4 Stocks This Week (Manufacturing) [11 August 2017] – ST Eng; Venture; SembMar; Haw Par
In the US, this week was the second worst week of the year, with the Standard & Poors 500 (S&P 500) declining 1.4%. This was mainly due to investors weighing up geopolitical tension between the US and North Korea. Weak inflation numbers and lower expectations of a Fed rate rise also muted stock markets recently.
In Singapore, there were knock-on effects as the Straits Times Index (STI) dived 1.4% for the week, bringing its return for the year to 13.9%.
Manufacturing in Singapore
Many in Singapore see manufacturing companies as sunset businesses or one that will likely be shifted to cheaper countries. Businesses in software engineering, internet technologies, consumer retail space and even property development and ownership are often deemed sexier by investors in Singapore.
This isn’t necessarily true. Manufacturing companies are still the bedrock for these sexier businesses, producing products and/or parts required in these industries. At the end of the day, manufacturing companies will always play a part, and thrive, in the economy no matter how far advanced the human civilisation becomes.
In a market update, SGX mentioned that manufacturing makes up close to 20% of the Singapore economy, and spans diverse sectors such as health, technology, industrials, materials.
In fact, Singapore’s manufacturing output has actually posted 11 straight months of growth, increasing 13.1% on a year-on-year basis in June. This was propped by a broad-based improvement in most industries, including electronics, biomedical engineering, chemicals, precision engineering and transport engineering. Only general manufacturing recorded a decline in output growth.
This shows that even as some manufacturing companies face headwinds and are being squeezed out of the Singapore market, those that incorporate innovation and technology or operate within an advanced scope will have ample opportunities to thrive.
ST Engineering (SGX: S63)
With a market capitalization of close to $11.8 billion, ST Engineering is one of Singapore’s largest manufacturing companies. A global aerospace and defense engineering group, the company has to be at the forefront of innovation, technology and creativity to continue thriving.
ST Engineering released its 2nd quarter 2017 results on Friday (11 August 2017), reporting an 8% increase in revenue to $1.8 billion, but a 12% decline in net profit to $111.5 million. In the pipeline, the group still maintains a healthy order book of $13.5 billion to give investors some foresight into its results in the near future.
The company also has several new acquisitions that will add to its expertise. In May 2017, it announced the completion of the acquisition of SP Telecommunications, adding an extensive network of fibre optic back-haul infrastructure and facilities. This will give it allow the company to offer a more comprehensive suite of info-communications technology (ICT) services.
It has also entered into an agreement for the acquisition of Aethon, Inc., which will enhance the group’s offering of autonomous mobile robots for deployment in the healthcare, industrials and hospitality sectors.
In the longer term, it is well-positioned to tap on the growing start-up scene in Singapore and the region with the setting up of its $150 million Corporate Venture Capital Unit and Open Innovation Lab.
So far in 2017, it has delivered a return of close to 14.6%.
Venture Corp (SGX: V03)
Headquartered in Singapore, Venture Corp comprises about 40 companies in Southeast Asia, North Asia, America, Europe and employees more than 12,000 people worldwide. Moreover, with a market capitalisation of $4.4 billion, the company is the largest capitalised technology stock on the Singapore Exchange (SGX).
Venture released its 2nd quarter results on 4 August 2017, posting a 48.3% gain in revenue $1.0 billion, and a 61.0% gain in net profit to $69.8 million.
The company noted that it has a strong focus on research & development initiatives/programmes that will continue to sustain its operational excellence.
Since the start of the year, Venture Corp has returned close to 59.9%.
SembCorp Marine (SGX: S51)
Operating in the extremely competitive offshore and marine engineering industries, SembCorp Marine has a market capitalisation of close to $3.4 billion. Over the years, SembCorp has put Singapore’s capabilities in these industries on the map becoming one of the best recognised companies for such contracts.
With the weak energy market today, the company has naturally run into some headwinds. In its 2nd quarter results, posted on 27 July 2017, it posted a 27.8% decline in turnover to $655.5 million and a 51.2% decline in net profit to $5.6 million.
SembCorp Marine is also looking towards the future by placing a strong emphasis on research & development. One example is its recent Semb-Eco LUV, which was researched, developed, manufactured and factory-tested in Singapore, became the first International Maritime Organisation type-approved ballast water treatment system.
Since the start of the year, SembCorp Marine has delivered a return of 15.9%, and has also made its way into the STI’s Reserve List.
Haw Par Corporation (SGX: H02)
At a market capitalisation of $2.4 billion, Haw Par Corporation is a large company that tends to go under the radar in Singapore. Most renowned for its Tiger Balm products, which are sold in over 100 countries worldwide, the company has been listed in Singapore since 1969 and operates within the healthcare, leisure, property and investments businesses.
It released its 2nd quarter results on Friday (11 August 2017), posting a 15.0% increase in revenue to $60.5 million, and a 7.3% increase in net profit to $51.9 million.
Over the years, it has marketed and rebranded as well as extended the range of products of its flagship Tiger Balm range of products. Today, its manufacturing, marketing and trading of healthcare products contribute approximately 66% of its overall revenue.
Since the start of 2017, it has delivered a return of 17.9%.
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