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The Winners Of 9M13 – Is There Further Room For Ascent?
What a ride it has been for the past three months! We have had the possibility of a taper in the Federal Reserve’s bond purchase programme increase and then decrease. We watched on as the US government shutdown. We applauded as China released glowing growth figures, while at the back of our minds, wonder if China is indeed on the road to economic revival.
From the Straits Times Index standpoint, investors seemed to be a wee bit more pessimistic about the future, as the benchmark posted a 0.65 percent decline over the nine month period from 2 January to 30 September 2013.
In such an environment, it goes without saying that stocks in general did not fare very well. However, there arewinners . Some of these winners have been quite consistent while others made it to the top through theirdefensive nature in the midst of the selldown.
Please note however, in our analysis of the winners for 9M13, we have removed certain stocks (such as Blumont, Asiasons and LionGold) who would have made it to this list if we were to only look at total percentage gains.
As with our previous updates, we have basically taken the winners of each of the main three indices. These are the benchmark Straits Times Index, the FTSE ST Mid-Cap Index and the FTSE ST Small-Cap Index
ThaiBev, StarHub, And SingTel – Historical Dividend Plays Gain
As mentioned earlier, the STI has indeed seen better days than the nine months leading up to 30 September 2013. Although not exactly spared from the sell-down, the winners of this category have weathered the decline rather well.
The winners includeThai Beverage Public Compan y, which interestingly has occupied the pinnacle spot for the past two quarters as well,StarHubandSingapore Telecommunications . You might be interested to know that many historical dividend plays such as DBS, ComfortDelGro,SIA Engineerin g (also featured in our “Stocks for the Modern Homemaker list”) and OCBC all made it to the top ten in terms of share price appreciation.
Source: FactSet, chart on the returns of the STI versus ThaiBev (Green), StarHub (Red), SingTel (Yellow)
Source: SharesInv.com, top three stocks in the Straits Times Index with the highest returns over 9M13 (excluding dividends)
Source: SharesInv.com, mean and median return statistic of all STI components
StarHub And SingTel – Telcos Push Through With Defensive Properties
Our local telecommunications companies (Telcos) have often outperformed the market in times of decline. 9M13 was no exception. Indeed, the local telcos (M1 included) have a few things going for them.
This include theincreased margins from service revenue as consumers move from 3G to LTE. And you wondered why the telcos switched from a default 12GB data plan to a 2GB one. The local telcos have also remained attractive as long term investments due largely tohigh dividend yields andstable earnings growth on a year-on-year basis.
Mid-Cap Champions – Silverlake Axis, Super Group, And Ezion Holdings
As the name implies, a mid-cap company is in the middle of the large cap and small cap companies. Hence, these counters usually exhibit some characteristics of both ends of the spectrum. These characteristics can take the form of volatility, dividend yields, etc.
The champions of the mid-cap index are a diverse bunch, though. They include an IT company ( Silverlake Axis ), a consumer products company ( Super Group ), and an oil and gas company ( Ezion Holdings ). Other companies such as M1, Raffles Medical, SATS rounded up the remainder of the top ten counters in the mid-cap index.
Source: FactSet, chart on the returns of the FTSE ST Mid-Cap Index versus Silverlake Axis(Green), Super Group(Red), Ezion Holdings(Yellow)
Source: SharesInv.com, top three stocks in the FTSE ST Mid-Cap Index with the highest returns over 9M13 (excluding dividends)
Source: SharesInv.com, mean and median return statistic of all FTSE ST Mid-Cap components
Silverlake Axis – Attractive Yield And Growth Proposition
Silverlake Axis is a provider of IT solutions to financial institutions such as banks. With a firm grasp of the market (eight out of 20 top banks in South-East Asia use them), Silverlake Axis is reaping the benefits ofrecurring income (~45 percent of group revenue). Analysts also note that the company is expanding beyond its current core banking clients to include insurance and mobile banking as well.
We note the Silverlake Axis is actively pursuing banking clients across South-East Asia with Malaysia, Thailand, Myanmar and Cambodia all featuring in its bid portfolio. The fact that the company is not exposed to the European or US banking sector also bodes well for it as it seeks expand aggressively with itscash hoard of over RM335 million.
Small-Caps – Cordlife, Rowsley, And Kreuz Show Hows Its Really Done
The small-caps have received much flak lately, due largely to the dramatic fall of Blumont, Asiasons, LionGold as well as other counters. The most volatile class of counters, the small caps have had its fair share of ups and downs, albeit having much more pronounced graphs (VERY pronounced to be exact).
Of the three winners we picked, only one was ever featured in our previous reviews. This just further proves the point that small caps arehighly volatile . One quarter, they might be champions, and the very next, they are down and out. However, the premise still holds. With great risk, comes great reward. If you had invested inCordlife ,RowsleyorKreuz Holdings at the beginning of the year, you would probably be laughing your way to the bank right now.
Source: FactSet, chart on the returns of the FTSE ST Small-Cap Index versus Cordlife Group (Green), Rowsley (Red), Kreuz Holdings(Yellow)
Source: SharesInv.com, top three stocks in the FTSE ST Small-Cap Index with the highest returns over 9M13 (excluding dividends)
Source: SharesInv.com, mean and median return statistic of all FTSE ST Small-Cap components
Banking On Cord Blood – Cordlife Group
Cord blood bank, Cordlife Group is banking onregional growth in cord banking as it seeks to expand in South-East Asia, China and India. More recently, the group announced deals that would provide it with access to the Philippines, Indonesia, India, Thailand and Malaysia.
In particular, Cordlife’s recent acquisition of a stake in Malaysia’s Stemlife could prove to be a driver forincreased margins . The transfer of cord blood testing from Stemlife will allow Cordlife to conduct its own tests which it currently outsources at great expense. Overall, Cordlife boasts the kind of story investors crave for, a relatively stable dividend yield and a solid growth story.
Eventful 4Q13 To Confirm The Winners Of 2013
A possibly eventful 4Q13 (US government negotiations, Federal Reserve taper, China growth figures, etc) could prove to be the ultimate decider of winners for 2013. Currently, only the small-cap category has seen a major mix-up of results with the STI-constituents and mid-caps largely stable in terms of price appreciation.
As for whether investors should stay away from the aforementioned stocks due to their price appreciation, I would not say that is certain. This is particularly true if the growth story of the specific counter appeals to the investor. For example, if I were to buy in to Cordlife’s strategic expansion in the region, its current stock price should not be a big hindrance to my investing in that counter.
As what the trio of small-cap stocks (Blumont, Asiasons and LionGold) have shown us, it is very important for every investor to open both eyes before taking the plunge. Make sure you are totally comfortable with the counter, its fundamentals, and its growth story before investing! Don’t just take it from me, do your own research as well!
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