The FTSE Singapore Growth Index generated a 1.9% total return for the three years ending 31 Aug. Singapore’s 20 stocks with the highest growth factor exposure (with highest 3-year sales-per-share and 3-year earnings-per share growth) were led by AEM, represent multiple Sectors, and generated a median gain of 0.1%.
Three of the 20 stocks – Dasin Retail Trust, China Everbright Water and Sasseur REIT report all their revenue to China and two of the 20 stocks - Yangzijiang Shipbuilding and China Sunsine Chemicals report more than half their revenue to China. The five stocks have averaged an 7.6% decline in total return over the last 3 years.
Together the 20 stocks averaged total returns of 35.6% between the major market lows of 23 March and post-low high on 9 June, outpacing the STI’s 26.8% total return. The 20 stocks also generated a median marginal decline of 0.6% in total return between 9 June and 7 Sep, compared to the STI’s 8.6% decline.
Defining a Growth Stock
As detailed in the recent Factor Investing in Singapore Report by Nicolas Rabener (click here for full report), 2 Growth metrics used by FactorResearch for selecting stocks with Growth Factor exposure include 3-year sales-per-share and earnings-per share growth. The report noted there is little empirical evidence that the Growth Factor generates excess returns and hence it does not enjoy broad support from the research community, however it is a widely followed investment style. Another Factor Exposure used to characterise stocks is Quality which was discussed in more detail last month here.
The Factor Investing in Singapore Report, which was completed in collaboration with Singapore Exchange, ranked more than 100 stocks according to their Growth Factors. As a group, the 20 stocks that ranked the highest in Growth factor Exposure outpaced the Straits Times Index (‘STI’) over the past three years, with the group generating a median gain of 0.1% and the STI declining 12.6%. The comparative total return of the 20 stocks, relative to the STI total return is illustrated below.
China-focused Stocks Amongst Growth Factor Exposure Leaders
Three of these 20 stocks: Dasin Retail Trust, China Everbright Water and Sasseur REIT are currently China-focused stocks and ranked amongst the 10 stocks with the highest growth factor exposure.
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As at July 2020, the portfolio of Dasin Retail Trust (SGX:CEDU) comprised seven retail malls in Greater China, valued at approximately RMB 12.1 billion. The manager noted in July (click here) in the short to medium term, it would actively manage the portfolio of shopping malls to drive organic growth, creating new value through asset enhancement or property redevelopment initiatives. The Manager added it will also seek accretive acquisitions and divest its mature assets timely, to recycle capital and reinvest in new opportunities. Revenue for its 1HFY20 (ending 30 June) was 5.2% higher than 1HFY19 mainly due to the contribution from Doumen Metro Mall which was acquired in September 2019, partially offset by lower rental income from Ocean Metro Mall, Shiqi Metro Mall, Xiaolan Metro Mall and Dasin EColour arising from the impact of COVID-19 as well as rental rebates provided to the tenants.
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China Everbright Water (SGX:U9E) is an environmental protection company focusing on water environment management. For its FY19 (ending 31 Dec), China Everbright Water’s Revenue increased by 16% from FY18, with profit increasing by 20%. For its 1HFY20, the Group’s revenue amounted to HK$2.12 billion, representing a decrease of 15% from 1HFY2019 – the Full 2020 Interim report can be found here. In 1HFY0, China Everbright Water expanded water treatment business steadily, securing six waste water treatment (“WWT”) projects and undertook one operation and management project. This helped solidify the Company’s market position in several regions, such as the Yangtze River Economic Belt and the Bohai Bay Rim Economic Zone. For a market dialogue with Chairman Wang Tianyi back in August 2018 click here.
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Sasseur REIT (SGX:CRPU) offers investors exposure into China’s growing outlet mall business, one of the country’s fastest growing retail segments, supported by increased spending power of middle-class Chinese consumers. As of 31 December 2019, the Chongqing, Bishan, Hefei and Kunming outlets maintained a combined valuation of RMB 8.2 billion, based on an independent valuation by JLL. On 14 August, the Manager reported that Sasseur REIT’s portfolio of four outlet malls in China delivered higher 2QFY20 sales, rental income and distributable income as compared to 1QFY20, showing positive signs that business recovery is firmly underway across its portfolio. Click here for the 10 in 10 with Sasseur REIT dialogue published earlier this year.
