SGX Market Updates

Recent Market Rebound Extended to SGX Value Stocks


PUBLISHED ON |

29 December 2020

  • 4 of the STI’s 10 strongest performers in the 4Q-to-date ranked highly for the Value factors in early 2H20. These 4 stocks were Jardine Matheson, Sembcorp Industries, Jardine Strategic and CapitaLand. UOL Group and Yangzijiang Shipbuilding also ranked highly for the Value factor. 

  • Of the 30 stocks with the highest Value factors, Sunpower Group, saw the most gains in the 4Q-to-date. Sunpower Group is an environmental protection solutions specialist with 20+ years of experience in providing environmental protection and energy-saving solutions, with its 9MFY20 underlying net profit growing 47% y-o-y.

  • The 5 of these 30 stocks that have seen the most net institutional inflows (proportionate to market cap) this quarter include BHG Retail REIT, Sembcorp Industries, CDL Hospitality Trusts, CapitaLand and Hong Fok Corporation. The 5 stocks averaged a 17% total return in the 4Q-to-date, in-line with the gains of the STI.




Rotation from healthcare and technology stocks to more cyclical sectors and stocks seen to be trading at value has seen the STI generate close to double the gains of the S&P 500 Index in the 4Q-to-date. In both the 4Q-to-date and 2020-to-date, Singapore’s 30 largest and most actively traded stocks with the highest factor exposure to Value have averaged total returns broadly in-line with the Straits Times Index (“STI”).

While the group of 30 Value stocks include just six of the 30 STI constituents, 5 of these 6 stocks were among the 10 top performers of the 30 Value stocks in the 4Q-to-date. Jardine Matheson, Sembcorp Industries, Jardine Strategic, CapitaLand and UOL Group have averaged 26% total returns in the current quarter, compared to 16% for the STI. UOL Group also saw the least drawdown of the 30 stocks in percentage terms for the 2020-to-date. Jardine Matheson, Sembcorp Industries, Jardine Strategic and CapitaLand were also among the top performing STI stocks in the 4Q-to-date. 



Sunpower Group & Sembcorp Industries Led Value Stocks in 4Q-to-date & 2020-to-date 

The strongest performer of the 30 stocks with the highest Value factor in the 4Q-to-date, Sunpower Group, is an environmental protection solutions specialist with over 20 years of experience in providing environmental protection and energy-saving solutions. For its 9MFY20 (ended 30 Sep) Sunpower Group’s underlying net profit surged 47% y-o-y to record high of RMB 278.7 million (for more details click here). Meanwhile the strongest performer of the 30 stocks in the 2020-to-date was Sembcorp Industries.

On 11 September, Sembcorp Industries demerged from Sembcorp Marine to become a focused energy and urban business, with a renewed mandate to unlock value for investors. On the environmental front, Sembcorp Industries has announced it had signed a memorandum of understanding to study the use of integrated energy solutions to power data centres with CapitaLand and SP Group. One of the targeted outcomes for Sembcorp Industries in the partnership is to determine the most efficient deployment for green hydrogen fuel cell technologies in Singapore to reduce the carbon footprint of data centres.


10 Strongest Performers of 30 Singapore Stocks with Highest Value Factor in 4Q20-to-date



Defining Value Stocks 

Factor investing is a relatively new method of grouping that looks to link past and potential performances of stocks according to common factor attributes. As detailed in the recent Factor Investing in Singapore Report by Nicolas Rabener and supported by Singapore Exchange (click here for full report), Value is 1 of 5 factors used by modern day analysts to characterise stocks. 

For the purposes of the report released in 2H20, the 30 stocks were viewed as the most inexpensive valuations or lowest valuations in terms of a screening that applied an equal-weight combination of price-to-book (“P/B”) and price-to-earnings (“P/E”) multiples. The report noted that the returns of the Value factor were highly dependent on the business cycle. Specifically, in the United States, the performance was positive when real GDP was positive and negative when the economy was in a recession. Furthermore, the return was significantly higher when economic growth was accelerating compared to slowing down.

Currently, the global economic recovery is expected to continue into 2021. The capacity for global growth to swing from -4.4% in 2020 to 5.2% in 2021 as forecast by the IMF will mostly depend on the efficacy of the vaccine, COVAX and GAVI distribution success, and continued second-line measures of defence such as PPE, social distancing, tracing and safe work practices. 



