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STI Reserve List Seedly

5 Companies That Could Replace Any of the Straits Times Index Stocks

profileSudhan P

Singapore’s stock market benchmark, the Straits Times Index (STI), comprises 30 component stocks.

The 30 companies are reviewed every quarter to determine if any changes should be made.

The latest review was earlier this month, and there were no changes to the STI constituents.

However, if any of the companies become ineligible to continue being part of the index for any reason, they would be replaced by those on the STI reserve list.

This reserve list consists of the five highest-ranking non-constituent STI shares by market capitalisation.

Here are the five companies that are part of the reserve list right now (sorted according to market capitalisation):

CompanyTickerMarket Capitalisation
Olam InternationalSGX: O32S$6.3 billion
Suntec REITSGX: T82US$4.0 billion
Keppel REITSGX: K71US$3.9 billion
Frasers Centrepoint TrustSGX: J69US$3.9 billion
NetLink NBN TrustSGX: CJLUS$3.8 billion

With that, here’s a brief introduction to each of the companies that are part of the STI reserve list.

You can use this list as a starting point to conduct your own research if you wish to invest in any of them.

Company #1: Olam 

Olam, which is the latest joiner to the STI reserve list, is 53%-owned by Temasek Holdings.

Olam’s business went through a re-organisation in January 2020, and it can be broken down into two main parts: Olam Food Ingredients (OFI) and Olam Global Agri (OGA).

OFI offers sustainable, value-added food ingredients and solutions to 8,000 customers ranging from multinational organisations such as Starbucks to small family-run businesses.

We might have consumed Olam’s products without us knowing, such as its cocoa beans and dairy products.

Source: Olam Investor Presentation

Olam has plans to demerge OFI and list it separately by the first half of 2022 on the London Stock Exchange (primary listing) with a concurrent secondary listing in Singapore.

On the other hand, Olam’s OGA is a food, feed and fibre agri-business focusing on high-growth emerging markets.

Over the past four years, Olam’s overall revenue grew 10.9% annually from S$26.3 billion in 2017 to S$35.8 billion in 2020, but its profit after tax fell from S$580.7 million to S$245.7 million during the same period.

Excluding one-off items, Olam’s profit after tax would have risen from S$431.5 million to S$677.8 million.

At Olam’s share price of S$1.74, it has a price-to-earnings (P/E) ratio of 24x and a dividend yield of 4.6%.

Company #2: Suntec REIT

Suntec Real Estate Investment Trust (SGX: T82U) is a real estate investment trust (REIT) that owns properties in Suntec City, Singapore’s largest integrated commercial development.

It also has stakes in One Raffles Quay (one-third interest) and Marina Bay Financial Centre Towers 1 and 2 and the Marina Bay Link Mall (one-third interest).

Last week, Suntec REIT announced that it has divested its portfolio of office strata units at the Suntec City Office for S$197.0 million.

The REIT also owns properties in Australia and the UK.

In terms of contribution, the office sector took up most of Suntec REIT’s net property income (NPI) and joint venture (JV) income for the first half of 2021.

Source: Suntec REIT Investor Presentation

At Suntec REIT’s unit price of S$1.41, it has a price-to-book (P/B) ratio of 0.7x and a distribution yield of 5.9%.

Company #3: Keppel REIT

Like Suntec REIT, Keppel REIT (SGX: K71U) is a commercial REIT with properties in Singapore, Australia, and South Korea.

In Singapore, it owns Ocean Financial Centre (79.9% interest), Marina Bay Financial Centre Towers 1, 2 and 3 and Marina Bay Link Mall (one‐third interest), and One Raffles Quay (one‐third interest).

As of 30 June 2021, Keppel REIT’s assets under management stood at S$8.7 billion with a total of 10 properties (except 275 George Street in Australia, which has been sold).

Source: Keppel REIT Investor Presentation

For the first half of 2021, Keppel REIT’s distributable income grew 24.7% year-on-year to S$105.7 million, while its distribution per unit (DPU) rose 5% to 2.94 Singapore cents.

At Keppel REIT’s unit price of S$1.07, its P/B ratio is 0.8x while its distribution yield is 5.5%.

Company #4: Frasers Centrepoint Trust

Frasers Centrepoint Trust (SGX: J69U) is a retail REIT with nine shopping malls in the suburban areas of Singapore.

Some of its properties include Causeway Point, Century Square, and Hougang Mall.

Source: Frasers Centrepoint Trust Investor Presentation

Frasers Centrepoint Trust’s suburban malls are resilient in that they were among the first to benefit from the recovery as Singapore exited the circuit breaker in early June 2020.

In its third quarter of financial year 2021 (FY2021) update, Frasers Centrepoint Trust said that its retail portfolio occupancy was stable at 96.4% and that it had renewed substantial expiring leases due in FY2021, with only 8% remaining to renew in the final quarter of the year.

At Frasers Centrepoint Trust’s unit price of S$2.27, it has a P/B ratio of 1.0x and a distribution yield of 4.6%.

Company #5: NetLink NBN Trust

NetLink NBN Trust (SGX: CJLU) is involved in designing, building, owning and operating the passive fibre network infrastructure.

The extensive network gives nationwide coverage to residential homes and non-residential locations in mainland Singapore and the adjoining islands.

Source: NetLink NBN Trust Investor Presentation

NetLink NBN Trust is seen to have a resilient business model with predictable cash flows.

Since the trust is the sole nationwide provider of residential fibre networks in Singapore, it is hard for a new competitor to come in and knock NetLink NBN Trust off its perch.

For its first quarter of FY2022 (year ending 31 March 2022), NetLink NBN Trust’s overall revenue grew 5% year-on-year to S$93.4 million.

The growth was on the back of higher installation-related revenue, residential, NBAP (non-building address point) and segment connections revenue, and diversion revenue.

Over the past three years, NetLink NBN Trust’s DPU has grown from 4.88 Singapore cents in FY2019 to 5.08 cents in FY2021.

For FY2022, apart from growing organically, NetLink NBN Trust is looking at opportunities to invest in telecoms infrastructure businesses.

At NetLink NBN Trust’s unit price of S$0.98, it has a P/B ratio of 1.4x and a distribution yield of 5.2%.

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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 doesn’t own shares in any companies mentioned. 

About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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