Singapore’s stock market, as represented by the Straits Times Index (SGX: ^STI), has not done too well over the last 12 months – it is down by 4%. Not every stock has performed poorly over the same timeframe though. Tai Sin Electric Ltd (SGX: 500) would be one stock that has climbed. At their closing price of S$0.385 each yesterday, Tai Sin’s shares are up by 17% from where they were on 29 August 2015. The price of S$0.385 is also just a whisker away from a 52-week high of S$0.39. What could have contributed to the rise in Tai Sin’s share…
Singapore’s stock market, as represented by the Straits Times Index (SGX: ^STI), has not done too well over the last 12 months – it is down by 4%.
Not every stock has performed poorly over the same timeframe though. Tai Sin Electric Ltd (SGX: 500) would be one stock that has climbed. At their closing price of S$0.385 each yesterday, Tai Sin’s shares are up by 17% from where they were on 29 August 2015. The price of S$0.385 is also just a whisker away from a 52-week high of S$0.39.
What could have contributed to the rise in Tai Sin’s share price over the past year? Before we take a look at the possible reasons, let’s first have a quick background on the company.
Tai Sin is a provider of electric cabling and wiring solutions for industrial, commercial, residential, and offshore & marine projects. The company runs three cable manufacturing plants in Singapore, Malaysia, and Vietnam.
With that, let’s dig into some of the possible reasons behind the strong gains displayed by Tai Sin’s shares:
1. Strong growth
In Tai Sin’s fiscal year ended 30 June 2016 (FY2016), revenue grew 10.7% to $320.9 million due to higher deliveries to various sectors in Singapore, Malaysia, and Vietnam. Higher exports to Myanmar also helped.
Meanwhile, the top-line growth trickled down to the bottom-line with net profit attributable to shareholders soaring 35.5% to S$23.1 million. Tai Sin also ended FY2016 with a net-debt to equity ratio of merely 2%.
The blemish was that Tai Sin’s operating cash flow fell hard, from S$34.4 million in FY2015 to just S$8.42 million.
2. Stable historical dividend payouts and market-beating yield
Tai Sin’s dividend has either grown or remained steady over the past few years as you can see below:
Source: S&P Global Market Intelligence
Based on its total dividend of S$0.0235 per share in FY2016, the company has a yield of 6.1% at its closing share price yesterday. For perspective, this is nearly twice the SPDR STI ETF’s (SGX: ES3) yield of 3.2%. The SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s market barometer, the Straits Times Index (SGX: ^STI).
3. Upbeat outlook amidst macroeconomic gloom
In Tai Sin’s latest earnings results, for the fourth-quarter of FY2016, the company had shared some of its thoughts on its nearer-term future. It said:
“All our operations continue to face challenges from two fronts: continued uncertain global economic conditions affecting our markets and increasing competition. With the forecast of slower economic growth in Singapore, this continues to be of concern.
In Singapore, economic growth is expected to be lower in the coming year, especially for the oil and gas industries. Private building and construction demand is also expected to be slower in 2016.
However, more public sector projects coming on stream in the coming year will provide a pocket of opportunities for the Group’s business in Singapore. Moving ahead, the Group will focus more of its efforts on Singapore’s building infrastructure sector.
Over in Malaysia, the continuing rail network and Pengerang oil and gas complex development is expected to also provide opportunities for business for our C&W and T&I segment.
In Vietnam, the C&W segment will continue to expand its market through the local wholesaler and distributor network.
In Indonesia, the T&I segment will reach out for opportunities outside Riau Island.
Our business segments will also continue to leverage on each other’s presence and strengths in overseas markets, such as Cambodia, Myanmar and Vietnam and step up their marketing efforts to secure more new projects.”
So as you can see, Tai Sin’s business is being buffeted by gloomy macroeconomic conditions. But, the company still sees opportunities to grow its business.
At Tai Sin’s closing share price of S$0.385 yesterday, it has a trailing price-to-earnings (P/E) ratio of just 7.3. For perspective, the SPDR STI ETF has a P/E of 12 at the moment.
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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 James Yeo doesn’t own shares in any companies mentioned.