with the lockdown easing, the company still faces heightened trade tensions which could result in accelerated shifts of supply chain out of China.
‘Apart from its smart lighting customer which had relocated some business to its Mexico plant in FY20, we see potential risks from its consumer lifestyle and selected ICE customers (including auto)’, they wrote, adding that 41% of sales that have already been delivered to North America are still subject to tariffs.
While there are some new customers and projects in the pipeline, these have also been disrupted by Covid-19. As such, the analysts predict that recovery could take some time.
On that note, they lowered their FY2021 to FY2022 full-year earnings per share by 3.6-32.4% to reflect potential revenue loss, in line with the management’s guidance of a significantly weaker 2021 financial year, as compared to 2020.
Shares of Valuetronics rose 5.7% in May 2020, and are trading at S$0.56 per share as of Friday 12 June 2020, based on IG data.
How to trade Singapore tech stocks with IG
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