The Global Singapore Stocks With The Best Returns

The Singapore stock market boasts 40 primary-listed industrial companies which make up the FTSE All-World Index.

The FTSE All-World Index consists of more than 3,000 stocks that represent around two-thirds of the total market capitalisation of all primary-listed stocks around the world. In this sense, it can be considered a global stock market benchmark.

Finding the best returns

The return on equity (ROE) is a measure of how much profit a business can generate for every shareholder dollar it has. This ratio can be a quick way to compare the business quality of different companies.

recent report shared information on the aforementioned 40 companies and their ROEs. From there, we can fish out the best of the lot (figures as of 27 May 2016, unless otherwise stated):

  1. The 40 stocks had averaged a 5.1% annualised total return over the past 10 years. In contrast, the SPDR STI ETF (SGX: ES3), an exchange traded fund that mimics the fundamentals of the Straits Times Index (SGX: ^STI), had generated an annual return of 4% in the ten years ended 30 April 2016.
  2. The median ROE for the group of 40 stood at 9%. This could be a good yardstick for comparison for the ROEs of individual companies. Singapore Technologies Engineering Ltd (SGX: S63), with its ROE of 23%, has one of the highest ROEs in the group of 40. But, investors may want to note that ST Engineering’s ROE has been trending downwards in recent years.
  3. Singapore Post Ltd  (SGX: S08) is another with an above-median ROE. The logistics and mail services provider has an ROE of 21.5%. But, just like ST Engineering, Singapore Post’s ROE has been falling in recent years as well.
  4. At the other end of the ROE-spectrum, Singapore Airlines Ltd  (SGX: C6L) and CapitaLand Limited (SGX: C31) both sport an ROE of only 6.4%, which falls below the median ROE benchmark. Both companies operate in cyclical industries which may cause their ROEs to fluctuate wildly from year-to-year. Singapore Airlines, for instance, has seen its ROE range from 2.5% to over 7.5% from its fiscal year ended 31 March 2010 (FY2010) to FY2014.

The ROE provides one dimension for investors to gauge the profit generating potential of a company. Investors should note that the ratio is also a historical measure, therefore we have to determine if a company with a high ROE has the capability and runway to continue generating an ROE that is commensurate with its own history.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.