5 "Election-Proof" Stocks to Consider for Singapore General Election 2020 and Beyond
The 2020 Singapore General Election (GE) fever has started.
With Singapore going to the polls on 10 July, the various political parties are laying out their plans to take our country to the next stage.
Amid this, if you are wondering what are some “election-proof” or resilient stocks to consider buying for your portfolio…
…you have come to the right place.
What are Some Singapore Stocks to Consider For 2020 GE and Beyond?
Be it election year or not, we should focus on high-quality companies that can stand the test of time.
World-renowned investor, Warren Buffett, once said:
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”
Investing is about the long-term.
With that in mind, I picked five Singapore-listed stocks that I believe have the potential to do well over the long run.
The stocks span various industries, from healthcare to information and communications technology (ICT).
These companies should also continue performing well, no matter which political party rules the day.
What you can do with this list is to research further into the companies to determine if they fit your stock portfolio.
Company #1: Raffles Medical Group Ltd (SGX: BSL)
First up on my list is Raffles Medical, a large private healthcare group based in Singapore.
The healthcare outfit’s 2020 first-quarter update didn’t look good.
Revenue fell 0.3% year-on-year to S$128.0 million, as compared to S$128.3 million a year ago.
Raffles Medical’s profit after tax fell even more at 45.4% year-on-year to S$7.5 million in the 2020 first-quarter.
Excluding the results of its China healthcare division (which comprises Raffles Hospital Chongqing, Raffles China Clinics and Raffles Medical Hongkong), which had been severely affected by the COVID-19 pandemic, Raffles Medical’s profit after tax would have been S$15.1 million, down by a smaller margin of 5.1%.
However, a mitigating factor is that Raffles Medical has a strong balance sheet. As of 31 March 2020, it had a very low net gearing of around 3%.
A healthy balance sheet helps a company tide through tough economic conditions.
Over the long-term, Raffles Medical is investing for growth in China with its Chongqing and Shanghai hospitals.
The total addressable market in those two cities are many times larger than that of Singapore.
With its rock-solid balance sheet and a long runway for growth in a resilient industry like healthcare, Raffles Medical should perform decently well.
At Raffles Medical’s share price of S$0.90, it has a PE ratio of 27 and a dividend yield of 2.8%.
Company #2: Sheng Siong Group Ltd (SGX: OV8)
Sheng Siong is a Singapore-grown supermarket chain with 61 outlets in Singapore. The company has also expanded into China to capture growth in that market.
For Sheng Siong’s first quarter of 2020, revenue rose 30.7% year-on-year to S$328.7 million while net profit surged 49.9% to S$29.0 million.
The strong growth was mostly due to elevated demand arising from COVID-19.
Correspondingly, the supermarket chain’s net profit margin improved by 1.1 percentage points to 8.8%.
Even though revenue and net profit may taper once the pandemic blows over, Sheng Siong has put in plans for sustained growth.
Lim Hock Chee, Sheng Siong’s chief executive, explained the following in the 2020 first-quarter earnings update:
“Moving ahead, we remain committed to our strategy of opening supermarkets in areas where our potential customers reside but we have no presence. We will continue with our efforts to nurture the growth of the new stores and build on the momentum of improving comparable same store sales in Singapore and China, while focusing on improving gross margin and cost efficiency by changing the sales mix with a higher proportion of fresh produce and deriving more efficiency gains in the supply chain.”
Sheng Siong’s revenue growth from 2010 to 2019 has matched the increase in the supermarket chain’s total retail area.
With its cash balance of S$133.7 million as of 31 March 2020, Sheng Siong certainly has the financial muscle to expand its business further in both Singapore and China.
At Sheng Siong’s share price of S$1.62, it has a PE ratio of 29 and a dividend yield of 2.2%.
Company #3: Singapore Exchange Limited (SGX: S68)
Singapore Exchange (SGX) slots into the third spot on my list.
SGX is a multi-asset exchange that provides services such as equities, derivatives, and fixed income trading.
For SGX’s third quarter of its 2020 financial year, revenue grew 29.3% year-on-year to S$295.8 million as all its three business segments — Fixed Income, Currencies and Commodities; Equities; and Data, Connectivity and Indices — showed growth.
SGX’s net profit also improved, rising 38% to S$137.5 million.
The multi-asset exchange that SGX has built over the years has allowed it to take advantage of the market volatility brought about by COVID-19.
SGX said the following in its latest outlook statement:
“During the quarter, volatility in global markets escalated as government-led measures to contain the spread of COVID19 heightened concerns of a global slowdown and recession in some countries. Our position as a multi-asset exchange offered solutions to investors to manage the risks of their equities, commodities and currencies portfolios. With our expanded international footprint, we saw increased participation from customers in the US and European time zones. … There was higher activity in our cash equities market as investors realigned their portfolios to manage returns.”
Market volatility is part and parcel of the financial markets.
Therefore, SGX’s wide coverage of products should help it to capture as much of the upside brought about by the volatility as possible.
At SGX’s share price of S$8.06, it has a PE ratio of 19 and a dividend yield of 3.7%.
Company #4: NetLink NBN Trust (SGX: CJLU)
NetLink NBN Trust is involved in designing, building, owning and operating the passive fibre network infrastructure. It is the sole nationwide provider of residential fibre network in Singapore.
For NetLink NBN Trust’s financial year ended 31 March 2020, revenue increased by 4.7% year-on-year to S$370.2 million while profit after tax rose 1% to S$78.1 million.
More importantly, distribution per unit (DPU) grew 3.5% to 5.05 Singapore cents.
NetLink NBN Trust’s business model enables it to have predictable and recurring cash flows that would, in turn, largely flow down to unitholders.
As for its future plans, NetLink NBN Trust’s chief executive, Tong Yew Heng, said the following in the trust’s 2020 annual report:
“NetLink is essentially in the fibre-to-the-home (“FTTH”) business. This, we have done successfully by connecting and serving more than 1.4 million households and many businesses. While FTTH continues to be our core business, looking ahead, our focus will have to be expanded to move from FTTH to fibre-to-anywhere (“FTTX”). Thus, our next phase of growth is to ensure that we efficiently support the deployment of devices for street furniture such as traffic lights, lamp post, bus stops, anywhere in the street that may require a fibre connection.”
At NetLink NBN Trust’s unit price of S$0.98, it has a PB ratio of 1.3 and a distribution yield of 5.2%.
Company #5: VICOM Limited (SGX: WJP)
Last but not the least is VICOM, a provider of technical testing and inspection services largely in Singapore. In 2019, the company had a 74% market share in the vehicle testing business in our country.
For the first quarter of 2020, revenue and net profit fell 0.9% and 0.2%, respectively, year-on-year. The revenue fall was mainly due to the outbreak of COVID-19 and weak economic outlook.
However, over the slightly longer term, with a higher number of cars that are older than 10 years on the road, there should be a faster increase in vehicle inspection revenue for VICOM.
According to VICOM’s 2019 annual report, more than 41,000 private cars renewed their Certificates of Entitlement (COE) during the year.
Those cars have to be inspected every year, instead of once every two years, which is the case for cars between three and 10 years old.
At VICOM’s share price of S$2.27, it has a PE ratio of 28 and a dividend yield of 4.2%.
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the companies mentioned.