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Finding Great Investments in the Billion Dollar Club

A market capitalisation of more than S$1 billion typically signifies that a company’s business has reached a certain level of maturity. It can also be seen as a sign that the company has a stronger business foundation as compared to companies with smaller market caps, all other things being equal.

For these reasons, it may not be a bad idea for investors to focus more of their energies in finding investing opportunities from the billion dollar club instead of trying to shoot for the moon with speculative investments from the small caps universe.

In Singapore’s stock market, the billion dollar club is rather exclusive. Through the StockFacts stock screener provided by bourse operator Singapore Exchange, I found that there are 106 listed entities out of more than 700 that have market capitalisations of more than S$1 billion. And of those 106 stocks, only 51 have revenues of more than S$1 billion.

So, which companies within the billion dollar club can be interesting investing opportunities? Let’s take a look.

For the dividend investor

Looking for high sustainable dividends to build a stream of income? There are multiple high-yielding stocks among members of the billion dollar club. Some examples include Asian Pay Television Trust (SGX: S7OU), Lippo Malls Indonesia Retail Trust (SGX: D5IU), OUE Hospitality Trust (SGX: SK7), and Hutchison Port Holdings Trust (SGX: NS8U).

Stock Yield
APTT 10.2%
LMIRT 8.5%
OUE Hospitality Trust 8.4%
HPH Trust 8.8%

Source: S&P Capital IQ

For the deep value investor

Maybe you prefer stocks at bargain-bin prices? Stocks that carry low price to earnings (PE) ratios might be a good starting point for us to unearth candidates for further research. Here are some companies that currently have very low PE ratios: Ezion (SGX: 5ME), Yangzijiang Shipbuildings Holdings Ltd (SGX: BS6), and Ho Bee Land Ltd (SGX: H13).

Stock PE Ratio
Ezion 3.4
Yangzijiang 6.3
Ho Bee Land 4.1

Source: S&P Capital IQ

For the growth investor

A market cap of more than a billion may seem big, but that doesn’t mean that companies in that space cannot be fast-growers. Here’s a sample list of companies within the billion dollar club with impressive annual revenue growth of more than 20% over the past five years: Silverlake Axis Ltd (SGX: 5CP) and CITIC Envirotech Ltd (SGX: U19).

Stock Annualised revenue growth over past five years
Silverlake Axis 24.0%
CITIC Envirotech 34.7%

Source: S&P Capital IQ

For all Fools (capital ‘F’!)

It should be noted that all the stocks I’ve mentioned above are not necessarily good investments.

Let’s use the dividend examples. In our current low interest rate environment, the yield offered by the four aforementioned trusts are really attractive. But, we have to be aware that a stock’s dividends (or a trust’s distributions) can be cut if its underlying business worsens. Finding which stocks have high yields should only be the starting point for your research – our job as investors is to investigate whether a stock’s dividends are sustainable or not.

The same logic actually applies regardless of what metrics we are looking at. A low PE ratio, a high dividend yield, or a high revenue growth rate should be taken only as an initial sign that this stock is worth a deeper look. Such metrics should never be the deciding factor when we want to make an investing decision.

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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 does not own shares in any of the companies mentioned above.