If you have S$10,000 sitting idly in the bank, it might be worthwhile to put it in the stock market. Here are three Singapore-listed companies I would buy with S$10,000. (Remember to invest only after you have taken care of some basics, such as having “rainy day” funds.)
The first company to look into is iFAST Corporation Ltd (SGX: AIY), an Internet-based investment products distribution platform. I would put S$5,000 in this company.
iFAST’s recurring net revenue is correlated to its assets under administration (AUA) and is the biggest portion of its overall net revenue. Therefore, iFAST’s AUA, which shows the total net value of investment products that are under the company’s custody, is a key figure to track for the company.
Source: iFAST 2018 annual report
With the increase in AUA over time, iFAST’s recurring net revenue (shown in the dark blue bar below) has also grown over the years.
Source: iFAST 2018 results presentation
If iFAST plays its cards well, it could well hit its 2028 AUA target of S$100 billion. As mentioned in the company’s 2018 annual report, chairman and chief executive Lim Chung Chun feels that the goal is achievable thanks to the “tremendous size of Asia’s wealth management industry and robust growth potential for a scalable Fintech platform.”
iFAST’s business is also highly scalable since it builds its platforms in-house. As the company’s AUA grows, its operating costs would be further spread out on a per unit basis, leading to potentially higher profit and free cash flow margins over time.
iFAST’s price-to-earnings (PE) ratio of 27 may look expensive right now, but it could prove to be long-term cheap if the company can hit its ambitious AUA goal. At iFAST’s share price of S$1.11, its dividend yield stands at 2.8%.
SATS Ltd (SGX: S58) is the next company and I would allocate S$3,000 to it. SATS is a provider of food solutions and gateway services that serves mainly the aviation industry.
I like how SATS has consistently increased its dividend. From FY13/14 (fiscal year ended 31 March 2014) to FY17/18, SATS’s dividend has climbed by 8.5% per year from S$0.13 per share to S$0.18 per share.
Source: SATS FY217/18 earnings presentation
I also like SATS’s durable competitive advantage. The company has a large network of joint ventures and strategic alliances — in similar lines of businesses as what it does — in many countries. This massive network and SATS’s presence in many vital airports bring about high barriers to entry for new entrants.
Going forward, there are plenty of tailwinds for SATS. For one, growth in Singapore’s tourism numbers should bode well for the company’s future. The recently-announced expansion of Singapore’s two integrated resorts could bring in even more tourists to Singapore’s sunny shores.
At SATS’s current share price of S$5.18, it has a PE ratio of 22 and a dividend yield of 3.5%.
Lastly, there is SBS Transit Ltd (SGX: S61), the provider of bus and rail services in Singapore. I would invest S$2,000 in the company.
SBS Transit’s share price has risen significantly since February this year mainly due to the company’s solid financial performance for 2018. In fact, SBS Transit’s share price of S$4.00 right now is near a 52-week high. So, why is SBS Transit still a buy in my books?
I believe there is potential for the company’s earnings, free cash flow, and dividend to improve further in the coming years as discussed here and here. In my opinion, SBS Transit’s current PE ratio of 16 is a fair value to pay for a robust cash-generative business.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool has recommendations on iFAST Corporation Ltd, SATS Ltd and SBS Transit Ltd. Motley Fool Singapore contributor Sudhan P owns shares in iFAST Corporation Ltd, SATS Ltd and SBS Transit Ltd.