Singapore Banks Return to Book Value 

Much of the STI’s 16% total return in the 4Q-to-date has hinged on the gains of the three banks - DBS Group, OCBC and UOB. The trio maintain a 40 per cent day-to-day impact on the performance of the STI.  While the trio are not among the top 30 rankings for the Value factor, this quarter has seen their average P/B multiple rise from 0.84x to 1.02x, in line with a revaluation of global banking stocks on vaccine development and deployment this quarter. Hence, while not highly ranked Value stocks, rotation to Financials in the current quarter saw the trio revalued from an average 16% discount to book value to a marginal premium. Historically, the trio averaged a P/B ratio as high as 1.38x at the end of the 1Q 2018. 



Highlights of the Largest & Most Actively-Traded Singapore Value Stocks 

The table below details the stocks that are amongst the 30 largest and most traded Singapore stocks that demonstrated the highest Value factor in the aforementioned report. As noted above, this was based on P/B and P/E valuation metrics.  The 30 stocks are sort by the highest positive Value factor at the time Factor Investing in Singapore report was published.

Note that stocks can trade at low valuations for financial reasons, and combining a Quality factor to the screening that considers return-on-equity and debt-to-equity can help to avoid so called value traps. Of the 30 stocks tabled below, 6 stocks also ranked amongst the 30 stocks with the highest Quality factor, including China Sunsine Chemical, Tianjin Zhongxin Pharmaceutical, China Aviation Oil, Yangzijiang Shipbuilding, Sasseur REIT and IREIT Global.

The 5 stocks that have seen the most net institutional inflows proportionate to current market value this quarter include BHG Retail REIT, Sembcorp Industries, CDL Hospitality Trusts, CapitaLand and Hong Fok Corporation. The 5 stocks averaged a 17% total return in the 4Q-to-date, in-line with the gains of the STI.

Stocks sort by the highest positive Value factor in Factor Investing in Singapore SGX
Code
Mkt Cap
S$M
QTD Net
Institutional
Flow
S$M
QTD Total
Return
%
YTD Total
Return
%
Max Drawdown
in 2020 YTD
%
Current
P/B
Yanlord Land Z25 2,183 -7.3 0 -1 -28 0.4
Hutchison Port Holdings Trust NS8U 2,213 0.6 14 21 -44 0.5
China Everbright Water U9E 629 -1.9 -2 -27 -40 0.4
Hong Fok Corporation H30 621 2.1 15 -6 -36 0.3
OUE LJ3 1,042 -1.3 0 -17 -36 0.3
GuocoLand F17 1,822 -1.1 7 -18 -38 0.4
Frasers Property TQ5 3,579 -1.1 5 -26 -41 0.5
Yangzijiang Shipbuilding BS6 3,644 -156.3 -5 -12 -34 0.6
China Sunsine Chemical QES 485 1.6 47 0 -50 0.9
Golden Agri-Resources E5H 2,018 -3.2 12 -30 -47 0.4
Tianjin Zhongxin Pharmaceutical T14 2,325 3.3 8 8 -38 0.8
CapitaLand C31 16,877 69.4 20 -10 -35 0.7
Asian Pay Television Trust S7OU 215 -3.3 -2 -23 -36 0.2
SPH T39 1,750 -49.4 7 -49 -55 0.5
BHG Retail REIT BMGU 291 15.3 4 -13 -42 0.7
Jardine Matheson J36 54,137 42.7 36 2 -34 0.7
Olam International O32 4,730 4.3 17 -13 -35 0.8
Oxley 5UX 928 -1.2 9 -33 -47 0.9
Sasseur REIT CRPU 983 -6.1 8 0 -41 0.9
Chip Eng Seng C29 337 -5.8 -1 -25 -32 0.3
EC World REIT BWCU 571 0.9 6 3 -42 0.8
UOL Group U14 6,482 18.9 15 -5 -28 0.7
Jardine Strategic J37 36,554 -9.0 22 -18 -41 0.4
Suntec REIT T82U 4,266 -21.4 6 -14 -40 0.7
China Aviation Oil G92 912 1.7 14 -13 -44 0.8
Sunpower Group 5GD 644 -1.1 50 29 -48 1.5
IREIT Global UD1U 609 -0.1 6 -5 -52 0.8
Sembcorp Industries U96 3,028 39.1 27 50 -40 0.5
CDL Hospitality Trusts J85 1,539 13.4 20 -18 -57 0.8
CapitaLand Retail China Trust AU8U 2,077 -8.1 27 -8 -41 0.8
Average       13 -9 -41 0.6

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, Refinitiv and Bloomberg (Data as of 28 December 2020).







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