SGX Market Updates

Expansion of the Utility Sector


PUBLISHED ON |

29 March 2017

  • The capitalisation of Singapore’s Utility Sector has expanded by 80% over the past five years outpacing the capitalisation growth of the MSCI AC Asia Pacific Utility Index and the parent MSCI AC Asia Pacific Index.

  • Together the 10 stocks of Singapore’s Utility Sector supply water, gas and independent power through renewable electricity production. The 10 stocks have averaged a 5.2% YTD gain, similar to the MSCI AC Asia Pacific Utilities Index which gained 4.3%.

  • The most recent stock to join the Sector is China Jinjiang Environment Holding Company. For FY 2016, the company reported RMB 597.6 million in profit attributable to owners, up 35% from the previous year.




Utilities stocks maintain infrastructure that provide water, electricity and waste removal services. Across the world, these stocks span traditional service providers, such as thermal power stations, to newer Waste-to-Energy operators that generate electricity from the treatment of waste.

Across Asia Pacific, the Utilities Sector has not been as strong as the broader market in the year thus far. Over the period, the MSCI AC Asia Pacific Utilities Index gained 4.3% compared to the 6.7% gain of the MSCI AC Asia Pacific Index. Utilities makes up 5% of the MSCI AC Asia Pacific Index, with the Utilities segment trading at lower valuations, yet marginally maintaining higher Return on Equity ratios over the past 12 months. Utilities is classified by GICS® as a defensive sector.



Sector Expansion

Over the past five years, Asia-Pacific’s Utilities Sector has expanded, albeit at a lesser rate than the broader market. In Singapore, the Utilities Sector has grown from a market capitalisation of S$4.9 billion to US$8.8 billion.

As illustrated below the market capitalisation of the Singapore’s GICS® Utilities Sector has expanded by 80% since the end of 2011, compared to a 48% expansion for the MSCI AC Asia Pacific Index and a 21% expansion for the MSCI AC Asia Pacific Utilities Index.


Market Capitalisation

MSCI AC Asia Pacific Index 
US$ Trillion

MSCI AC Asia Pacific Utilities Index 
US$ Billion

Singapore GICS® Utilities Sector 
US$ Billion

Source: SGX Bloomberg (2011 and 2016 data as of year ends, Current capitalisation as of 27 March 2017).



The 10 stocks that make up Singapore’s Utility Sector have a combined market capitalisation of S$12.5 billion (US$8.8 billion). The 10 stocks have had a mixed performance year-to-date with six gainers, one stock unchanged and two decliners, while averaging a 5.2% return. One stock is currently suspend from trading. The table below details these 10 stocks and are sorted by market capitalisation. Click on each stock to visit its profile page on SGX StockFacts.

Name SGX
Code
Market Cap
S$M
Total
Return
YTD
%
Dvd
Ind Yld
%
GICS® Industry Name
AusNet Services AZI 6,486 9.8 5.0 Electric Utilities
Keppel Infrastructure Trust A7RU 1,948 8.4 7.4 Multi-Utilities
SIIC Environment Hldgs BHK 1,252 -5.1 N/A Water Utilities
China Everbright Water U9E 1,214 -7.0 0.8 Water Utilities
China Jinjiang Environment Hldgs BWM 1,107 7.1 N/A Indep Power and Renewable Electricity Producers
Hyflux 600 448 10.7 0.9 Water Utilities
C&G Environmental Protection D79 27 14.9 N/A Indep Power and Renewable Electricity Producers
China Intl Hldgs BEH 24 8.0 N/A Water Utilities
Ipco Intl I11 11 0.0 N/A Gas Utilities
Renewable Energy Asia Grp* 5DW N/A N/A N/A Indep Power and Renewable Electricity Producers
Average 5.2 3.5

Source: SGX, Bloomberg & SGX StockFacts (data as of 28 March 2017)
*Renewable Energy Asia Group is Currently Suspended – click here for more details


Of the 10 stocks tabled above,  the three best performers in the year-to-date were C&G Environmental Protection, Hyflux and AusNet Services. AusNet services is also the largest stock among the 10 in terms of market capitalisation and China Jinjiang Environment Holdings is the most recent Utilities stock to list on SGX.