Ranking Stocks by Growth Factors
The table below provides the list of stocks that are amongst the largest and most traded Singapore stocks that demonstrated the highest Growth Factor exposure. As noted above this was based on financial metrics of sales and earnings growth. SGX StockFacts includes the compound annual growth rate of revenues per share over the last five years.
The 20 stocks, sort by the highest positive Growth Factor at the time Factor Investing in Singapore report was published are tabled below. Aside from the trio of China-focused stocks discussed above, the 20 stocks included Yangzijiang Shipbuilding and China Sunsine Chemical Holdings which report more than half of their revenue to China.
| Stock | SGX Code |
Mkt Cap S$B |
3Mar – 9Jun 2020 Total Return % |
9Jun - 7Sep 2020 Total Return % |
3-Year Total Return % |
Revenue/ Share 5-Year Growth |
|---|---|---|---|---|---|---|
| AEM HOLDINGS | AWX | 1,054 | 118 | 26 | 638 | 59.2 |
| COSCO SHIPPING INTERNATIONAL | F83 | 439 | 32 | -9 | -34 | -47.4 |
| BRC ASIA | BEC | 269 | 23 | -15 | 50 | 13.8 |
| DASIN RETAIL TRUST | CEDU | 617 | 5 | -2 | 22 | 27.6 |
| CHINA EVERBRIGHT WATER | U9E | 644 | 10 | 4 | -46 | 30.2 |
| GSH CORP | BDX | 362 | -3 | -12 | -63 | 29.4 |
| PROPNEX | OYY | 216 | 26 | 13 | 5* | - |
| SASSEUR REAL ESTATE INVESTME | CRPU | 907 | 44 | -3 | 14* | - |
| YANGZIJIANG SHIPBUILDING | BS6 | 3,679 | 36 | -8 | -24 | 8.4 |
| FRENCKEN GROUP | E28 | 422 | 59 | 24 | 127 | 6.1 |
| HONG FOK CORP | H30 | 542 | 32 | -9 | -15 | 3.3 |
| UOL GROUP | U14 | 5,560 | 20 | -8 | -12 | 9.2 |
| LIPPO MALLS INDONESIA RETAIL | D5IU | 331 | 46 | -25 | -68 | 11.2 |
| KEPPEL PACIFIC OAK US REIT | CMOU | 927 | 55 | 4 | 6* | 7.0 |
| CHINA SUNSINE CHEMICAL HLDGS | QES | 350 | 34 | -1 | -5 | 4.3 |
| DBS GROUP HOLDINGS | D05 | 52,611 | 41 | -9 | 19 | 9.3 |
| OLAM INTERNATIONAL | O32 | 4,154 | 21 | -10 | -27 | - |
| VENTURE CORP | V03 | 5,478 | 28 | 23 | 40 | 6.9 |
| UMS HOLDINGS | 558 | 533 | 59 | 15 | 64 | 3.7 |
| OVERSEA-CHINESE BANKING CORP | O39 | 38,017 | 28 | -9 | -11 | 6.7 |
| 35.6 | -0.6 | 0.1 |
Note stocks were screened from a list of more than 100 stocks that include the STI constituents, REITs and a number of other stocks that maintain either comparatively large market capitalisation or a higher tradability metric than industry peers. Source: Factor Investing in Singapore Report (click here), SGX StockFacts and Bloomberg (Data as of 7 September 2020)
In the Spotlight: Factor Investing in Singapore Webinar
Nicolas Rabener is the Founder & CEO of FactorResearch. The FactorResearch team provides quantitative solutions for factor investing in equity markets globally.
To watch FactorResearch’s 11 August webinar with the SGX Academy that delved deeper into the performance of classic equity factors in Singapore, such as value, growth, size, momentum, volatility, quality – click here.
