Singapore’s Manufacturing sector grew by a robust 10.2% YoY in 2Q18, extending the 10.8% YoY growth in 1Q18 and 10.1% YoY expansion in 2017. Manufacturing has been a keen driver of Singapore’s GDP growth which has been on trending higher since the end of 2015.
ST Engineering, Yangzijiang Shipbuilding, Venture Corp, Sembcorp Marine and Haw Par Corp are amongst Singapore’s five biggest manufacturing plays excluding F&B manufacturing. Since the end of 2015, the five stocks have averaged a 51% total return.
The five stocks have also recently reported their 2QFY18 and 1HFY18 earnings, with four stocks reporting net profit growth. These four stocks averaged 2QFY18 net profit growth of 40% YoY and 1HFY18 net profit growth of 35% YoY.
Broadening of Manufacturing Growth
On 13 August the Ministry of Trade and Industry (“MTI”) reported that in 2Q18 Singapore’s manufacturing sector grew by a robust 10.2% year-on-year (“YoY”). This extends from the 10.8% YoY growth in1Q18. As noted in the report (click here) all clusters within the sector expanded in 2Q18, with the electronics, biomedical manufacturing and transport engineering clusters contributing the most growth.
For 2017 MTI reported that the manufacturing sector expanded by 10.1%, accelerating from the 3.7% growth in 2016. However in 2017, the growth was less broad and largely driven by the electronics and precision engineering clusters – with the biomedical manufacturing, transport engineering and general manufacturing clusters contracting.
Quarterly GDP growth has been on a steady uptrend in Singapore since a 1.3% YoY GDP growth rate was reported for the December 2015 quarter.
As noted in the aforementioned report, Singapore’s 2Q18 GDP growth rate was 3.9% YoY.
Five Largest Manufacturing Plays (Excl. F&B) average 51% Gains Since End of 2015
Singapore Technology Engineering, Venture Corporation, Yangzijiang Shipbuilding, Sembcorp Marine and Haw Par Corporation represent the five largest capitalised manufacturing plays excluding F&B manufacturing listed on SGX. Combined, the five stocks maintain a market capitalisation of S$26.1 billion.
Four of the five stocks have their headquarters in Singapore. The exception is Yangzijiang Shipbuilding which produces a broad range of commercial vessels such as containerships, bulk carriers and LNG vessels, with its shipbuilding bases strategically located along the Yangtze River.
Since the end of the December 2015 quarter, the five stocks have averaged a 50.7% total return. However in the year thus far the five stocks were not immune to the broader declines of the region and have averaged a 3.6% decline in total return, with mixed performance ranging from a 23.4% decline for Yangzijiang Shipbuilding Holdings to a 20.7% total return for Haw Par Corporation.
All five stocks have reported their 2QFY18 (ended 30 June) and 1HFY18 earnings, with four of the five stocks - Singapore Technology Engineering, Venture Corporation, Yangzijiang Shipbuildingand Haw Par Corporation reporting net profit growth. These four stocks averaged 2QFY18 net profit growth of 40% YoY and 1HFY18 net profit growth of 35% YoY.
Of these stocks, Haw Par Corporation reported the strongest growth in Net Profits for both 2QFY18 and 1HFY18 and generated the strongest year-to-date total returns of the group at 20.7%.
For more details on each of the stocks and their recent results click on the links below.
31 Dec 2015
|ST Engineering||S63||10,263||-1.8||5.4||24.3||4.8||19.8||4.6||Click Here|
|Venture Corp||V03||5,020||-2.1||-12.3||141.9||2.3||11.6||4.6||Click Here|
|Yangzijiang Shipbuilding||BS6||4,261||16.8||-23.4||10.9||0.8||6.8||4.2||Click Here|
|Sembcorp Marine||S51||3,509||-8.7||-8.3||-0.1||1.5||N/A||0.6||Click Here|
|Haw Par Corp||H02||3,003||-1.5||20.7||76.4||0.9||18.3||1.8||Click Here|
Source: Bloomberg and SGX StockFacts as of 16 August 2018
Whilst Sembcorp Marine reported a 1HFY18 operating loss of S$33 million in 1HFY18, the Group reported revenue of S$2.81 billion for 1HFY18 which compared to S$1.39 billion in revenue generated in 1HFY17, which was restated for accounting changes on adoption of SFRS (I). The higher revenue in 1HFY18 was largely due to revenue recognition on delivery of four jack-up rigs to Borr Drilling, one jack-up rig to BOTL, sale of the West Rigel semi-submersible rig (West Rigel) and higher percentage recognition for ongoing drillship and offshore production projects in 1HFY18.
Did You Know?
According to MTI Research, in Singapore manufacturing can also generate positive spillovers for distribution, transportation and financing industries. Based on an MTI study (click here) a S$10 million increase in manufacturing demand would lead to S$810,000 in non-manufacturing output and between six and seven non-manufacturing jobs.