4 Stocks This Week (Mid-Cap Institutional Inflow) [7 May 2020] AEM; Q&M; NetLink; StarHub
After getting a beat down in March, April has been a relatively ‘stable’ month for the financial markets in comparison. The Straits Times Index (STI) even managed to eke out a gain, increasing from 2,481 as of 31 March to 2, as of 8 May. With COVID-19 still shutting down many economies, only time will tell if the worse is already behind us, or if the financial markets may suffer a second dip in the coming months.
April 2020 also saw some mid-cap stocks on the Singapore Exchange (SGX) doing better than the STI. Some of these stocks have captured the attention of institutional investors and are already giving good short-term returns to their investors.
In this week’s edition of 4 Stocks This Week, we look at some mid-cap stocks that have garnered the most attention from institutional investors this week, and how they have performed thus far for the year.
AEM Holdings Ltd (SGX: AWX)
AEM is a semiconductor company that provides customised system solutions to advanced manufacturers across various industries around the world, as well as designing and manufacturing precision engineering products used in the electronics, life sciences, instrumentation and aerospace industries.
Despite the uncertainty over the COVID-19 pandemic, it appears that AEM order book has not been affected. AEM announced on 6 May that it had received about $416 million in sales order for FY2020. On 28 April, the group also announced a 449% jump in profits before tax to $43.8 million for 1Q2020.
These positive announcements have led to its stock price increasing by 45% within less than two weeks. It has increased from 2.18 as of 28 April to 3.08 as of 8 May. The company started the year with its stock price at 2.02.
Since 23 March 2020, AEM has seen a net institutional inflow of $19.1 million, which represents about 2.8% of its market capitalisation of $671 million.
Q & M Dental (SGX: QC7)
Established in 1996, Q & M Dental is the largest private healthcare group in Singapore with over 70 dental clinics located across Singapore.
In April, it was announced that Q & M Dental Group is investing about $3 million to build a new COVID-19 testing business via a joint venture with scientist Dr Ong Siew Hwa. The company believes there will be a demand for these diagnostic test kits. It is also setting up a polymerase chain reaction laboratory in Singapore to analyse test results. Additionally, it has plans to conduct clinical trials, as well as manufacture, sell and distribute vaccines for viruses such as COVID-19.
Given the intentions and the investments made by the company, investors are naturally bullish about the company’s future.
After hitting a low of 0.36 on 26 March, the company has bounced back strongly thanks to its announcement, hitting a high of 0.54 on 23 April. It’s now at 0.495 as of 8 May.
Since 23 March 2020, Q & M has seen a net institutional inflow of $3.1 million, which represents about 0.8% of its market capitalisation of $378 million.
NetLink NBN Tr (SGX: CJLN)
Netlink is a company that builds, owns and operates the passive fibre network infrastructure for homes and non-residential premises, and non-building address points (NBAP) in Singapore.
This is the same fibre network which telco providers use to provide broadband access to you. It has approximately 1.3 million residential end-user connections and more than 45,000 non-residential end-user connections.
A defensive stock, NetLink generates a large part of its revenue from residential connections. NetLink is essentially a monopoly in the residential fibre network business. Its revenue source primarily comes from one-off installation and a monthly recurring connection charge. So as long as people in Singapore are using fibre networks in Singapore, Netlink will do well.
During this uncertain period, investors clearly appreciate the robust business model of Netlink. Netlink started the year with its share price at 0.94. After experiencing a steep decline in March, where its price dropped to 0.795, it has recovered and its now trading at 0.985.
Given the low interest rate environment, it appears that many investors are now preferring the stable and higher dividends that they can get through Netlink. The company regularly pays about 0.05 in dividends each year, paid semi-annually.
Since 23 March 2020, Netlink has seen a net institutional inflow of $27.5 million, which represents about 0.7% of its market capitalisation of $3.89 billion.
StarHub (SGX: CC3)
After the delisting of M1 in 2019, StarHub remains as just one of two telcos that you can invest in on the SGX. Compared to SingTel, it’s a much smaller player.
Similar to most other companies, 2020 has been a challenging year for StarHub. Due to the impact of COVID-19, the company posted a decline of 25.7% in its 1Q2020 profits to $40 million as compared to a year ago. It also expects global travel restrictions and circuit breaker measures (less data needed if you are staying at home) to impact its revenue.
Service Revenue for StarHub declined 8.9% to S$404.9 million, as a result of lower revenues from Mobile, Broadband and Pay TV.
On a positive note, the Enterprise business recorded a 13.9% increase in revenue to S$152.8 million, led mainly by a 136.8% rise in Cybersecurity Services revenue to S$62.4 million. The company also managed to reduce its operating expenses by 14.5% to $448 million.
Despite the challenges of COVID-19, StarHub stock has been positive for 2020. At the start of the year, stock price was at 1.42. On 8 May 2020, it closed at 1.43.
Since 23 March 2020, StarHub has seen a net institutional inflow of $15 million, which represents about 0.5% of its market capitalisation of $2.58 billion.
Find out more about what other stocks institutional investors are investing into during this period in this SGX Market Update report.
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