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SGX Market Updates - "STIs Strongest Sectors in YTD - Real Estate, Financials & Industrials"

SGX Market Updates - "STIs Strongest Sectors in YTD - Real Estate, Financials & Industrials"

 

 

 

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28 August 2017

 

 

 

Market Updates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STI’s Strongest Sectors in YTD – Real Estate, Financials & Industrials

 

 

  • The STI has generated a 13.2% price gain in the 2017 YTD, with its eight Real Estate stocks averaging a 24.1% price gain, its four Financial stocks averaging a 15.0% price gain and its 10 Industrial Stocks averaging a 13.6% price gain.

 

  • Of these three STI Sectors, Real Estate and Industrials averaged turnaround price performances in the 2017 YTD after respective declines averaging 0.5% and 5.2% in 2016. Yangzijiang Shipbuilding, UOL Group, CapitaLand & A-REIT swung from price declines in 2016, to gains of 15.0% or above in the 2017 YTD.

 

  • Valuations for the STI’s Real Estate & Industrial stocks are mostly at or above historical standards. The STI’s Real Estate stocks’ average P/B ratio at 1.0x is marginally above the five year average of 0.9x, while the average P/E ratio for the STI’s 10 Industrial stocks has advanced to 20x from a five year average of 17x.

 

 

 

 

 

The Straits Times Index (STI) provides a benchmark gauge for the performance of Singapore’s 30 largest capitalised and actively traded stocks. The results of the next quarterly review for STI inclusion will be published on Thursday 31 August after the market close, and these results will be effective from the start of trading on Monday, 18 September.

 

Last week the STI generated a marginal gain of 0.2% to take its 2017 year-to-date dividend-inclusive return to 16.4%. This compares to a year-to-date average total return of 10.8% in SGD terms for the benchmarks of Japan, Hong Kong and Australia.

 

Source: SGX StockFacts & Bloomberg (Data as of 25 August 2017). Note Total Return assumes dividend distributions are reinvested into the Index. Average of regional Indices is converted to SGD equivalent returns.

 

The illustrated returns above include STI price returns of 13.2%, with reinvested dividends boosting the STI total return to 16.4% in the year thus far. Note that while in its standard Index form (taking into account free-float capitalisation weightings) the Index generated a 13.2% price return, the simple average price return (i.e. non-weighted) of all 30 constituents was 12.7%.

 

In the 2017 year through to 25 August, the Real Estate and Industrial Sectors generated turnarounds in average price performance after respective declines of 0.5% and 5.2% in 2016. Conversely, whilst the STI’s Consumer Staples & Consumer Discretionary Sectors averaged a 16.2% price gain in 2016, the six stocks have averaged a price decline of 0.6% in the 2017 year through to 25 August.

 

The average price performances of STI constituents, grouped by GICS® Sectors in the 2017 year through to 25 August are illustrated below.

 

 

Source: SGX StockFacts & Bloomberg (Data as of 25 August 2017)

 

Three of the STI’s five strongest price performers in the 2017 year through to 25 August were Real Estate stocks - Global Logistic Properties, City Developments and UOL Group. This helped to boost the average price returns of the eight stocks that make up the STI’s Real Estate Sector to 24.1%.

 

Comparative Valuations

 

Valuation ratios are often used by investors to assess the operating and financial conditions of a stock against its historical or Sector average. Historical standards compare the stock’s ratio in a particular year to past years, while Sector standards can involve comparisons with Sector competitors.

 

Two such valuation ratios, the price-to-earnings (P/E) and price-to-book (P/B) ratios vary across the different Sectors represented within the STI. For Sector valuations, the P/E ratio is commonly used for the Industrials and Consumer Sectors, whilst the P/B ratio is commonly used for the valuation of Financials and Real Estate Sectors.

 

The P/E ratio indicates how much the market values a stock, relative to the income it has actually generated over the past 12 months, while the P/B ratio allows investors to compare the stock’s value on the market, relative to its book value. For the 30 STI constituents, the simple average P/E ratio is currently 17x and simple P/B ratio is 2.1x. Note this is not the P/E and P/B of the Index in its weighted form, rather a simple average of the P/E and P/B of each of the 30 stocks that make up the Index.

 

Average P/B Ratio of STI’s Real Estate Sector Marginally Above Historical Average

 

The three Banks all maintain similar P/B ratios, with their average P/B of 1.2x, just 0.1x above their five year average P/B of 1.1x. Over the past twelve months, the three banks have seen average price gains of 30.3%.

 

Similarly, the current P/B ratio of the Real Estate Sector stocks at 1.0x is also marginally higher than the five year average at 0.9x. As noted above, the eight Real Estate stocks in the STI have averaged a 24.1% price gain in the 2017 year thus far, after averaging a 0.5% price decline in 2016.

