“An investment in knowledge pays the best interest” — Benjamin Franklin
You have been a great student of Seedly’s “university” and have “attended” the accounting classes covering different aspects of reading the financial statement, namely, the income statement, balance sheet, and cash flow statement.
Now that you feel you are ready to put your money to good use by investing in the stock market and do not want to go the exchange-traded fund-track, here are three starter stocks you can consider researching further to buy for your first portfolio.
Starter Stock #1: Raffles Medical Group
Raffles Medical Group Ltd (SGX: BSL) is a large private healthcare group based in Singapore. Established in 1976, the company has a presence now in 14 cities across Asia, serving more than 2 million patients and 7,000 corporate clients each year.
Raffles Medical has three business segments that it makes money from, and they are healthcare services, hospital services, and investment holdings.
Revenue from healthcare services comes from the operations of medical clinics and other general medical services. It also provides health insurance and trading of pharmaceutical products. For 2018, the healthcare services segment raked in the majority of revenue for Raffles Medical.
Next, the hospital services segment offers specialised medical services and is involved in the operation of hospitals. Last but not the least, the investment holdings segment mainly owns investment properties.
The table below shows some of Raffles Medical’s financial figures from FY2014 to FY2018 (the company has a 31 December year-end):
|Net profit |
|Dividend per share |
The company is investing for future growth by opening new hospitals in China’s Chongqing and Shanghai. For its latest 2019 third-quarter, net profit decreased by around 17% due to start-up losses at Raffles Hospital Chongqing, which opened in 2019.
Raffles Medical is slated to open another hospital in Shanghai this year.
There is huge potential for these two hospitals, considering the total addressable market in the two cities is many times larger than Singapore’s.
At Raffles Medical’s share price of S$1.00, it has a price-to-earnings (PE) ratio of 28 and a dividend yield of 2.5%.
Starter Stock #2: Singapore Exchange
The next stock on the list is Singapore Exchange Limited (SGX: S68) (SGX).
SGX runs the infrastructure that allows people to buy and sell shares, real estate investment trusts (REITs), exchange-traded funds (ETFs), bonds, and derivatives, among other things. If you wish to buy any stock in Singapore, you have to go through SGX.
SGX’s financial highlights from FY2015 to FY2019 can be seen below (the company has a 30 June year-end):
|Revenue (S$ million)||779||818||801||845||910|
|Net profit (S$ million)||349||349||340||363||391|
|Dividend per share |
For FY2019, SGX’s revenue hit a record since listing in 2000, and net profit reached an 11-year high.
The strong growth in revenue and net profit over the years shows that SGX’s plan of being a multi-asset exchange providing a single point of access into Asia is bearing fruits.
At SGX’s share price of S$8.72, it has a PE ratio of 23 and a dividend yield of 3.4%.
Starter Stock #3: Sheng Siong
The final stock that beginners can look into is Sheng Siong Group Ltd (SGX: OV8), a Singapore-grown supermarket chain with close to 60 outlets in Singapore. The company has also expanded into China to capture growth in that market.
Many would be familiar with how Sheng Siong makes money. It runs supermarket outlets that provide both “wet and dry” shopping options selling a wide range of goods, including over 1,200 products under 18 house brands.
Over the years, the supermarket chain’s revenue and net profit have grown strongly:
|Net profit |
|Dividend per share |
For further reading: Your Complete Sheng Siong Group Ltd (SGX: OV8) Dividend Guide
Sheng Siong is not resting on its laurels, though. The company has plans to continue growing over the long-term.
Sheng Siong’s chief executive Lim Hock Chee said the following in its 2019 third-quarter earnings release:
“Going ahead, we will continue with our efforts in expanding our retail network in Singapore, especially in areas where our potential customers reside. Besides placing focus on nurturing the growth of our new stores in Singapore and China, we remain committed to enhancing the gross margin and lowering input cost by improving the sales mix with a higher proportion of fresh produce and deriving more efficiency gains in the supply chain.”
At Sheng Siong’s share price of S$1.27, it has a PE ratio of 25 and a dividend yield of 2.8%.
The three companies above could be a great starting point for you to further research before buying their shares.
Other things to dive into would be their balance sheet strength, ability to generate free cash flow, management capability, insider ownership, and valuation.
Hopefully, the companies are easy to understand as well, which is a widely-neglected factor when investing in stocks. As Peter Lynch once said, “Never invest in any idea you can’t illustrate with a crayon.”
If you don’t understand any of the businesses above, it would be good to dive further into the business model, or neglect that company altogether and look out for other companies instead.
Have Burning Questions Surrounding the Stock Market?
Why not check our Seedly Community and participate in the lively discussion regarding stocks!
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 has a vested interest in some of the companies mentioned.