S(t)ocks For Christmas: Santa’s “Nice” List

Santa Claus is coming to town! I had previously looked at which companies might end up in Santa’s “Naughty” list. Now, it is time to look at the companies which might possibly end up in Santa’s “Nice” list for having delivered solid business performances.

The axis of goodness

Singapore-based computing software outfit Silverlake Axis Ltd (SGX: 5CP) has been a remarkable company. Over its past five completed financial years, revenue has grown at a compounded annual rate of 29.9%, from RM175.8 million in FY2010 (financial year ended 30 June 2010) to RM500.7 million in FY2014. The same goes for Silverlake’s net income, which has compounded at a rate of 40.7% over the same period from RM63.5 million to RM248.9 million.

The company, whose core banking solutions are used by 40% of South-East Asia’s top 20 largest banks, has boasted a return on equity of at least 38% since FY2010. And, the company has achieved its remarkable growth and generated those impressive returns by utilizing minimal borrowings – between FY2010 and FY2014, Silverlake’s total debt to equity ratio has never climbed above 5%.

It is hard to fault the financial performance of this company and Santa might agree to that as well.

“Doctors? Those Muggle nutters that cut people up?” 

Wizards in the fictional Harry Potter universe might not think much of doctors (the quote above comes from Ron Weasley, a character within that universe), but in the real world, doctors in Singapore have helped build one of the best businesses here.

Fools, meet Raffles Medical Group Ltd (SGX: R01). The company, which runs its flagship Raffles Hospital and more than 100 multi-disciplinary clinics in Singapore, has compounded its revenue at an annual rate of 11.8% between 2009 and 2013. Raffles Medical’s net profit grew at an even more impressive pace of 22.2% annually over the same period, improving from S$38 million to S$84.9 million.

In a similar fashion to Silverlake Axis, Raffles Medical has also accomplished what it did with minimal borrowings as its total debt to equity ratio has been less than 10% in those five years (2009 to 2013).

Shareholders would really have little to complain about as the company’s impressive corporate performance has helped drive its share price to appreciate by 465% to S$3.90 since the start of 2009. With such business and share price performances, it’d be tough to exclude Raffles Medical from Santa’s “Good” list.

The quiet one

The last in this list is LanTroVision S Ltd (SGX: Q7W). Although it is a smaller company and is less well-known in the market (Silverlake Axis, Raffles Medical and LanTroVision have market capitalisations of S$2.73 billion, S$2.19 billion, and S$150 million respectively), LantTroVisionn has also achieved strong growth in recent years.

From FY2010 (financial year ended 30 June 2010) to FY2014, LanTroVision’s revenue had compounded at an annual rate of 16%. Meanwhile, the firm’s net income had grown from S$3.2 million to S$13.9 million, representing a compounded annual growth rate of 44.4%.

The network integration and cabling company has also done all these without having to resort to heavy borrowings as its total debt to equity ratio has been below 1% in that period. With the boom in cloud computing, the need for networking services might be on the rise in the next few years and allow LanTroVision to enjoy a nice tailwind.

Foolish Summary

These companies have done well and deserves a pat on the back. However, in business, nothing is certain forever. The economic and business environment is always changing. If these three companies fail to change and remain relevant when the need arises, there is still a high chance of failure. But for now, it is a time to celebrate.

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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 contributor Stanley Lim owns Lantrovision