With over 700 shares to choose from in the Singapore stock market, you could be forgiven for feeling overwhelmed. To make your life simpler, I have filtered out two shares, using a stock screener, that you can look further into.
The two companies have robust earnings growth, clean balance sheets, and a respectable return on equity (ROE). With that, let’s dive into those two stocks.
AEM Holdings Ltd (SGX: AWX) is the first company that emerged from the stock filter. AEM is involved in the designing and manufacturing of equipment and precision components for the semiconductor, solar and smart card industries.
Over the past three years, net profit grew from S$4.7 million in the financial year ended 31 December 2016 (FY2016) to S$33.5 million in FY2018, giving it an annualised growth rate of a whopping 168%. The bottom-line increase came on the back of revenue climbing from S$70.1 million to S$262.3 million during the same time frame. AEM ended 2018 with an ROE of 37.4%, which is high.
As of 31 March 2019 (end of 2019 first-quarter), AEM’s balance sheet carried S$54.7 million in cash with negligible debt. For the quarter, the company did not perform well financially as revenue and net profit fell 19.7% each. In 2018, AEM announced that it expects the initial ramp phase of its equipment at its clients’ sites to be completed by the end of that year. Therefore, the rolling upgrade phase in 2019 may introduce significant volatility into its business.
Valuation-wise, AEM seems to be trading reasonably. At its share price of S$1.06, it has a trailing price-to-earnings (PE) ratio of 9 and a dividend yield of 3.3%.
China Sunsine Chemical Holdings Ltd (SGX: CH8) is the next company on the list. It is a leading specialty rubber chemicals producer. The company serves more than 65% of the top 75 tyre makers in the world, including brands such as Bridgestone, Michelin, Goodyear, and Pirelli.
China Sunsine Chemical’s revenue grew from RMB 2.04 billion in FY2016 to RMB 3.28 billion in FY2018. With that, net profit surged 70.1% annually from RMB 221.7 million to RMB 641.3 million. For FY2018, the company produced an ROE of 27.6%, and its balance sheet carried no debt, as of 31 March 2019.
Just like AEM, China Sunsine didn’t have a great start to 2019. Its first-quarter revenue fell 20% while net profit tumbled 26%. The company said that lower sales were largely due to a decrease in the average selling price of its products on the back of falling raw material prices.
At its share price of S$1.15, China Sunsine has a PE ratio of just 5 and a dividend yield of 4.8%.
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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 Singapore has recommended shares of AEM. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.