The STI: Two Stocks for Your Buy Watchlist

The Straits Times Index (STI) is a well-known index tracking the performance of the top 30 companies listed on SGX. It was among the two indexes trading within the green zone this year in Asia Pacific, along with the Jakarta Composite Index from Indonesia.

The STI has returned around 4% YTD, while the Jakarta Composite has returned 3.3% in the same period. Despite the turmoil in the global stock markets, analysts remain bullish on Singapore stocks.

Shekhar Jaiswal, an analyst from RHB, described Singapore stocks as a “safe haven.” He added, “after a year of resilience and outperformance in 2022, RHB is bullish on Singapore for next year.”

Let’s discuss two stocks from the STI that delivered solid results in 2022 and are headed for more growth in 2023.

Jardine Matheson Holdings (SG:J36)

Jardine Matheson is a multinational group based in Asia, that includes a wide range of businesses like real estate, hotels, engineering, infrastructure, and more.

Jardine Matheson is among the top ten stocks on the STI index. The company’s stock has been shaky in the last year and was trading down by 5.12%.

For its first-half results in 2022, the group posted a profit of $747 million, which increased by 22% over last year. The company witnessed a solid improvement in its performance across most of its businesses. The company’s engineering and infrastructure division, Astra, performed the best, with a 106% growth in its profits. The company also recovered from a loss of $423 million in 2021 to a profit of $423 million attributable to its shareholders.

The interim dividend also grew by 25% to $.55 per share, which reflected the company’s choice to pay out more dividends in the first half.

Moving ahead, the company is cautious about its business in Hong Kong and China due to ongoing pandemic restrictions. However, it is still well-positioned to enter a period of stable earnings growth in its core Asian markets.

Jardine Matheson Stock Price Forecast

According to TipRanks, Jardine Matheson stock has a Moderate Buy rating, based on one Buy recommendation from CLSA analyst Jonathan Galligan.

He has a target price of $63.0, showing a growth of 24% on the current price level.

Yangzijiang Shipbuilding (Holdings) Ltd. (SG:BS6)

Yangzijiang Shipbuilding is a big manufacturing company in shipbuilding and marine engineering. The company also deals in ship leasing and logistics.

The company suddenly came under the radar of investors when its stock saw phenomenal growth in the last year, with almost 100% returns.

In its 2022 half-yearly results, Yangzijiang posted a 32% jump in its profits of RMB 1.2 billion attributable to equity holders. The highlight of the results was a 78% increase in its core shipping revenue of RMB 8.5 million. This was driven by higher vessel sales, with 35 deliveries in the first half as compared to 23 in the first half of 2021. Despite the supply chain disruption and higher raw material costs, the gross margins only dipped by 1% to 13%.

Talking about the outlook, the company has a target of 70 vessel deliveries in 2022 and is right on track, with 50% already achieved in the first half. The company’s strong order book of $ 1.09 billion for 18 vessels so far this year puts it in a better position to grow earnings for the full year.

Yangzijiang Shipbuilding Target Price

Based on three Buy recommendations, Yangzijiang stock has a Strong Buy rating on TipRanks.

The BS6 target price is S$1.53, representing an 11.4% change from the current price level.

Conclusion

Singapore equities will continue to attract investors due to the companies’ strong earnings growth when compared to their counterparts in Asia Pacific. 

Both Jardine Matheson and Yangzijiang Shipbuilding have delivered strong first-half results, with proven business models, and are poised for a better 2023.

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