Analyst
Analyst
Highlights
- We screened the 30 STI component stocks for companies with sound fundamentals but are trading at a significant discount in terms of PE or P/B.
- YZJ’s 2026F PE of 9.5x is the lowest among the 30 STI component stocks. It has the potential to re-rate towards peers’ average 2028F PE of 11.3x. CityDev’s P/B 0.77x is the fifth lowest. The unveiling of CityDev’s strategic review by Sep 26 could be a catalyst for re-rating. MPACT’s P/B of 0.73x is the fourth lowest. A recovery for Festival Walk in Hong Kong and three office buildings at the Makuhari sub-market in Chiba City could generate a turnaround.
What’s New
- Screening for the underappreciated gems. We screened the 30 STI component stocks for companies with sound fundamentals but are trading at a significant discount in terms of PE or P/B. We identified Yangzijiang Shipbuilding (YZJ), City Developments (CityDev) and Mapletree Pan Asia Commercial Trust (MPACT) as laggards that have the potential to be re-rated and catch up with the rally in the broader market.
- Yangzijiang Shipbuilding (YZJSGD SP/BUY/Target: S$5.30)
- We like YZJ for its strong earnings visibility and resilient margins. Its US$22.4b orderbook provides visibility through 2029, with 2029 delivery slots nearly full. Contract pricing also remains strong, allowing YZJ to avoid price competition and largely secure profitability through 2029.
- We also see earnings upside from strong execution and capacity expansion. 1H26 net profit rose 28% yoy to Rmb5.37b, while shipbuilding gross profit margin reached 37.1% on higher-priced contracts and favourable vessel mix. The new Hongyuan yard should provide another growth leg, potentially contributing around 20% of group revenue from 2027.
- Finally, its valuation remains attractive. YZJ trades at 9.5x/8.3x 2026F/27F PE with 5.3-6.0% prospective dividend yields, backed by a strong net-cash balance sheet and ~30% ROE. Its 2026F PE is the lowest among the 30 STI component stocks. Our S$5.30 target price implies 9.1x 2028F PE, or 1.5SD above YZJ’s historical mean PE of 6.2x. Our target 2028F PE is still conservative, at a 20% discount to peers’ average 2028F PE of 11.3x.
- City Developments (CIT SP/BUY/Target: S$11.50)
- CityDev’s strategic review is aimed at accelerating the transformation into an asset-light real estate platform. The review is expected to assess options, such as increased capital recycling, expansion of its fund management business, and potential divestment of lower-yielding assets. Management could unlock the value embedded within CityDev's substantial global portfolio of development projects, commercial properties and hotels, while improving ROE. The review could lead to a more aggressive asset monetisation programme and a larger recurring income base. The strategic review is expected to be unveiled by Sep 26.
- CityDev trades at P/B 0.77x, which is the fifth lowest among the 30 STI component stocks and 1SD below the long-term mean.
- Maintain our BUY rating with a target price of S$11.50, pegged to a 15% discount to RNAV of S$13.54. Further narrowing of this discount could be possible if CityDev demonstrates material progress in its capital recycling programme and unlocking of value for its non-core assets.
Highlights
- We screened the 30 STI component stocks for companies with sound fundamentals but are trading at a significant discount in terms of PE or P/B.
- YZJ’s 2026F PE of 9.5x is the lowest among the 30 STI component stocks. It has the potential to re-rate towards peers’ average 2028F PE of 11.3x. CityDev’s P/B 0.77x is the fifth lowest. The unveiling of CityDev’s strategic review by Sep 26 could be a catalyst for re-rating. MPACT’s P/B of 0.73x is the fourth lowest. A recovery for Festival Walk in Hong Kong and three office buildings at the Makuhari sub-market in Chiba City could generate a turnaround.
What’s New
- Screening for the underappreciated gems. We screened the 30 STI component stocks for companies with sound fundamentals but are trading at a significant discount in terms of PE or P/B. We identified Yangzijiang Shipbuilding (YZJ), City Developments (CityDev) and Mapletree Pan Asia Commercial Trust (MPACT) as laggards that have the potential to be re-rated and catch up with the rally in the broader market.
- Yangzijiang Shipbuilding (YZJSGD SP/BUY/Target: S$5.30)
- We like YZJ for its strong earnings visibility and resilient margins. Its US$22.4b orderbook provides visibility through 2029, with 2029 delivery slots nearly full. Contract pricing also remains strong, allowing YZJ to avoid price competition and largely secure profitability through 2029.
- We also see earnings upside from strong execution and capacity expansion. 1H26 net profit rose 28% yoy to Rmb5.37b, while shipbuilding gross profit margin reached 37.1% on higher-priced contracts and favourable vessel mix. The new Hongyuan yard should provide another growth leg, potentially contributing around 20% of group revenue from 2027.
- Finally, its valuation remains attractive. YZJ trades at 9.5x/8.3x 2026F/27F PE with 5.3-6.0% prospective dividend yields, backed by a strong net-cash balance sheet and ~30% ROE. Its 2026F PE is the lowest among the 30 STI component stocks. Our S$5.30 target price implies 9.1x 2028F PE, or 1.5SD above YZJ’s historical mean PE of 6.2x. Our target 2028F PE is still conservative, at a 20% discount to peers’ average 2028F PE of 11.3x.
- City Developments (CIT SP/BUY/Target: S$11.50)
- CityDev’s strategic review is aimed at accelerating the transformation into an asset-light real estate platform. The review is expected to assess options, such as increased capital recycling, expansion of its fund management business, and potential divestment of lower-yielding assets. Management could unlock the value embedded within CityDev's substantial global portfolio of development projects, commercial properties and hotels, while improving ROE. The review could lead to a more aggressive asset monetisation programme and a larger recurring income base. The strategic review is expected to be unveiled by Sep 26.
- CityDev trades at P/B 0.77x, which is the fifth lowest among the 30 STI component stocks and 1SD below the long-term mean.
- Maintain our BUY rating with a target price of S$11.50, pegged to a 15% discount to RNAV of S$13.54. Further narrowing of this discount could be possible if CityDev demonstrates material progress in its capital recycling programme and unlocking of value for its non-core assets.
Analyst
Analyst
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