UOBKH adds Aztech, Thai Beverage to February alpha picks

UOB Kay Hian (UOBKH) has added Aztech Global 8AZ and Thai Beverage (ThaiBev) Y92 shares to its alpha picks for the month of February, and removed ComfortDelGro C52 and Uni-Asia Group CH J.

In a strategy note on Thursday (Feb 3), the brokerage said that Aztech was added with a target price of S$1.55 as its share price correction presented a good buying opportunity due to its strong order book and intact operations.

Analyst John Cheong finds the company's current trading price unjustified, as it is trading at 7 times its price-to-earnings ratio, compared to its peers trading at above 10 times.

Shares of Aztech rose S$0.015 or 1.8 per cent to close at S$0.86 on Thursday.

The lighting manufacturing company's recent buyback of 1.9 million shares, which account for 0.2 per cent of its total shares, is seen as a "vote of confidence", Cheong said.

He also predicted "robust" Q4 FY2021 results for the company, as it serves as a proxy to the high-growth sector of Internet of Things products, where orders were just starting to ramp up in 2021 and would sustain into 2022.

Meanwhile, analyst Llelleythan Tan added ThaiBev with a target price of S$0.92, expecting the beverage company to benefit from Thailand's tourism revival and boost to consumption with the relaxation of alcohol consumption rules.

ThaiBev's strong December and November 2021 sales numbers could also positively impact its upcoming Q1 FY2022 earnings, he observed.

Tan also noted that the potential initial public offering of ThaiBev's beer subsidiary may unlock value for the group in the first half of FY2022, "conservatively" valuing the beer business at around US$5 billion using 13 times its Ebitda (earnings before interest, taxes, depreciation and amortisation), which is lower than its peers.

ThaiBev shares closed flat at S$0.655 on Thursday.

The brokerage has dropped ComfortDelGro and Uni-Asia from its February alpha picks as they do not see any near-term share price catalysts for both counters. However, it is bullish towards ComfortDelGro in the longer term.

UOBKH's alpha picks performed poorly in January against the Straits Times Index (STI), declining 1.8 per cent month on month versus a 4 per cent rise in the STI.

The portfolio was "hurt by real estate investment trusts (Reits) and small caps", although the brokerage remains bullish on selective Reit sub-sectors and has not changed its stock calls. Frasers Logistics and Commercial Trust B UOU was the main underperformer, dropping 9.9 per cent month on month.

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