SGX Market Updates

China Businesses Amongst Singapore’s Leading Growth Stocks


08 September 2020

  • 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.

Average Total Returns

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.

  • 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. 

  • 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.

  • 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
Mkt Cap
3Mar – 9Jun 2020
 Total Return
9Jun - 7Sep 2020
 Total Return
Total Return
Revenue/ Share
5-Year Growth
AEM HOLDINGS AWX 1,054 118 26 638 59.2
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* -
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
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.

This article is provided by SGX My Gateway.

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