Real estate, industrials top performers on SGX

The industrials sector maintained an average price-to- earnings ratio of 20 times, with Singapore Airlines posting a ratio of 37 times.
The industrials sector maintained an average price-to-earnings ratio of 20 times, with Singapore Airlines posting a ratio of 37 times.ST PHOTO: JAMIE KOH

Numbers reflect turnaround for both industries; financial stocks also did well

Real estate firms, financials and industrials are the best-performing stocks on the local market, the Singapore Exchange said .

While the Straits Times Index has generated a 13.2 per cent price gain so far this year, the eight real estate stocks in the benchmark averaged a 24.1 per cent increase over the same period.

The STI's four financial stocks have chalked up an average gain of 15 per cent, while the 10 industrial stocks have risen by an average of 13.6 per cent.

The numbers reflect a turnaround for the real estate and industrials sectors, both of which declined last year.

Real estate shares posted an average decline of 0.5 per cent in 2016 while industrial stocks fell by 5.2 per cent on average.

Among the property players, some of the biggest turnarounds have come from UOL Group, CapitaLand and Ascendas Reit, all of which ended in the red last year, but have since made gains of at least 15 per cent so far this year.

Indeed, UOL Group is among the STI's five strongest price performers this year, along with two other real estate plays - Global Logistic Properties (GLP) and City Developments (CDL).

Valuations for the stocks in these three sectors are mostly at or above historical standards, the SGX noted.

The three banks have an average price-to-book ratio of 1.2 times, while real estate stocks have an average price-to-book ratio of 1, the SGX said.

The price-to-book ratio allows investors to compare the stock's value on the market, relative to its book value.

The local banks' share prices have largely been buoyed this year by their strong financial results, but have recently been affected by renewed concerns over their exposure to the offshore oil and gas industry.

GLP, CDL and UOL, the three strongest performers among real estate stocks, have price-to-book ratios above their five-year average.

GLP has surged 47.7 per cent so far this year, while CDL has soared 39.3 per cent and UOL has shot up 35.7 per cent.

Meanwhile, the STI stocks representing the industrials sector maintain an average price-to-earnings ratio of 20 times, the SGX said.

The price-to-earnings ratios of these 10 STI stocks range from 7 times for Jardine Matheson Holdings to 37 times for Singapore Airlines.

The price-to-earnings ratio, which indicates how much the market values a stock relative to the income it has actually generated over the past 12 months, is commonly used to discuss valuations in the industrials and consumer sectors, while the price-to-book ratio is commonly used for the valuation of the financial and real estate industries.

A version of this article appeared in the print edition of The Straits Times on August 31, 2017, with the headline 'Real estate, industrials top performers on SGX'. Print Edition | Subscribe