Yahoo Finance 5 Sectors Best Positioned For the Upcoming Years
As we welcome the second half of 2024, it may be time for investors to reconsider their portfolio strategies.
The first half of 2024 has provided valuable insights into the growth potential of certain sectors, thanks to pivotal events and market trends.
Given these developments, we have pinpointed five crucial industries that are well-positioned for success in the coming years, as well as companies that will ride on this growth.
Clean Energy
In the Singapore Budget 2024 speech, DPM Lawrence Wong emphasized the importance of safeguarding Singapore’s internal energy security.
The government has laid out plans to increase electricity output while committing to a clean energy transition.
This commitment is demonstrated by the establishment of the Future Energy Fund, with an initial injection of S$5 billion for investments in infrastructure and technologies that explore various forms of clean energy.
The main focus is on hydrogen as the best candidate for clean fuel, although other sources such as geothermal and nuclear are also being explored.
We have identified two companies that are in a good position to capitalise on this transition.
They are Keppel Ltd (SGX: BN4) and Sembcorp Industries (SGX: U96).
Keppel is one of the nation’s largest asset managers and operators. The group has an assortment of key infrastructure that can help the state to move into green energy efficiently and quickly.
Most importantly, Keppel is developing Singapore’s first hydrogen-ready power plant, the 600 MW Keppel Sakra Corgen Plant, which is expected to commence operations by 2026.
Keppel announced a record profit for the fiscal year 2023, details of which are further explored in this article.
Similarly, Sembcorp Industries is also one of the nation’s leading players in renewable energy. In 2022, it announced a strategic partnership with Japan and various corporations on hydrogen initiatives.
Most notably, Sembcorp Industries is exploring technology to transport decarbonised hydrogen from offshore locations to Singapore, eyeing operations in 2026.
We foresee Keppel and Sembcorp Industries leading the charge in the country’s goal of clean energy while receiving substantial support from the government.
Semiconductors
Despite a temporary slump in 2023, the semiconductor industry is more robust than ever.
Global semiconductor sales in the first quarter of 2024 rose by 15.2% year-on-year, fueled by a surge in demand from China and the United States.
A fresh wave of optimism has swept through the market following Taiwan Semiconductor’s (NYSE: TSM) announcement of a 60% year-on-year growth in sales for April.
The Semiconductor Industry Association (SIA) forecasts semiconductor capacity to double from 2022 to 2032, with the USA leading the charge.
The country is projected to triple its manufacturing capacity by then.
One company seeking to ride along is Micro-Mechanics (SGX: 5DD).
The company specialises in the design, manufacture, and marketing of high-precision parts and tools essential for wafer fabrication and other process-critical applications in the semiconductor industry.
Micro-Mechanics now serves a global customer base with operations in key semiconductor hubs like the USA, Taiwan, and China.
Looking at most recent quarterly earnings, USA and China contributed significantly to the group’s revenue at 16.6% and 35.1% respectively.
For the third quarter of fiscal year 2024, Micro-Mechanics experienced a year on year decline in sales by 8.7%, dropping from S$14.9 million to S$13.6 million.
However, profits went up by 12.8%, from S$1.6 million to S$1.8 million, mainly driven by effective cost management and resource optimisation.
Despite a downturn in sales, largely due to industry-wide slowdowns, Micro-Mechanics is positioned for a recovery alongside the semiconductor sector’s resurgence as a vital player in the midstream supply chain.
For more information on other semiconductor companies in Singapore, it can be found here.
Technology and Telecommunications
Returning to DPM Lawrence Wong’s speech regarding the 2024 budget, Singapore has set its sights on establishing Artificial Intelligence (AI) as a key industry.
This is reflected in the introduction of the National AI Strategy 2.0, which consists of a S$1 billion investment over five years aimed at nurturing the sector and enhancing the nation’s broadband network.
The government plans to improve infrastructure and attract and improve talent so as to create a flourishing environment for significant advancement in the AI field.
Here are two companies that we predict will benefit from Singapore’s strategic focus on AI.
Aztech Global (SGX: 8AZ) engages in design and manufacturing, with the Internet of Things (IoT) devices being one of its key products.
IoT devices, like smartwatches or smart home devices, are pieces of hardware that transmit data from one platform to another.
The role of AI makes IoT devices learn faster, thereby making systems smarter and more efficient.
The firm has acknowledged the transformative capabilities of AI and is planning to integrate AI into its products and operations.
Following Aztech’s 1Q 2024 earnings, net profit leapt to S$15.9 million, an 18.7% year on year increase.
However, revenue saw a decline of over 20%, from S$161.6 million to $S128.6 million, which was attributed to the rescheduling of customer orders due to heavy snowstorms in China.
Despite this, the company’s order book remains strong at S$456 million, indicating healthy prospects.
NetLink NBN Trust (SGX: CJLU)
NetLink designs, builds, owns, and operates the passive fibre network infrastructure of Singapore’s Nationwide Broadband Network.
The company will play a pivotal role in Singapore’s aim to enable mass market access to increased broadband speeds, of up to 10 GB per second in the later half of this decade.
Fibre network infrastructure is paramount for the growth of Singapore’s technology sector, acting as an ideal medium for the growth of IoT, further complementing Aztech Global.
Lastly, Netlink Trust is a reliable dividend payer, committing to distribute 100% of its cash available for dividends.
The trust has consistently increased its distribution per unit (DPU) over the past five fiscal years. DPU has gone up once again for FY2024, from S$0.0262 in FY2023 to S$0.0265.
Maritime
Singapore’s maritime industry is the backbone of our trade and economy and transports over 80% of the world’s cargo.
As an essential facilitator of global trade, the growth of e-commerce should strongly boost the growth rate for the maritime sector.
Singapore remains resolute in maintaining its status as a global maritime hub.
This focus can be seen in the construction of the Tuas Mega Port, the world’s largest fully automated port, targeting operational status by the 2040s.
In the medium term, exciting developments are also happening within the industry.
Seatrium (SGX: 5E2) is a leading global marine group, specialising in a wide range of marine activities including shipbuilding and ship repairing.
The company is at the forefront of transforming the shipping industry through digitalisation. The company recently partnered with A*STAR to explore AI in marine applications, such as improving vessel design through automation.
Singapore Technologies Engineering (SGX: S63) is also making waves in the maritime sector by advancing autonomous vessel technologies.
The company has developed the NERVA system, which facilitates centralised control and monitoring of platform sensors and systems remotely, enchanting operational capabilities and efficiency.
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Disclosure: Aw Kai Rui does not own any of the stocks mentioned in this article.
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