Excerpts from UOB Kay Hian report

Selected quality mid-caps to provide alpha. CAO and DFI both outperformed the FSSTI in Jan 17 and remain on our BUY list – given CAO’s strong structural outlook in the aviation sector in China and given that DFI’s earnings have not yet fully reflected the benefits from its Heinemann partnership.

uobkh2.17In addition, its strong financials also opens up the possibility for accretive M&As.

DFI recently rewarded patient shareholders with a 3QFY17 interim dividend of 1.25 S cents and a 2-for-5 bonus warrant issue, which surpassed our expectations.

We added in Food Empire as it is the dominant coffee mix market leader in Eastern Europe. With the revival of the rouble and the explosive growth in Vietnam, profits should recover nicely in 2016-17.

Food Empire - BUY (Nicholas Leow/Edison Chen)
maccoffee variants♦ Food Empire is a dominant coffee mix market leader in Eastern Europe with a market share of more than 50% in Russia and more than 40% in Ukraine.

The company has raised prices in excess over local inflation in the last few years which demonstrates its immense pricing power in its core Eastern European markets.

♦ With a stable ruble and potential for Russian sanctions relief from the new US President Donald Trump, we expect a strong sustainable rebound in net profit for FY16 with the potential to return to paying dividends once again.

♦ Any upside to the US$/RUB will see further upward adjustments to our target price.

Share Price Catalyst
♦ Event: Sustained earnings growth momentum in 4Q16 and a return to paying dividends.

♦ Timeline: Potential upside in upcoming 4Q16 results (mid- to late-February) from a stable US$/RUB.

Full report here.

Share Prices

Counter NameLastChange
AEM Holdings2.1600.020
Avi-Tech Electronics0.405-
Best World Int.1.360-
China Sunsine0.460-
CNMC GoldMine0.245-
CSE Global0.560-
Eagle HTrust USD0.520-0.010
Food Empire0.7400.020
Golden Energy0.169-
GSS Energy0.102-0.002
ISDN Holdings0.2050.005
JB Foods0.6250.020
KSH Holdings0.400-
Moya Asia0.081-
Nordic Group0.315-
Oxley Holdings0.345-
REX International0.2050.005
Sing Holdings0.4150.015
Straco Corp.0.5700.005
Sunningdale Tech1.2800.020
Sunpower Group0.550-0.010
The Trendlines0.1320.011
Tiong Seng0.198-0.001
Uni-Asia Group0.7000.005
Yangzijiang Shipbldg1.000-0.010

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