Singapore’s High Flying Mid-Caps

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Following yesterday’s close at 3,082 points, which marked six days of consecutive losses, the Straits Times Index (SGX: ^STI) is now some 2.7% lower than it was at the end of last year.

Given the index’s uninspiring performance, investors can be forgiven for thinking that 2013 has been a lousy year for Singapore’s stock market so far. But that said, there have been bright sparks appearing throughout the market.

Even within the Straits Times Index’s 30 constituents, there have been blue chips that have managed to clock double digit gains for the year. Outside the index, we also have more than a handful of shares that have done very well.

In particular, here are three mid-caps that have trounced the Straits Times Index so far: Ezion Holdings (SGX: 5ME), Osim International (SGX: O23), and GuoccoLeisure (SGX: B16).

Company 31 Dec 2012 10 Dec 2013 % Change Current Market Cap
Ezion Holdings S$1.408 S$2.22 57.7% S$2.57b
Osim International S$1.73 S$2.30 33.0% S$1.66b
GuoccoLeisure S$0.655 S$0.84 28.2% S$1.097b
Straits Times Index 3,167 3,082 -2.7%

Source: S&P Capital IQ

1. Ezion Holdings

The company develops, owns and charters offshore assets, which includes multi-purpose self-propelled jack-up rigs catered for the oil & gas industry; heavy-haul vessels for heavy deck cargo; and ballastable vessels, among others.

Over the past nine months ended 30 Sep 2013, Ezion Holdings has done exceptionally well: revenue for the period has surged 86% to US$198m while profits more than doubled from US$58m to US$121m.

The growth came from higher revenue contribution from its deployed assets (Liftboats and jack-up rigs) and the provision of offshore logistic support vessels services. In addition, expenses grew at a much slower pace, leading to faster bottom-line growth.

Ezion’s stellar results so far could probably explain its share price gains for the year-to-date.

There has been some interesting developments for the company that are related to its proposed acquisition of 45.15% of Ocean Sky International’s (SGX: O05) enlarged share capital that was announced on 30 Sep 2013. Ezion would be injecting its marine supply base business into Ocean Sky along with a shuffling of personnel at the top-management level.

Ezion’s acquisition would “allow Ocean Sky to have a dedicated management team to capture new business opportunities in providing vital marine infrastructure in resource rich Australia while allowing [Ezion] to continue to focus on meeting the strong demand from clients of its existing business.”

That said, according to Ocean Sky’s latest annual report and investor relations page, the company seems to be involved with apparel marketing, designing, and manufacturing activities. That’s a completely different world from a marine supply base business that Ezion wants to inject into Ocean Sky. Investors in Ezion would probably have to keep a close watch on how the marine supply base business is integrated with Ocean Sky.

In any case, going forward, Ezion “expects more assets to be deployed in 4Q 2013” as it continues to hunt for business opportunities in support of Liquefied Natural Gas related projects in the Australian region. Management also said that they expect “to perform better in the financial year ending 2013” barring any unforeseen circumstances.

2. Osim International

Health and wellness company Osim International makes the cut here as well with its shares up 33% year-to-date. While the company might be most well-known for its massage chairs and related paraphernalia, it actually sells luxury tea products (through its stake in TWG Tea) and nutraceutical products and supplememnts through RichLife and GNC outlets.

In addition, it also operates lifestyle-product retail outlets under the Brookstone banner.

Osim has had a good first nine months of the year, as revenue went up 5% year-on-year to S$469m while profits were 15% higher at S$73.9m.

The company has had solid corporate performance for more than four years now, as it achieved 19 straight quarters of growth in profitability in its latest third quarter results.

Along the way, its shares have also delivered stellar multi-bagger returns since the start of 2009, gaining 3,186%. Investors likely can’t expect such performance going forward, as Osim was in deep trouble back in 2007-2009 due to problems related to its Brookstone acquisition, thus depressing its share price.

Those problems have since been resolved, which manifested itself in that long stretch of consecutive growth in profitability.

Osim’s management expressed confidence in their business for the rest of 2013 and beyond during its third quarter earnings release, as they expect growth in profitability “will continue to be driven for a number of years by market leadership [Osim is Asia’s number 1 brand in well-being and healthy lifestyle products], continuous innovation and productive execution.”

3. GuoccoLeisure

GuoccoLeisure is a company wearing many hats. As an investment holding company, it has interests in a number of different industries: it owns and manages hotel chains under the Guoman and Thistle brands, predominantly in the United Kingdom; it operates a casino, The Clermont Club, in London; it is active in real estate development on the Fijian and Hawaiian islands; and lastly, it has stakes in oil & gas production activities in the Bass Strait in Australia.

While the company’s share price returns have been excellent, its corporate results paint a different picture. For the financial year ended 30 June 2013, revenue inched up 1% to US$437.5m but profits got slashed by 43% to US$44m.

GuoccoLeisure’s latest first quarter results, for the three months ended 30 Sep 2013, continued the trend as quarterly profits slipped 29% to US$16.5m.

The company’s management gave some colour on its hotel business in the United Kingdom – responsible for more than 80% of the company’s overall revenues – during its first quarter earnings release:

London hotels are coping with the need to absorb a significant increase in new supply that came onto the market prior to the 2012 Olympic Games. However, London and the UK were generally seeing a return of business and leisure travel as well as experiencing early signs of economic recovery. This, along with the rebranding and transformation initiatives currently underway at the hotels, is expected to support our UK-based business.”

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.