Five stocks on the Singapore market you wish you had bought in 2020

Among this year's best performers on the S'pore market are non-STI constituents, highlighting need to look beyond the stock benchmark

Sheng Siong Group’s stock has rallied more than 30 per cent so far in 2020. PHOTO: ST FILE

The ardent job of presenting five Singapore Exchange-listed stocks that performed brilliantly in the first 11 months of this year starts with some simple objectivity and reasoning.

First, the five were among the 50 most traded stocks on the Singapore Exchange (SGX). Second, they generated the strongest gains and were the best performers in their respective industries.

The five stocks' vibrancy also extended to multiple milestones, with a number of notable accolades beyond the heavy trading participation and solid share price performances. Going into 2020, just one of the five was a Straits Times Index (STI) constituent, underscoring the importance of keeping an eye beyond the stock benchmark.

1. Medtecs International Corporation

Manufacturers and distributors of medical supplies, including rubber gloves and personal protective equipment (PPE), have generated exponential returns in the year to date. Besides Catalist-listed Medtecs, another three stocks - secondary-listed Top Glove Corporation, Riverstone Holdings and Catalist-listed UG Healthcare - could easily have been included in this column on significant turnover growth and instances of share price returns paralleling financial returns.

When it comes to this genre this year, Medtecs saw the most share price returns and turnover of this industry, soaring more than 2,200 per cent from 3.7 cents per share to 87.5 cents. The stock has averaged more in daily turnover this year ($21 million) than it maintained in market capitalisation at the end of last year ($20 million).

For its first nine months of FY20 (ended Sept 30), Medtecs reported a 1,442 per cent increase in its gross profit. This has been mostly attributed to the exporting of PPE to over 30 countries in South-east Asia, North Asia, the United States, Australia and Europe. It also serves as a one-stop vendor to hospitals, supplying PPE, workwear and medical consumables to more than 200 hospitals in Taiwan and the Philippines.

Other notable accolades this year include joining the MSCI Singapore Small Cap Index on Nov 30 and the board proposing to apply for a transfer from Catalist to the main board.

On Nov 18, Medtecs chief executive William Yang, who has over 10 years' experience in the textile industry, acquired one million shares of the company at an average price of 92.2 cents per share.

The group intends to increase its market share in the US by supplying locally manufactured face masks starting in the first quarter of FY21, while key growth markets in the Asia-Pacific such as Singapore, the Philippines and Taiwan remain. It is also aiming to raise productivity by systematically automating manufacturing processes and enhancing employee training and education programmes to remain competitive.

2. AEM Holdings

The company still ranks among the 30 most traded stocks this year with more than $20 million of shares changing hands daily. AEM is one of the few stocks that have seen net inflows by both institutional and retail investors this year, with liquidity providers accounting for the outflows.

As a provider of application specific intelligent system test and handling solutions for semiconductor and electronics businesses, AEM has seen its share price continue to gain this year. The price has moved from $2 at the end of last year to over $3.50 by early this month.

This means the stock has rallied 74 per cent this year. Moreover, AEM maintains its status as the best performing global technology stock with a current market capitalisation above US$500 million (S$666 million) since the global re-rating of technology stocks at the beginning of 2016.

On Nov 3, AEM raised its FY2020 (ending Dec 31) revenue guidance to be between $500 million and $520 million based on the sales order visibility and business outlook. It also reported a record FY19 financial performance, achieving revenue of $323 million.

The Employees Provident Fund Board of Malaysia emerged as a substantial shareholder of AEM early last month. Recent years have also seen AEM frequently labelled a growth stock with a 1.9 times price-to-sales ratio. The company has built up its capabilities in advanced testing solutions over the past few years.

3. Keppel DC Reit

The company was again the best performer of the S-Reit sector in the year to date, after winning the title last year. From its debut in December 2014, Asia's first pure-play listed data centre made it into the STI in less than six years, joining it on Oct 19.

The Reit debuted with a market capitalisation of $821 million, with a string of acquisitions seeing its market capitalisation grow more than fivefold to $4.7 billion.

Its portfolio assets under management (AUM) have grown from $1 billion to $2.9 billion as at Sept 30, excluding Intellicentre 3 East Data Centre with development expected for completion in the first half of FY21.

