As many as 16 of Singapore’s 20 most traded stocks with double-digit ROE ratios are trading at discounts to their 5 year P/B ratios. These 16 stocks maintain P/B ratios that are on average 25% below respective 5 year averages, while most ROEs are inline or higher than 5 year averages.
The 5 stocks that were at the biggest discount to their 5 year average P/B ratios on 13 May were Jardine Cycle & Carriage, SATS, ComfortDelGro Corporation, Dairy Farm International and Jardine Matheson Holdings. These 5 stocks averaged 27% declines in the 2020 year to 13 May.
These 5 stocks also averaged debt-to-assets ratios of 26%, which compared to average debt-to-asset ratios of 5% for AEM, UMS and REX International which were trading at premiums to their five year P/B ratios on 13 May.
20 Most Actively Traded Singapore High ROE Stocks
For the 2020 year to 13 May, Singapore’s 20 most traded stocks by average daily turnover, that maintained Return-on-Equity (‘ROE’) ratios of at least 10%, averaged a 16% decline in total return, with average five year annualised returns of 8%. Due to an outlier performance by AEM Holdings, the median annualised 5-year total return for the 20 stocks was 2%, which still outpaced the Straits Times Index (‘STI’) by 4% a year. The 20 stocks include both STI constituents and non-STI constituents.
Strongest of the High ROE Stocks in 2020 YTD included companies with Net Cash Positions
The 3 strongest stocks of the 20 most traded stocks by average daily turnover that maintain ROE ratios of at least 10% in the 2020 year to 13 May, included AEM Holdings, Venture Corporation and Mapletree Industrial Trust. The 3 stocks were all recipient to net institutional inflows, totalling of S$184 million, with total returns ranging from 55.9% for AEM Holdings to -3.2% for Mapletree Industrial Trust.
Aside from maintaining high ROE, a common thread of the two of companies, AEM Holdings and Venture Corporation were their low debt, and hence net cash positive positions:
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With minimal borrowings, AEM Holdings maintained a strong financial position with net cash of S$107.7 million as of 31 Dec, with its cash and cash equivalents decreasing 7% from 31 Dec 2019 to S$100.2 million as of 31 March (click here for more);
Venture Corporation reported its net cash position improved by 19.5% for the March 2020 quarter to S$852.5 million (click here for more);
Another company within the top 5 performing of these 20 stocks for the 2020 year to 13 May, UMS Holdings, reported net cash as at 1QFY2020 grew by S$6.7 million to S$31.8 million from S$25.0 million in 31 Dec 2019 (click here for more).
The majority of the 20 stocks have not seen significant declines in the their current ROE relative to their respective average ROE for the past 5 years. According to Bloomberg data, three of the 20 stocks, Mapletree Commercial Trust, ComfortDelGro Corporation and UMS Holdings currently maintain ROEs that are lower than their average 5-year ROE by 10% or more. The majority of the 20 stocks are, however, trading at price-to-book (P/B) ratios than are lower than respective five years averages.
Majority of the High ROE Stocks trading at Low P/B Ratios
As many as 16 of Singapore’s 20 most traded stocks with double-digit ROE ratios were trading at discounts to their five year P/B ratios on 13 May. These 16 stocks maintained P/B ratios that were on average 25% below respective five year averages.
P/B ratios are commonly used in value investing. Note that while comparatively higher ROE can help to lessen the risk of a ‘value trap’ in value-investing, book values can also be devalued amid economic challenges, which may or may not be fully priced in.
Of the 20 most traded stocks with the comparatively high ROE, the five stocks that maintained P/B ratios that were at the biggest discount to their 5-year P/B ratios on 13 May, were Jardine Cycle & Carriage, SATS, ComfortDelGro Corporation, Dairy Farm International and Jardine Matheson Holdings.
3 of those 5 stocks, Dairy Farm International, SATS and Jardine Cycle & Carriage were also amongst the 10 of the 20 stocks with the highest ROEs. The trio averaged a 28% decline in the 2020 year to 13 May. The trio also averaged debt-to-asset ratios ranging from 53% for Dairy Farm International to 4% for SATS. This compares to aforementioned AEM Holdings and Venture Corporation which maintained debt-to-asset ratios of less than 1%.
The table below is sort by the stocks that were trading at the most discount to their respective and indicative five year P/B ratios on 13 May.
| Stock | SGX Code |
Mkt Cap S$M |
YTD Average Daily Turnover S$M |
Net Institutional Flow S$M |
ROE | P/B (x) |
5-Year Average P/B (x) |
Total Return YTD (%) |
5-Year Annualised Total Return (%) |
|---|---|---|---|---|---|---|---|---|---|
| Jardine C&C | C07 | 8,039 | 11.7 | -50 | 14% | 0.8 | 1.5 | -32% | -10% |
| SATS | S58 | 3,085 | 18.4 | -200 | 14% | 1.9 | 3.4 | -45% | 1% |
| ComfortDelGro | C52 | 3,336 | 24.5 | -200 | 10% | 1.3 | 2.0 | -35% | -9% |
| DairyFarm USD | D01 | 9,276 | 8.3 | -30 | 28% | 5.4 | 8.4 | -7% | -8% |
| JMH USD | J36 | 46,391 | 24.0 | -20 | 10% | 0.5 | 0.8 | -13% | -2% |
| UOB | U11 | 32,871 | 84.5 | -750 | 12% | 0.8 | 1.2 | -25% | 0% |
| DBS | D05 | 48,953 | 166.1 | -1,403 | 13% | 1.0 | 1.3 | -23% | 3% |
| Frasers Cpt Trust | J69U | 2,262 | 9.6 | -8 | 10% | 0.9 | 1.2 | -27% | 5% |
| OCBC Bank | O39 | 38,894 | 75.5 | -516 | 11% | 0.8 | 1.1 | -19% | 0% |
| CapitaLand | C31 | 14,652 | 37.2 | 38 | 10% | 0.6 | 0.8 | -23% | -2% |
| ThaiBev | Y92 | 17,330 | 16.3 | -66 | 19% | 3.2 | 3.8 | -21% | 1% |
| ST Engineering | S63 | 10,457 | 24.7 | 12 | 26% | 4.7 | 5.4 | -15% | 2% |
| Mapletree Com Trust | N2IU | 6,129 | 35.9 | -25 | 10% | 1.1 | 1.2 | -22% | 10% |
| CapitaR China Trust | AU8U | 1,626 | 6.8 | -38 | 10% | 0.9 | 1.0 | -15% | 2% |
| Frasers L&C Trust | BUOU | 2,443 | 13.0 | 31 | 11% | 1.1 | 1.2 | -10% | 12% |
| Venture | V03 | 4,543 | 25.2 | 104 | 15% | 1.8 | 1.9 | -2.8% | 19% |
| Mapletree Ind Trust | ME8U | 5,416 | 25.0 | 54 | 11% | 1.5 | 1.5 | -3.2% | 16% |
| UMS | 558 | 501 | 6.0 | -3 | 14% | 1.8 | 1.6 | -9% | 25% |
| Rex Intl | 5WH | 169 | 8.7 | -3 | 15% | 0.8 | 0.7 | -37% | -15% |
| AEM | AWX | 862 | 20.5 | 26 | 47% | 6.2 | 3.0 | 56% | 118% |
| Average | 16% | -16% | 8 |
Note: Frasers L&C Trust annualised 5-year total return from 21 June 2016 & SGX excluded from analysis.
Note: ROE and P/B can vary amongst Data providers with StockFacts measures applied to the majority of the stocks above.
Source: SGX StockFacts, Thomson Reuters, Bloomberg.
(Data as of 13 May 2020)
