Bank of America picks 10 Asia stocks to buy this quarter

Published Thu, Oct 14 20217:20 PM EDT

Analysts at Bank of America have named their "top Asia Pac ideas" through to year end, and gave six of their picks potential upside of 20% or more. Names on Bank of America's list offer exposure to diverse industries and include some of Asia Pacific's most recognizable companies. All are buy-rated by the bank. "We present our new list of 10 short-term stock recommendations among Asia Pac companies we cover, based on our view that these stocks could have the most significant market and business-related catalysts in the quarter ahead," the analysts, led by Christine Tan, said in a note dated Sept. 29. Top stocks Precision equipment maker Olympus has the highest potential upside among the bank's stock picks at 45%. The global market leader in gastrointestinal endoscopes is in the midst of a restructuring, which could see the company deliver "earnings improvement," the analysts said. The bank is anticipating the company to deliver growth of 18% through 2024, boosted by "multiple revenue drivers." Taiwan-listed Unimicron , a printed circuit board manufacturer and Apple supplier, has 42% potential upside, according to Bank of America. The bank expects the firm to benefit from a protracted supply squeeze and stronger growth in the average selling price of its ABF substrate. The company's "higher-than-peers capacity increase" will also bode well amid stronger structural demand growth for the ABF substrate, the analysts added. ABF substrate is an important component in the production of semiconductors. The bank likes South Korea's largest discount store, E-mart, for its "on-going earnings turnaround momentum, and growth potential from e-commerce business in Korea with SSG.com and eBay Korea." E-mart had acquired a controlling stake in eBay 's Korean business for $3 billion in June. The bank's analysts added that same-store sales growth momentum is expected to "remain in the positive in 2021" and put its potential upside at 33%. The bank added that as e-commerce continues to take off strongly in Southeast Asia, Singapore-headquartered internet company Sea is best positioned to ride the boom, given the dominance of its online marketplace Shopee. It believes the company is best placed to benefit from the region's growing affluence, while strong cashflow from the company's gaming platform Garena would allow "Sea to invest in new businesses which would help unlock value in future." Other positives for the company include its expansion into Brazil as well as opportunities through its $1 billion Sea capital fund, the analysts added. They are also bullish on Hong Kong-listed real estate developer Longfor Group for "its solid execution, reputable brand name and proven track record." The company enjoys an "industry-leading growth outlook," the analysts noted, and an outsized exposure to the "most fast-growing non development property businesses" that is expected to grow by 30% in the next few years. Japan's Sony made the bank's list too, with the bank's conviction driven by the company's medium-to-long term earnings growth as a result of its diverse businesses. The company's recent acquisitions to grow its content business could help boost Sony's valuation and offers potential cross-content synergies, the analysts noted. Bank of America estimated the stock has potential upside of 25%. The remaining four stocks on BofA's list of top Asia picks for the fourth quarter are Indian conglomerate Larsen & Toubro , Mahindra Finance , also headquartered in India, Japanese camera and optics firm Nikon and Chinese consumer electronics giant Xiaomi .

Brendan McDermid | Reuters

Analysts at Bank of America have named their "top Asia Pac ideas" through to year end, and gave six of their picks potential upside of 20% or more.