With over 40 per cent total return, Keppel DC Reit has been the eighth-best performer of all global Reits with current market capitalisation above $500 million.

Since its listing, Keppel Reit has also outpaced the world's biggest data centre Reit, Equinix.

For its first nine months of FY20 (ended Sept 30), Keppel Reit's net profit grew 37 per cent from the same period in FY19, attributed to widespread lockdowns contributing to an accelerated adoption of digital technology. Its 9MFY20 distribution per unit increased 16.5 per cent year on year to 6.7 cents while distributable income went up 41.2 per cent to $115.5 million.

The Reit also secured new take-ups at co-location facilities in Singapore and Dublin, as well as early lease renewal at iseek Data Centre in Brisbane, Australia. Data centres located in the Asia-Pacific make up approximately 70 per cent of the portfolio AUM.

With regard to its tenants, Internet Enterprise under the trade sector makes up close to 50 per cent of the portfolio's rental income.

According to the minutes in the FY18 annual general meeting, Keppel DC Reit Management reiterated its policy of not sharing tenant names. This was due to confidentiality to the location of the data centres, an important part of client relationships.

4. Sembcorp Industries

On Sept 11, Sembcorp Industries (SCI) demerged from Sembcorp Marine (SCM) to become a focused energy and urban business, with a renewed mandate to unlock value for investors.

SCI is Singapore's largest capitalised utility stock and has a balanced thermal and renewable energy portfolio of over 12,600MW, with more than 2,600MW of renewable energy capacity globally.

The demerger saw SCI shift its previous SCI stake in the recapitalised SCM to SCI shareholders, in the form of 4.911 SCM securities for every one existing SCI security. Taking into account this corporate action on shareholder returns, SCI has generated more than 30 per cent total returns in the year to date. SCI's share price has so far surged 47 per cent. This placed SCI as the strongest performer on the STI, which gained 14 per cent by comparison.

On the mega trends, SCI announced it had signed a memorandum of understanding to study the use of integrated energy solutions to power data centres with CapitaLand and SP Group.

One of the targeted outcomes for SCI in the partnership is to determine the most efficient deployment for green hydrogen fuel cell technologies in Singapore to reduce the carbon footprint of data centres. The announcement also cited a June report by the International Energy Agency, that global data centre electricity demand last year contributed close to 1 per cent of global demand and was equivalent to the annual consumption of about 47 million four-room HDB flats and 83.76 million tonnes of carbon emissions.

5. Sheng Siong Group

The stock of Sheng Siong Group (SSG) has also rallied more than 30 per cent in the year to date following a 21 per cent total return last year. The stock has remained in the top 50 stocks by turnover this year, after ranking among the top 70 stocks by turnover last year.

For its first nine months of FY20 (ended Sept 30), SSG reported 48 per cent growth in its gross profit from the same period in FY19. The group's balance sheet remained healthy with net cash of $180 million as at Sept 30, which is up from $76 million at the end of FY19.

The financial results coincided with elevated supermarket demand since February, which peaked in April and May and eased following the lifting of the circuit breaker in June. SSG has noted that demand appeared to have stabilised in the third quarter of FY20, albeit higher than pre-Covid-19 levels.

The group has maintained expectations since June that competition in the supermarket industry will remain keen and challenging among the traditional brick-and-mortar operators and e-commerce platforms, which have gained a larger share since the onset of Covid-19.

Founded in 1985 by Mr Lim Hock Eng, Mr Lim Hock Chee and Mr Lim Hock Leng, SSG has grown its presence to 64 outlets, primarily located in retail locations in the heartland of Singapore.

SSG's main source of growth is the opening of new stores in high-density housing areas and areas where it does not have a presence. During the recent quarter, SSG opened two new stores at 6 Potong Pasir Avenue 2 and Tampines Street 86 Block 872C with a retail area of 4,600 sq ft and 8,500 sq ft respectively.

In a recent business update, Mr Lim Hock Chee said the group would continue with its efforts in enhancing gross margin via higher sales mix of fresh produce and more efficiency gains in the supply chain.

• The writer is the strategic market analyst for the Singapore Exchange.

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