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Two Consistent Growth Shares

A share’s historical performance, though by no means a definite predictor of its future, can go a long way in helping us form a clearer estimate of how it might look like say, 10 years later.

As my colleague Stanley Lim recently pointed out, the consistency of a company’s operating history is one of billionaire investor Warren Buffett’s essential criteria when looking at a business. “Investing in companies that have a profitable track record over long stretches of time”, wrote Stanley, “will give us confidence in their ability to operate successfully in their sector and survive through booms and busts”.

In light of that, here are two shares that have managed to grow their bottom-line almost without fail with each passing year over the last decade:

1. Ezion Holdings (SGX: 5ME)

Ezion Holdings builds, owns, and charters offshore oil & gas assets in addition to providing logistics and support services for the oil & gas industry. It is also the owner of “one of the largest and most sophisticated class of Multi-Purpose Self Propelled Jack-up Rigs (“Liftboats”) in the world”.

The company ended 2003 with losses of 1.27 Singapore cents per share. But, Ezion has steadily narrowed its losses and improved its profitability with each passing year, eventually ending 2013 with earnings per share of 16.4 Singapore cents.

Profit growth in 2013 was particularly strong as earnings per share jumped some 106%, driven in part by higher chartering activity from deploying more Liftboats and higher contributions from providing offshore logistic support vessels services for three liquefied natural gas (LNG) projects in Australia.

Year

Earnings per share (Singapore US cents)

2003

-1.27

2004

-1.07

2005

-0.55

2006

0.14

2007

0.71

2008

1.04

2009

1.63

2010

4.70

2011

6.79

2012

7.95

2013

16.4

Source: S&P Capital IQ

Shares of Ezion are currently worth S$2.13 each and are valued at 10 13 times trailing earnings.

2. Kingsmen Creatives (SGX: 5MZ)

While many might not be familiar with Kingsmen Creatives, it’s likely they’ll have come across the company’s handiwork in one way or another. That’s because Kingsmen Creatives helps international brands like Coach, Tag Heuer, and Swarovski among others, manage and produce their retail and corporate interiors here in Singapore and other parts of Asia. In addition, Kingsmen also has a hand to play in creating exhibits for museums, exhibitions and visitor centres; some famous landmarks in Singapore where Kingsmen has helped to spruce up include Universal Studios Singapore and Gardens By The Bay.

All told, Kingsmen Creatives’ main business interests lie in the design, manufacture, and setting up of installations for theme parks, museums, exhibitions, and retail stores etc.

The company has parlayed its creative work-output into attractive financial results for its investors judging from its consistent profit growth over the past decade.

Year

Earnings per share (Singapore cents)

2003

1.10

2004

0.84

2005

1.45

2006

3.26

2007

5.29

2008

7.46

2009

7.87

2010

7.94

2011

8.56

2012

8.84

2013

9.57

Source: S&P Capital IQ

At its current share price of S$0.955, shares of the MICE (meetings, incentives, conventions, and exhibitions) industry player carry a price-to-earnings ratio of 10.

Foolish Bottom Line

With the Straits Times Index (SGX: ^STI) being valued at almost 14 times earnings at its current level of 3,200 points, both Ezion Holdings and Kingsmen Creatives might seem to carry very undemanding valuations at 13 times and 10 times trailing earnings each respectively.  That’s especially so when we consider their steady – and in Ezion’s case, explosive – growth in profitability.

But, a great track record is really no guarantee of future returns and investors ought to think hard about whether shares such as Ezion Holdings and Kingsmen Creatives can continue on their winnings ways over the next decade.

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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 owns shares in Kingsmen Creatives.