There are many different sectors and industries within SGX’s universe of stocks, and there’s bound to be something to pique everyone’s interest. The Industrials sector consists of companies that deal with engineering, transportation, heavy industries like repair and maintenance, and marine and shipbuilding.
Industrial companies are usually large corporations with long track records, and they have a place in most investors’ portfolios as stable, predictable stalwarts. Some of these companies are also prone to occasional disruption and competitive threats. If management is able to innovate and evolve in order to successfully counteract these threats, investors may see superb share-price gains as pessimism would have depressed the share prices of such companies over time.
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An SGX report has highlighted three industrial stocks with billion-dollar market capitalisations which have seen stellar share-price performances year to date. These three companies averaged a year-to-date total return of 15.4% as of 24 May 2019.
1. ComfortDelGro Corporation
ComfortDelGro Corporation Ltd (SGX: C52), or Comfort, is a land transportation conglomerate with business interests in rail, buses, and taxis. The group’s operations span a wide variety of countries, from Singapore to Malaysia, Ireland, Vietnam, Australia, China, and the UK.
Comfort’s share price is the best performer in the Industrials category, gaining 18.1% year to date. Investors may wonder at this, as the threat of ride-hailing companies such as Grab and Gojek is still ever present. However, Comfort has managed to hold them at bay for now and has also managed to grow its taxi fleet this year, after many years of shrinkage. While the coast is far from clear, there are positive signs that Comfort is adapting itself to deal with the competition.
In addition, Comfort has also gone on an acquisition spree in order to build up its scale and capacity for buses and taxis in Australia and the UK. Investors may be cheering these acquisitions since they should bring in incremental revenue and profit and also act as a buffer to the taxi division’s woes.
2. Singapore Technologies Engineering
Singapore Technologies Engineering Ltd (SGX: S63), or STE, is a Temasek majority-owned conglomerate with four key divisions: Aerospace, Marine, Land Systems, and Electronics. STE is an engineering giant that provides products, services, and solutions to clients in many industries such as the military, aerospace, and semi-conductor.
STE reported a good start to the year, with higher year-on-year revenue and net profit of 5% and 11%, respectively. The group’s order book has hit a high of S$14.1 billion, and management is pursuing growth in Smart City and in the international defence business. The group also recently acquired Newtec Group, which operates in the high-tech satellite communications industry. STE’s share price has gained 14.7% year to date.
3. Yangzijiang Shipbuilding
Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6), or YZJ, is one of the largest private shipbuilding companies in China. The group was listed in SGX in 2007 and owns four shipyards in Jiangsu Province. YZJ produces a broad range of commercial vessels including bulk and LNG carriers, and it boasts a well-established customer network spanning North America, Europe, and other parts of the world.
YZJ’s share price has climbed 13.4% year to date as the shipbuilder reported a stellar set of earnings. Revenue soared 27% year on year, while net profit jumped by 38% year on year. In the first four months of 2019, YZJ has secured three new orders with a total contract value of US$116 million. As of 29 April 2019, the group’s outstanding order book was US$3.5 billion for 101 vessels, ranking the group No. 1 in China and No. 5 in the world.
These orders will keep the group’s yard facilities at a healthy utilisation rate until 2021 and provide good revenue streams for at least the next two years. YZJ is not sitting still, though. It’s also working on building up its capabilities for the construction of LNG vessels, as research shows that the global LNG trade grew at a compound annual growth rate (CAGR) of 5.6% over the past 10 years.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies involved.