China Jinjiang Environment Holdings

China Jinjiang Environment Holdings is the most recently listed company of the 10 stocks and was founded in Hangzhou in 1993 and was formerly known as China Green Energy Holding Company Limited. The company had its IPO on SGX on 3 August 2016 with a price of S$0.90 (click here for more information).  Since its IPO, the stock has returned 1.1% with its last close price of S$0.91. The stock is up 19.0% from its 25 January 2017 low of S$0.765.

The company specialises in waste-to-energy facilities in Mainland China and operates primarily through two segments – Waste-To-Energy Business, and Project Technical and management Services, and a energy management contracting (EMC) Business. As at 31 December 2016, the Group had nineteen Waste-to-Energy facilities in commercial or trial operation.

The Group’s total installed waste treatment capacity and installed electricity generation capacity is 27,430 t/d and 469 MW/d respectively. Upon completion of the Gaomi Lilangmingde WTE Facility, Hohhot New Energy WTE Facility, Qitaihe Green Energy WTE Facility and the Zibo New Energy WTE Facility which are currently under construction, the total installed waste treatment capacity and installed electricity generation capacity of the Group would be increased by 4,800 t/d and 133 MW/d respectively.

For the 2016 Financial Year, China Jinjiang Environment reported profit and total comprehensive income attributable to owners of the company at RMB 597.6 million, up 35% from the previous year. At RMB 2,632 million, revenue in 2016 was up 36% from the year before. Basic and fully diluted earnings per share were RMB 54.85 cents against RMB 44.37 cents a year ago. For more information on the full year results, click here.

The Executive Chairman and Chief Executive Officer of China Jinjiang Environment Ms. Wang Yuanluo noted the company has been able to harness opportunities brought about by favourable Waste-to-Energy  government policies as well as growing demand for electricity supply and waste treatment from the local municipal authorities.

China Jinjiang Environment Holding Company was subject to a research initiation on 21 March, as tabled in this week’s SGX My Gateway Newsletter (click here) – click on the 21 March link in the table to see the full report.



C&G Environmental Protection

C&G Environmental Protection was the strongest year-to-date performer of the 10 stocks with a total return of 14.9% which included a special divided of S$0.103 following a balance payment for the sale of its business.

To read more about the most recent update regarding the acquisition, click here.



Hyflux

The next best performing stock in the year to date, after C&G Environmental Protection was Hyflux which gained 10.7%. Hyflux specialises in water and fluid treatment  globally with operations across Asia, Africa, Middle East, and North and South America through two key segments – Municipal and Industrial.

The company was founded in 1989 in Singapore and now has offices across eight different locations worldwide. The company currently focuses on Singapore for its operations with 69% of its revenue in FY 2016 being sourced locally. For more information about the most recent earnings release, click here.

In its most recent earnings release Hyflux reported for the 2016 year, profit attributable to owners of the company was S$4.8 million against S$52.5 million a year ago.  The company achieved record revenue of S$987 million in 2016, however net profit was “hard hit by weak Singapore electricity market”. The company noted that “the higher revenue was mainly contributed by the TuasOne Waste-to-Energy (WTE) project and Qurayyat Independent Water Project (IWP)”, and “ profits from higher engineering, procurement and construction (EPC) activities for these two projects were largely wiped out by weaker than expected electricity prices in Singapore.”

The company mainly serves municipal clients which made up 92% of its revenue in 2016. Hyflux has a current market capitalisation of S$448 million and generated a total return of 10.7% in the year-to-date.



AusNet Services

AusNet Services is currently the largest company of the 10 stocks and has a market capitalisation of S$6,486 million. The company has businesses in electricity distribution and transmission, and gas distribution businesses in Australia. The company has operations in four segments – electricity distribution, gas distribution, electricity transmission and select solutions. 

On 18 November 2016, AusNet Services reported its earnings for the first half of its FY 2017. The company reported a revenue from ordinary activities of AU$1,020 million which was a 4.5% drop from the same period the year before (click here to view the Company results of AusNet Services). The decline was due caused by a decrease in revenue from its Electricity Distribution Transmission segment.

AusNet Services will announce 2016/17 Full Year Results and final dividend on 16 May.






This article is provided by SGX My Gateway.



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