 

The three strongest year-to-date performers of the STI’s eight Real Estate stocks – Global Logistic Properties, City Developments and UOL Group currently maintain P/B ratios that are above their five year average. The P/B ratios of the remaining five real estate plays are 0.1x above to inline their five year average P/B ratios.

 

Average P/E Ratio of STI’s Industrials Sector Above Historical Average

 

The STI stocks representing the Industrials Sector currently maintain an average P/E ratio of 20x, higher than the five year average P/E ratio of the 10 Industrial stocks at 17x. The P/E ratios of these 10 STI stocks currently vary from 7x for Jardine Matheson Holdings to 37x for Singapore Airlines.

 

Six of the relevant 10 stocks of the Industrials Sector have P/E ratios that are above their five year average, which include Singapore Airlines, SIA Engineering Co, Hutchison Port Holdings Trust, Yangzijiang Shipbuilding Holdings, Keppel Corp and Singapore Technologies Engineering.

 

Sembcorp Industries and SATS currently maintain P/E ratios in line with their five year average, while ComfortDelGro Corp and Jardine Matheson Holdings maintain P/E ratios below their five-year average.

 

The 30 STI stocks are tabled below. To see more information on each stock including financial history in SGX StockFacts click on the stock name.

 

Name

SGX Code

Mkt Cap $ Bn

[SGD]

Price Change 2016 % [SGD]

Price Change YTD % [SGD]

P/E

P/B

GICS Sector

Jardine Matheson Hldgs*

J36

66

15.8

13.8

7.0

1.0

Industrials

Singtel

Z74

61

-0.5

2.7

16.0

2.1

Telecommunication Services

DBS Group Hldgs

D05

52

3.9

17.8

12.1

1.1

Financials

Oversea-Chinese Banking Corp

O39

46

1.4

23.1

12.3

1.2

Financials

United Overseas Bank

U11

39

4.0

15.6

12.7

1.1

Financials

Hongkong Land Hldgs*

H78

24

-7.7

9.6

3.3

0.5

Real Estate

Thai Beverage PCL

Y92

23

23.2

10.0

16.9

4.7

Consumer Staples

Wilmar International

F34

20

22.1

-10.3

10.9

1.0

Consumer Staples

Jardine Cycle & Carriage

C07

16

18.3

-2.4

15.2

1.9

Consumer Discretionary

CapitaLand

C31

16

-9.9

22.8

10.3

0.9

Real Estate

Global Logistic Properties

MC0

15

2.3

47.3

15.9

1.2

Real Estate

Genting Singapore PLC

G13

14

17.5

31.5

24.3

1.5

Consumer Discretionary

Singapore Airlines

C6L

12

-13.7

7.8

36.5

0.9

Industrials

Keppel Corp

BN4

12

-11.1

9.5

14.7

1.0

Industrials

ST Engineering

S63

11

7.3

9.9

23.9

5.2

Industrials

City Developments

C09

10

8.2

37.4

17.8

1.1

Real Estate

Singapore Exchange

S68

8

-7.0

3.5

23.4

7.7

Financials

Ascendas REIT

A17U

8

-0.4

15.0

16.7

1.2

Real Estate

CapitaLand Mall Trust

C38U

8

-2.3

11.9

12.3

1.1

Real Estate

UOL Group

U14

7

-4.0

34.1

19.6

0.8

Real Estate

Yangzijiang Shipbuilding Hldgs

BS6

6

-25.9

95.7

13.2

1.3

Industrials

Sembcorp Industries

U96

5

-6.6

6.0

16.2

0.8

Industrials

SATS

S58

5

26.3

-0.8

21.5

3.2

Industrials

CapitaLand Commercial Trust

C61U

5

9.6

14.9

10.1

0.9

Real Estate

ComfortDelGro

C52

5

-19.0

-7.7

15.4

1.9

Industrials

Golden Agri-Resources

E5H

5

26.5

-10.5

11.1

0.9

Consumer Staples

StarHub

CC3

5

-24.1

-5.3

15.5

11.6

Telecommunication Services

Hutchison Port Hldgs Trust*

NS8U

5

-16.2

-2.0

24.8

0.8

Industrials

Singapore Press Hldgs

T39

4

-10.4

-21.8

22.8

1.3

Consumer Discretionary

SIA Engineering Co

S59

4

-8.9

3.3

23.0

2.5

Industrials

Average

 

 

0.6

12.7

16.5

2.1

 

Source: SGX StockFacts & Bloomberg (Data as of 25 August 2017)* Note traded in USD, performances & market cap are all SGD-adjusted.

 

 

 

 

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