Over the past 12 months, the Straits Times Index (SGX: ^STI) has returned a respectable 5.9% to 3,254 (as of 2 August) as it begins to slowly recover from the shellacking received in May and June when US Federal Reserve Chairmen Ben Bernanke hinted that the Fed might ease up on Quantitative Easing. So while investors in the index itself would be sitting on small positive gains, investors in the following three shares – Sino Grandness (SGX: JS5), United Envirotech (SGX: U19), and Yoma Strategic Holdings (SGX: Z59) – have trounced the market in excess of a 100%, as…
Over the past 12 months, the Straits Times Index (SGX: ^STI) has returned a respectable 5.9% to 3,254 (as of 2 August) as it begins to slowly recover from the shellacking received in May and June when US Federal Reserve Chairmen Ben Bernanke hinted that the Fed might ease up on Quantitative Easing.
So while investors in the index itself would be sitting on small positive gains, investors in the following three shares – Sino Grandness (SGX: JS5), United Envirotech (SGX: U19), and Yoma Strategic Holdings (SGX: Z59) – have trounced the market in excess of a 100%, as shown in the chart below.
Source: Yahoo Finance
Sino Grandness has gained 215% over the past 12 months to S$1.43. The company, which cans vegetables and fruits in addition to making fruit juices, has delivered strong results since its IPO in 2009. Revenues almost quintupled from RMB330m in 2008 to RMB1.64b in 2012. Meanwhile, earnings jumped by 425% from RMB53m to RMB289m.
Its strong earnings momentum carried on to the first quarter of 2013 as quarterly earnings were up by 25% to RMB70m. year-on-year.
Last month, the company announced plans to spin off its fast-growing beverage business in an initial public offering. From 2009 to 2012, gross profits for Sino Grandness’s beverage business logged growth of almost 27 times from RMB13.4m to RMB374m. The announcement was welcomed by the market as its shares went up by around 12% to S$1.43 in a single day after the news was released.
Despite the sharp jump in the company’s share price over the past year and very strong earnings growth, it is still valued at six times trailing earnings, which is less than half the market’s PE of 13.
Sino Grandness’s low PE might look like a bargain for some, but to others, it might just reflect concern about China’s slowing growth, a country where the company derives more than half of its sales.
United Envirotech might be considered by some to be a ‘green’ company as they provide membrane-based water and wastewater treatment systems that utilises their advanced membrane technologies. Over the past 12 months the market has given a “green” thumbs-up to the company, with its shares up by 192% to S$0.95.
The company operates predominantly in China and its clients include petrochemical giants such as China Petrochemical Corporation, China National Petroleum Corporation, and China National Offshore Oil Corporation. In Singapore, it counts Sembcorp Utilities, the energy supplier and water-treatment arm of Mainboard listed Sembcorp Industries, as one of its clients.
The company’s top-line has grown by 260% to S$185m from March 2008 to March 2013, while earnings have improved by 250% to S$29.5m.
Growth seems to have slowed a little for UE though, as its recent first-quarter results saw a year-on-year earnings decline of 2.6% to S$5.7m.
United Envirotech is riding on the wave of the Chinese government’s desire to clean up wastewater discharge in the country and the management feels that they have an edge over competitors in terms of technology.
Shares of the company are valued on a trailing PE of 18.3, which appear in line with its growth prospects. But investors should be wary of an upcoming dilution. United Envirotech will be issuing 200m new shares – nearly a third of its current share count – as part of a deal to acquire Memstar Technology’s (SGX: 5MS) assets.
Yoma Strategic’s shares are up 128% to S$0.855 over the past year. Its business interests lie mainly in Myanmar, where it is involved with real estate, agricultural activities and automobile dealership.
The company has delivered strong earnings growth for its last two completed financial years. Profits in 2011 were S$2.8m and by 2013, they rocketed by 416% to S$14.4m.
The strong profit performance, along with its exposure to Myanmar – a country where there is high hopes of growth – has probably led to its market-beating returns.
But unlike Sino Grandness and UE, there are plenty of high expectations baked into Yoma’s share price as it carries a trailing PE ratio of 78.
I’ve previously raised questions over the sustainability of Yoma’s earnings growth, but the company may yet successfully ride on the coat-tails of Myanmar’s potential-boom and deliver stellar results. But with such high valuations, investors have to know what they are getting themselves into. The results generally aren’t pretty if the anticipated long-term growth fails to materialise.
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