While Singapore's Electronics Sector PMI moved to a marginal contraction (49.9) in November, it came off the back of 27 consecutive months of expansion. SIPMM also reported more expansion in the Electronics Employment Index in November.
The 25 largest Tech stocks in Singapore have generated median 16% declines in 2018 YTD, following median 2017 total returns of 72%. With a median 11% ROE and average 5.6% div. yield (100 bps above STI), the 25 stocks also saw above average 40% 12M volatility
While the 25 Tech stocks current average P/E is below the five-year average, 7 of the 25 stocks have generated gains in the 2018 YTD: Creative Technology, PCI, CSE Global, Procurri Corp, Excelpoint Technology, AEM Holdings and Chuan Hup Holdings.
The Technology Sector is deemed to be highly cyclical. Increased global demand for electronic products and services in recent years has coincided with expansion and new entrants within the Technology Sector. This has added to competition within the Sector that has the economic impact of weighing both prices and margins.
Technology Sector supply and value chains have also been subjected to trade related disruptions. Trading of electronic products and services has been pressured by the US-China trade disputes, particularly since May when the US announced it would impose tariffs on industrially significant technology.
Electronics PMI Contract in Nov, while Electronics Employment Index gains
Singapore's Electronics Sector PMI posted a drop of 0.6 point in November from the previous month to record contraction at 49.9. This was the first contraction record by the Singapore Institute of Purchasing and Materials Management (SIPMM) after the sector recorded its 27th month of consecutive expansion in October.
As illustrated above the SIPMM Singapore Electronics Cluster was well within the expansion rate at 52.9 in January 2018 and has since declined to 49.9 in November 2018. SIPMM noted the contraction reading of the electronics sector in November was due to slower expansion in the key indicators of new orders, new exports, factory output, and inventory.
However, the official publisher of Singapore's PMI noted that despite the contraction reading, the employment index posted a slightly faster reading, and the Electronics Employment Index recorded its 25th month of consecutive expansion.
Singapore's Largest Technology Stocks
The 25 largest capitalised Technology primary-listed stocks in Singapore have generated a median decline of 16% in the 2018 YTD, following 2017 median total returns of 72%. Note the median measure Is used because the total return of Creative Technology at 416.8% in the 2018 year to date, positively skews the average total return of the 25 stocks to 5.7%.
Some other observations for the 2018 year-to-date include:
- The 25 stocks average Return-on-Equity (ROE) of 13% with the median ROE at 11%. ROE measures a corporation's profitability by revealing how much earnings a business generates with the money shareholders have invested. The 25 stocks averaged ROEs of 16% over the past five years, which also coincided with average annualised total returns of 15% for the 23 of the 25 stocks that were listed for the duration.
- Similarly, from a valuation perspective, the average Price-to-Earnings (P/E) ratios and Price-to-Book (P/B) ratios for the 25 stocks are at discounts to the 5-year averages. The average P/E is currently 10.0x, which compares to a five year average P/E of 11.6x for the 25 stocks. Of the 20 stocks maintaining P/E ratios, 16 stocks are currently trading at a P/E which is at a discount to their respective five year P/E ratios. Meanwhile the current average P/B is 1.5x, compared to a five year average of 1.8x.
- The 25 stocks also average a comparatively high dividend yield of 5.6%, reflective of the net positive cashflow associated with multiple stocks within the sector. The dividend yield of 5.6% is approximately 100 basis points above the STI's dividend yield.
- These 25 stocks also saw above average 40% volatility over the past 12-month. Technology's largest stock Venture Corp joined the STI in January and was the most traded stock relative to market capitalisation within the STI for the first 10 months of 2018. The stock averaged 2.6% daily swings between its daily high and low for the period and effective November is now tradable via SIP Daily Leverage Certificates (click here for more).
- Of the 25 largest capitalised Technology stocks primary-listed in Singapore, seven stocks have generated gains in the 2018 YTD . These were Creative Technology, PCI, CSE Global, Procurri Corp, Excelpoint Technology, AEM Holdings and Chuan Hup Holdings.
Performances of the 25 largest capitalised primary-listed Technology stocks are tabled below.