In the first two parts of this 4-part series, we highlighted six chosen stocks as part of our ‘The Avengers’ investment portfolio. Want to make a guess which other SG stocks fall into the chosen group of elite stocks in our ‘The Avengers’ investment portfolio?
Investors Takeaway: Which SG Stock Deserves To Be Part Of “The Avengers”?
- Black Panther: Keppel DC REIT
One Of A Kind
Just like Black Panther is one-of-a-kind superhero, Keppel DC REIT is the only pure-play data centre REIT listed on SGX with an investment mandate to focus only on data centres. Its current portfolio is valued at $2 billion, spanning across Asia Pacific and Europe.
Backed By Increasing Digitalisation And Cloud Adoption
From a business perspective, Keppel DC REIT’s outlook is underpinned by increasing digitalisation and cloud adoption data centre outsourcing and data sovereignty regulations. Demand for data centre space is expected to remain robust. Keppel DC REIT recently entered into an agreement with Macquarie Telecom to construct Intellicentre 3 East Data Centre (IC3 East DC) in Australia. The asset is expected to be DPU-accretive with a lease that will be on a new 20-year triple net master lease from a blue-chip tenant.
Best In Class Capital And Risk Management
From a financial perspective, Keppel DC REIT is the best-in-class among S-REITs in capital management and interest rate risk management. Its aggregate leverage of 32 percent is one of the lowest among industrial REITs. This translates to debt headroom of eight percent to grow its existing portfolio by 13.5 percent. Keppel DC REIT has also been managing its interest rate risk by hedging 86 percent of its debt.
BUY, TP $1.45
- Ant Man: Sheng Siong Group
Don’t Be Fooled By Its Small Size. It Packs A Punch
Sheng Siong Group is like Antman. It looks harmless but it actually packs a punch. You will be surprised by how much positive return Sheng Siong can bring to your portfolio.
Six Consecutive Years Of Expanding Gross Margin
In 2018, Sheng Siong underwent a record expansion with the opening of ten new stores. Investors can expect another nine new stores to open in 2019 to support revenue growth in FY19. Besides expanding, Sheng Siong has also been undergoing massive improvement in store productivity. Store revenue per square foot has grown by four percent p.a. over the last five years.
Another impressive output can be seen from Sheng Siong’s rising gross margin. For the last six years, gross margin has been expanding year-on-year without fail. This was driven by a shift in contribution towards fresh food product which comes with greater gross margin. The establishment of central warehouses and strong bargaining power from its size and concentration of supermarket chains in Singapore will further push Sheng Siong’s gross margin.
Despite packing a punch, Sheng Siong is still attractively priced with a Return On Equity (ROE) of 25 percent and a net cash balance of $89 million.
BUY, TP $1.13
The Avengers: SG Stocks Edition (Part 2)