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Interest Rates Stay Higher for Longer: 4 Stocks That Can Give You Peace of Mind

Parkway Cancer Centre
Parkway Cancer Centre

Interest rates have been on a tear since early last year as the US Federal Reserve hiked rates to combat inflation.

Recent developments also suggest that the central bank intends to keep rates elevated for an extended period.

If economic data does not show inflation falling to the targeted 2% level, rates may even have to be increased further.

You may be worried about how your stocks will perform in a higher interest-rate environment.

The solution?

Look out for companies that either have low debt or zero borrowings to give you more peace of mind.

Here is a list of four Singapore stocks that should do well despite the spectre of higher interest rates.

LMS Compliance (SGX: LMS)

LMS Compliance is a laboratory testing and certification services provider with services that include chemical, microbiology, nucleic acid, and physical analyses for its clients.

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It owns three accredited laboratories across Malaysia and distributes a broad range of analytical instruments, testing equipment, and chemicals.

For the first half of 2023 (1H 2023), LMS Compliance saw revenue rise 13.1% year on year to RM 9.9 million.

Net profit, however, slipped slightly by 0.5% year on year to RM 2.6 million.

The business has RM 12.6 million of cash on its balance sheet as of 30 June 2023 along with just RM 1.1 million of debt.

Moreover, the group also generated higher operating cash flow and saw its free cash flow more than double year on year to RM 2.2 million for 1H 2023.

LMS Compliance flagged the high inflation and depreciating Malaysian Ringgit as headwinds for the business, but remains committed to pursuing its long-term strategy to expand into other Asia-Pacific markets.

Talkmed Group (SGX: 5G3)

Talkmed is a provider of tertiary healthcare services in medical oncology, stem cell transplant, and palliative care to patients in Singapore and the region.

Revenue for 1H 2023 climbed 16.4% year on year to S$37.8 million while net profit increased by 17.7% year on year to S$14.3 million.

The healthcare group maintained a clean balance sheet with zero debt and S$81.1 million of cash as of 30 June 2023.

Talkmed also generated a positive free cash flow of S$21.4 million, a 47.2% year on year jump from the prior year’s S$14.6 million.

The group will pursue more foreign patients to counteract the fall in Singaporean patients as the Ministry of Health has introduced a cancer drug list where patients had to bear higher expenses with the change in coverage from insurance companies.

Talkmed is also optimistic about a pick-up in venture funding for the cell and gene therapy sector in the later part of this year that will benefit CellVec, its gene therapy manufacturing arm.

Azeus Systems (SGX: BBW)

Azeus is a provider of IT products and services with its flagship Convene product used by a wide range of companies for paperless meetings.

For its fiscal 2023 (FY2023) ending 31 March 2023, Azeus reported a 16% year on year increase in revenue to HK$252.9 million.

Gross profit also improved by 16% year on year to HK$182.1 million while net profit inched up 4% year on year to HK$50.5 million.

Like Talkmed, Azeus also possesses a clean balance sheet with HK$152.8 million in cash along with zero debt.

The group’s free cash flow, however, fell by nearly 40% year on year to HK$34.6 million.

Azeus recommended a final dividend of HK$1.08 per share.

Together with its first-ever interim dividend of HK$0.60, the total dividend for FY2023 adds up to HK$1.68.

Earlier this month, the group secured agreements for the supply of IT professional services with the Hong Kong SAR government.

The contract will cover the design and implementation of the Business Information Solution Kit and include maintenance and support for three years following its implementation.

The majority of the revenue will be recognised in 2H FY2024 until FY2028.

Credit Bureau Asia (SGX: TCU)

Credit Bureau Asia, or CBA, provides credit and risk information solutions to clients such as banks, multinational corporations, telecommunication companies, and government bodies.

The group operates in Singapore, Malaysia, Cambodia, and Myanmar.

For 1H 2023, CBA saw its revenue improve by 12.3% year on year to S$26.4 million.

Net profit climbed 17.7% year on year to S$4.7 million.

CBA also maintained a clean balance sheet with zero debt and cash of S$53.8 million as of 30 June 2023.

The group generated a positive free cash flow of S$11.8 million, 13.8% higher than the free cash flow of S$10.4 million in 1H 2022.

An interim dividend of S$0.017 was declared, similar to the amount paid out last year.

The maturing Singapore digital bank sector will open up more opportunities for CBA to capture business.

Myanmar Credit Bureau has also signed up 27 banking financial institutions as members and has more than 40 non-bank financial institutions and foreign banks waiting for approval from the regulator.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

The post Interest Rates Stay Higher for Longer: 4 Stocks That Can Give You Peace of Mind appeared first on The Smart Investor.