Getting it right in uncertain times

CIMB-GK has won accolades for its stock recommendations last year

22 March 2010

It’s all about having access to information, says CIMB-GK Singapore research head Kenneth Ng.

‘In this business, the strongest thing is information. You can be the smartest analyst out there, with an IQ of 1,000, but if you don’t have information, you cannot do a lot,’ he says.

Mr. Ng should know what he’s talking about. Thomson Reuters’ analysis firm StarMine ranked CIMB-GK top last year for recommendations on Straits Times Index stocks, and second for recommendations on small and mid-cap counters.

‘We have analysts who have been covering companies for a long time,’ says Mr. Ng, who has been in the industry for 10 years. These analysts have good access to information – and, more importantly, they share what they learn with colleagues during morning breakfast breaks, he quips.

As well as those who are good at gathering news, there are others who excel at breaking numbers down, piecing diverse facts together or presenting data. Put them together and you have a strong team.

StarMine highlighted four calls by CIMB-GK as noteworthy, and Mr. Ng’s rating on United Overseas Bank is one of them.

Back in April, when the financial crisis was still deepening, the last thing most people wanted to invest in was a bank. But it was then that Mr. Ng upgraded his recommendation on UOB to ‘out-perform’ from ‘under- perform’.

Not only that, CIMB-GK called the bottom of the stock market in April, Mr. Ng says. The Straits Times Index had started picking up in March but most investors were still unsure if that was a false dawn.

Making that call on the broad market was tough, Mr. Ng recalls. ‘Although things looked so cheap, sometimes the pressure was there to downgrade. Good analysts are those who can hold their ground.’

Two other analysts from CIMB-GK also scored well with StarMine – Ho Choon Seng and Jonathan Ng, for their bullishness on Noble Group and Broadway Industrial Group respectively.

Mr. Kenneth Ng could be referring to deputy head Mr. Jonathan Ng when he talks about having analysts with good access to information – the latter has been researching companies for 16 years.

Even then, Mr. Jonathan Ng acknowledges: ‘Last year was definitely tough in terms of earnings forecasts.’

Because of the low earnings visibility, he had to look at indicators such as price-to-book ratio to help him determine whether a counter was cheap.

Compared with the two Mr. Ngs, Mr. Ho appears to be the newbie, with just three years’ experience under his belt. But his recommendations also caught StarMine’s attention – and not for the first time. He was ranked first for coverage of retail and consumer stocks in the 2009 StarMine Analyst Awards.

There was great pressure to downgrade stocks in the early part of last year, Mr. Ho says. ‘It’s easier for a lot of people to follow the general momentum. But as analysts, we try very hard to look at valuations. You need your own view at the end of the day. You need to do your own homework.’


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