DBS Vickers Securities (DBSVS) has listed 3 best small-cap stocks with sustainable earnings growth in 2021 amid the global economic slowdown resulting from Covid-19 pandemic. Here are the top 3 small caps to keep an eye on:
EKH : “BUY” recommendation with a target price of ฿7.00/share
Ekachai Medical Care Public Company Limited (EKH) operates the hospital under the name Ekachai Hospital in Samut Sakhon. Ekachai is the only hospital that offers complete services for In-vitro Fertilization (IVF) in Samut Sakhon Province.
DBSVS expected EKH’s 2021 revenue to grow 20% YoY as well as GPM underpinned by the opening of a new hospital with 39 fully-equipped Inpatient beds in 1Q22. While 2021-2023 earnings are expected to expand 41%, 23% and 17%, respectively. Also, EKH is interested in using cannabis as a medication.
Risk: revenue growth could miss the expectation due to more competitors in the market.
MICRO : “BUY” recommendation with a target price of ฿13.00/share
Micro Leasing Public Company Limited (MICRO) is one of Thailand’s largest hire purchase financing providers for second-hand trucks. The main client groups are used car tent sales and auto dealers. Currently MICRO has 12 branches nationwide with about 390 business allies.
MICRO aims to expand its hire purchase portfolio to 5 billion baht by 2022 and planned to open new 8 branches in 2021-2022. However, with DBSVS’s conservative view, it estimated MICRO’s hire purchase portfolio to stand at 4.3 billion baht by the end of 2022 and EPS growth in 2021-2022 at 33% and 40%, respectively.
DBSVS favors MICRO because 1) hire purchase financing for second-hand trucks business has high yield and LTV is lower than new trucks, 2) business with less competition and 3) has a strong growth outlook.
Risk: government intervention through regulation.
SFLEX : “BUY” recommendation with a target price of ฿7.00/share
The acquisition of 50 million share or about 6.09% of Starflex Public Company Limited (SFLEX) by BTS has regained investors’ confidence to SFLEX.
SFLEX said that the demand for flexible packaging tends to increase and the company also has a plan to expand its customer bases.
For the year 2021, SFLEX set aside about 300 million for investments in hopes of ramping up production capacity to 270 million meters per annum. COD is scheduled in 2022.
DBSVS expected SFLEX’s revenue to grow at least 10% YoY this year as the company has raised production capacity for high-margin packaging products. Full-year net profit is estimated at 186 million baht, an increase of 33% YoY, while 1Q21 earnings would grow 15-20% YoY.