SGX Market Updates

Technology Hardware Stocks form a Firm Foundation for Industry 4.0


PUBLISHED ON |

21 March 2017

  • Singapore Manufacturing Sector represents 20% of Singapore’s 2016 GDP. The Government is focusing on key growth areas such as advanced manufacturing and Industrial IoT.

  • SGX’s Technology Hardware companies form a firm foundation for the paradigm shift to Industry 4.0. These companies are mostly cash-generative and dividend payers.

  • The 10 highest yielding stocks within the Technology Hardware Industry excluding Broad Way Industrial Group averaged a yield of 6.5%.




Singapore Manufacturing Sector an important growth pillar for Singapore’s economy

The manufacturing sector is a very important pillar of growth for Singapore’s economy. Based on a recent report by the Committee on the Future Economy (CFE), the sector represented approximately 20% of Singapore’s GDP and 14% of total employment in 2016. Between 2009-2016, the manufacturing sector also experienced strong real productivity growth of 6.2% per annum, higher than the overall economy (2.5%) and the services sector (2.1%).

Specifically within manufacturing, the Electronics cluster represents a weight of approximately 27.4% of Singapore’s manufacturing output (with Semiconductors at 17.0%). Over the course of 2016, both clusters had seen consistent double-digit y-o-y expansion in manufacturing output.



Singapore’s Electronics and Semiconductors clusters saw strong expansion over the course of 2016

Source: EDB



According to the CFE report, digitalization of the economy presents many opportunities. Specifically within advanced manufacturing, the report suggested that new technologies and  the rise of complementary services can raise productivity.

Over the medium term, the CFE recommends building a globally competitive manufacturing sector (around 20% of GDP), actively encouraging the growth of areas that sit at the confluence of high-tech manufacturing and high-end services (e.g. advanced manufacturing and Industrial Internet of Things (IIOT)). To support the CFE’s strategies, the Singapore Government will be spending S$2.4 billion over the next four years to implement the various CFE-related schemes.



SGX Technology Hardware stocks form firm foundation for Industry 4.0

The focus on advanced manufacturing and IIOT runs parallel with the secular trend of Industry 4.0, where integrated computing, networking and physical processes are revolutionising manufacturing. This will likely have a significant impact on Singapore’s Technology hardware companies. According to the CFE, Singapore’s manufacturing sector is well-positioned to reap the full benefits of Industry 4.0 as a holistic revamp is underway.

There are 64 Technology Hardware companies listed on the SGX, the companies come from diverse sub-segments such as electronic component manufacturing to semiconductors and contract manufacturing and assembly. These companies are included within the Semiconductors & Semiconductor Equipment and Technology Hardwares & Equipment industries which are part of the larger Information Technology Sector as classified by the Global Industry Classification Standard (GICS®). These companies have a niche position and forms a firm foundation in the transition to Industry 4.0.



Top 10 Yielding Technology Hardware stocks

The 10 highest yielding stocks within the Technology Hardware Industry excluding Broad Way Industrial Group averaged a yield of 6.5%. Broad Way Industrial Group generated a yield of 67.5%. However, this was due to the distribution of the proceeds from the disposal of its FPS and FCD businesses which were acquired by Platinum Equity.

Many of SGX’s Technology Hardware companies have high cash generative businesses, allowing them to pay sustainable dividends to shareholders. The top 10 yielding companies averaged a free cash flow of S$7 million based on their latest fillings, with eight out of them having positive free cash flows.

The dividends are also sustainable, with a combined S$4,122 million paid out over the past five years for all 64 stocks within the Technology Hardware industry. The total cash dividends within the industry excluding Broad Way Industrial Group have been increasing gradually over the past five years from S$714 million in 2012 to S$893 million in 2016.

Total Cash Dividend (S$M)

Source: SGX, Bloomberg & SGX StockFacts (data as of 20 March 2017)




The table below detail the ten highest yielding Technology Hardware stocks on SGX excluding Broad Way Industrial Group and are sorted by Dividend Indicated Yield. Click on each stock to visit its profile page on SGX StockFacts.

Name SGX
Code
Market Cap
S$M
FCM
S$M
Total
Return
YTD
%
Total
Return
1 Yr
%
Total
Return
3 Yr
%
Div
Ind Yld
%
ROE
%
Karin Technology Hldgs K29 69 11 17.3 33.2 44.0 11.1 2.1
Global Testing Corp AYN 43 0 12.7 40.5 122.4 8.1 7.4
Advanced Integrated Manufacturing Corp AXH 24 -3 -13.3 -25.4 -63.1 6.3 -6.8
PNE Industries BDA 77 4 20.0 77.3 293.3 6.3 21.3
TeleChoice Intl T41 123 24 1.9 6.3 26.8 5.9 13.8
UMS Hldgs 558 356 12 38.5 66.7 93.6 5.7 11.8
Smartflex Hldgs 5RE 20 -4 5.8 27.3 258.9 5.7 27.4
Micro-Mechanics Hldgs 5DD 144 3 26.5 41.4 123.3 5.6 24.8
Elec & Eltek Intl Co E16 290 15 28.0 25.5 -16.4 5.5 3.1
Avi-Tech Electronics BKY 62 2 33.9 78.6 252.0 5.2 13.3
Average 7 17.1 37.1 113.5 6.5 11.8

Source: SGX, Bloomberg & SGX StockFacts (data as of 20 March 2017)







This article is provided by SGX My Gateway.



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