Singapore’s Electronics cluster (27.4% of total manufacturing activity) demonstrates strong momentum with its 13th consecutive month of YoY output growth.
SGX’s IT Sector is an outperformer in the YTD with total returns of 33.3%, above the STI’s +14.3% and the MSCI Asia ex-Japan IT Index’s +18.4%.
Strong earnings outlook likely the key driver of IT Sector’s outperformance. Consensus expects 10 largest IT stocks* to grow earnings by 20% in 2017.
Electronics Manufacturing Output Momentum Remains Strong
Singapore’s Electronics cluster has started 2017 on a bright note, continuing its strong manufacturing output momentum. Data from Economic Development Board (EDB) showed that Singapore’s Electronics cluster’s March manufacturing output expanded by 37.7% YoY (driven by Semiconductor cluster’s +54.6% YoY). This performance resonates with robust global semiconductor sales in March, which grew 18.1% YoY (largest increase since October 2010) – click here.
The strong momentum contributed to Singapore’s overall manufacturing output in March (+10.2% YoY), beating economists’ expectations of +7.1% (according to a Reuters poll). As a reminder, the Electronics cluster is a major contributor of Singapore’s total manufacturing activity with a 27.4% weightage.
Singapore Electronics cluster sees 13th consecutive month of YoY output growth, with Semiconductor sub-segment experiencing even more robust expansion rates.
Source: Economic Development Board (EDB) Singapore
Singapore IT Sector’s YTD total returns (+33.3%) Outperformed Regional Benchmark (+18.4%)
As the industry continues to see positive data-points, it is not surprising that the Information Technology (IT) Sector was the top-performing Sector in the year-to-date (YTD). Specifically, SGX’s IT Sector generated a capitalisation weighted total return of 4.9% in April, bringing YTD gains to 33.3% (click here for more details). This is higher than the Straits Times Index’s (STI) total return of 14.3% and the regional benchmark’s (MSCI AC Asia ex-Japan IT Index) total return of 18.4% (or +22.6% in USD terms) over the same period.
10 Largest IT Stocks* to Grow Earnings 20% in 2017 and 12% in 2018
Post the YTD rally, the 10 largest IT stocks (which have sell-side analyst coverage) are trading at an average trailing price-to-earnings (P/E) ratio of 17.6x. However, on a forward (full-year 2017) basis, the average P/E is much lower at 14.6x. These 10 stocks have returned 53.4% in the YTD thus far.
The lower forward P/E can be attributed to the growth expectations of these companies estimated by sell-side analysts. In fact, by using a price/earnings to growth (PEG) ratio, seven out of these 10 companies are trading at below 1.0x. As a general rule of thumb, a PEG ratio of 1.0x indicates that a stock is fairly valued when compared to the expected earnings growth. A PEG ratio lower than 1.0x may also indicate that the stock is undervalued and vice versa.
According to data from Bloomberg, consensus expects these 10 companies to grow EPS by a median of 19.9% in 2017 and another 11.7% in 2018. The strong earnings outlook is likely one of the factors driving the IT Sector’s return in the YTD.
The 10 largest IT stocks (which have sell-side analyst coverage) are listed below, sorted by market capitalisation. Click on each stock to visit its profile page on SGX StockFacts.
| Name | SGX Code |
Market Cap S$M |
Price Last Close S$ |
P/E (x) | P/E: Forward (x)** |
PEG (x)*** | 2017 Consensus EPS growth % |
2018 Consensus EPS growth % |
|---|---|---|---|---|---|---|---|---|
| Venture Corp | V03 | 2,283 | 12.83 | 18.4 | 16.5 | 0.820 | 20.1 | 9.1 |
| Silverlake Axis | 5CP | 1,460 | 0.54 | 8.0 | 18.6 | -1.089 | -17.1 | -34.5 |
| iFAST Corp | AIY | 303 | 0.775 | 32.7 | 27.7 | 0.742 | 37.3 | 14.3 |
| UMS Hldgs | 558 | 264 | 0.88 | 16.7 | 14.0 | 0.705 | 19.8 | 4.8 |
| Nera Telecom. | N01 | 230 | 0.39 | 31.8 | 16.3 | -0.186 | -87.6 | 50.0 |
| CSE Global | 544 | 214 | 0.505 | 12.3 | 11.5 | 1.617 | 7.1 | 9.1 |
| Valuetronics Hldgs | BN2 | 174 | 0.84 | 12.6 | 12.7 | 0.806 | 15.8 | 9.1 |
| TeleChoice Intl | T41 | 118 | 0.255 | 15.2 | 11.6 | 0.384 | 30.2 | 18.2 |
| Serial System | S69 | 112 | 0.177 | 8.2 | 8.4 | 0.027 | 311.8 | 19.0 |
| AEM Hldgs | AWX | 22 | 2.62 | 19.9 | 9.0 | 0.029 | 309.2 | 17.2 |
| Average | 17.6 | 14.6 | ||||||
| Median | 19.9 | 11.7 |
Source: SGX, Bloomberg & SGX StockFacts (data as of 9 May 2017)
Forward P/E based on full-year 2017 EPS
| Name | SGX Code |
Total Return YTD % |
Total Return 1 Yr % |
Total Return 3 Yr % |
Dvd Ind Yld % |
GICS® Sub-Industry Name |
|---|---|---|---|---|---|---|
| Venture Corp | V03 | 29.9 | 55.5 | 100.1 | 3.8 | Electronic Manufacturing Services |
| Silverlake Axis | 5CP | 3.1 | 3.1 | -17.3 | 5.2 | Application Software |
| iFAST Corp | AIY | -6.4 | -30.8 | N/A | 3.6 | Internet Software & Services |
| UMS Hldgs | 558 | 49.0 | 55.3 | 60.0 | 5.7 | Semiconductor Equipment |
| Nera Telecom. | N01 | -1.3 | -16.6 | -17.3 | 2.6 | Communications Equipment |
| CSE Global | 544 | 14.3 | 28.7 | -1.4 | 5.6 | IT Consulting & Other Services |
| Valuetronics Hldgs | BN2 | 61.5 | 95.7 | 213.4 | 4.3 | Electronic Manufacturing Services |
| TeleChoice Intl | T41 | 2.1 | 4.1 | 27.0 | 6.3 | Technology Distributors |
| Serial System | S69 | 24.9 | 44.9 | 47.2 | 1.9 | Technology Distributors |
| AEM Hldgs | AWX | 357.0 | 709.6 | 419.0 | 0.5 | Semiconductor Equipment |
| Average | 53.4 | 95.0 | 92.3 | 3.9 |
Source: SGX, Bloomberg & SGX StockFacts (data as of 9 May 2017)
* Based on the largest IT stocks with analyst coverage
** Forward P/E based on full-year 2017 EPS
*** Calculated by dividing “P/E: Forward” over “2017 Consensus EPS growth”
IT Stocks Comprises 10% of SGX’s Securities Market
There are 76 stocks listed on the SGX which are classified under the IT sector (based on MSCI GICS® Categorisations), accounting for approximately 10% of SGX’s securities market. These 76 stocks have a combined market capitalisation of more than S$12 billion. The sector comprises companies that offer software and IT services, manufacturers and distributors of technology hardware and equipment such as communications equipment, cellular phones, computers & peripherals, electronic equipment as well as related instruments and semiconductors.
