Singapore companies are top value creators
Singapore-listed companies are among the top value creators in Southeast Asia. In terms of total shareholder return (TSR), a Singapore-listed company has a return of 36 per cent over the past five years on the average. This is considerably higher than the global average of 17 per cent and the Southeast Asia average of 32 per cent.
The Business Times article provides a breakdown of the TSR of some Singapore-listed companies. Read the following article to find out more.
S’pore companies in top value-creating firms list
Investors looking for companies that generate good shareholder returns need look no further than the local bourse. Singapore Exchange-listed companies have shown up on the radar as among top value creators in South-east Asia. Twenty-one of them made the league table of the top 50 South-east Asian companies for total shareholder return (TSR) over the past five years, driven by capital gains and cashflow yields.
The Boston Consulting Group ranked 184 companies listed on the primary exchanges of Singapore, Indonesia, Malaysia and Thailand. Companies must have had a market cap of US$500 million or more as at June 30, with at least five years of public information available. Sixty-one such companies are listed in Singapore, 55 in Malaysia, 35 in Indonesia and 33 in Thailand.
On average, a Singapore-listed company had a TSR of 36 per cent over the past five years, versus the global average of 17 per cent for the top 650 companies in the world and the South-east Asian average of 32 per cent. Blue chips like Singapore Exchange (SGX), Singapore Petroleum Co (SPC), SembCorp Industries, Keppel Corporation, Jardine Cycle and Carriage and CapitaLand earned spots in the top 50.
This is no surprise, says Terence Wong, co-head of research at DMG & Partners Securities, who notes that many of these Singapore companies are regional powerhouses and have benefited from the region’s robust growth in recent years.
Many have also benefited from cyclical upturns in their industries, says CIMB-GK research head Kenneth Ng. “Singapore companies generally tend to have very good governance and tend to return cash to shareholders by ways of dividends or special capital payouts.”
SGX, the only Singapore financial institution in the top 50, generated five-year TSR of 86 per cent between 2003 and 2007 in tandem with an uptrend in stockmarket performance, during which the Straits Times Index surged 166 per cent from 1,302.85 points at end-2003 to 3,465.63 by end-2007. Sectoral strengths have played out. Property companies Keppel Land, CapitaLand, Guocoland and Wing Tai made the list as they rode the global property boom, particularly in 2006 and 2007. Healthcare providers Parkway Holdings and Raffles Medical Group each generated TSR of 55 per cent between 2003 and 2007.
Oil and gas players also enjoyed high TSR, buoyed by burgeoning orders for vessels and rigs, against a backdrop of ageing fleets and booming oil and gas exploration and production sparked by the surge in oil prices. SPC generated 71 per cent five-year TSR while Jaya Holdings’ TSR grew 67 per cent and Keppel Corp’s increased 61 per cent in the same period.
“The likes of Keppel Corp have benefited from the rise in the oil and gas industry because for the past five years, they were boom years for this sector,” says DMG’s Mr Wong.
But with these cyclical strengths tapering off with the economic downturn, the previous high TSRs of some of these companies no longer look sustainable, analysts reckon. For instance, Golden Agri Resources, whose TSR between 2003 and 2007 surged 114 per cent, could see downward pressure from its recent share price slump following the melt-down in crude oil and crude palm oil (CPO) prices.
Many Singapore companies have already done much of their capital distribution, having started in an over-capitalised position with spare capital to return some five years ago, says CIMB-GK’s Mr Ng. “I don’t think TSRs will stay at that kind of high level.”
Dinesh Khanna, a principal at BCG Singapore and head of BCG’s Corporate Development Practice in South-east Asia, believes the global economic crisis will cause some pain to Singapore firms as no market is immune. Like their overseas peers, many Singapore companies have marked declines in TSR in the first half of this year in the heat of broad market sell-offs. But the relatively healthy balance sheets of Singapore companies will help them ride the economic storm, he says.
Companies could sustain their TSRs if they continue to secure strong cashflow yields, Mr Ng reckons, citing the telcos and transport companies among such firms.
Mr Wong believes the more resilient companies that could fend off value erosion could be agricultural companies given the strong underlying demand for food, and telcos for their generous dividend payouts.