One method I use to screen for solid stocks is to look at the one-year returns list. Companies that have done well in the past year in terms of share price may have been bid up due to positive news flow, better financial performance, or both. Of course, investors have to separate the wheat from the chaff, as some companies may also soar in share price due to speculative fervour and over-optimistic expectations, but be unable to back it up with improved earnings and cash flow.
I shortlisted three companies that have delivered solid double-digit returns in the last year. Not only are these companies’ fundamentals strong, they are also supported by strong numbers in the form of rising revenues, profits, and in some cases, dividends.
No. 1: Yangzijiang Shipbuilding Holdings Ltd
Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6) is one of the largest shipbuilding companies in China and has been listed on the SGX Mainboard since 2007. The group has four shipyards in Jiangsu Province, China, and manufactures a broad range of commercial vessels including bulk carriers and large containerships.
Yangzijiang’s share price has risen by 60% in the last one year, from S$0.94 to S$1.50. The shipbuilder has reported solid first-quarter 2019 (Q1 2019) numbers, with revenue rising by 27% year on year, gross profit up 36% year on year, and net profit attributable to shareholders up 38% year on year. The group delivered 15 vessels in Q1 2019, much more than the nine vessels it delivered in Q1 2018. At S$1.50, the shares offer a historical dividend yield of 3.3%.
No. 2: Cortina Holdings Limited
Cortina Holdings Limited (SGX: C41) is a leading retailer and distributor of luxury watches and accessories across the Asia-Pacific region. The group has 24 boutiques in major cities in countries such as Singapore, Malaysia, Thailand, Indonesia, Hong Kong, and Taiwan.
Cortina’s share price has soared by 68.5% in the last 12 months, closing at a high of S$1.50 from just S$0.89 a year ago. Though the group’s revenue for fiscal year 2019 (FY 2019) ended 31 March 2019 was flat, good cost control and better gross margin resulted in net profit rising by 31% year on year. The group has also demonstrated a willingness to reward shareholders by increasing its total dividend to 5.5 Singapore cents (comprising 2 cents final and 3.5 cents special), up from 4.5 Singapore cents last year. The shares offer a trailing dividend yield of 3.7%.
No. 3: SBS Transit Ltd
SBS Transit Ltd (SGX: S61) is a provider of both bus and rail services in Singapore. The group runs multiple bus packages that were successfully bid from the government. SBS Transit also operates several rail systems: Singapore’s North East Line (NEL), Downtown Line (DTL) and the Sengkang and Punggol Light Rapid Transit (SPLRT). The group is 75% owned by land transport giant ComfortDelGro Corporation Ltd (SGX: C52).
SBS Transit’s share price has gained 72% in the last year, rising from S$2.50 to S$4.30. Its growth in revenue, net profit, and dividends has been nothing short of spectacular over the last two years as the group transitions from the old bus operating model to the new bus contracting model. This asset-light model frees up heavy commitments for maintenance that used to drag the group down and has enabled it to increase its revenue without a corresponding increase in costs.
Investors need to assess each business’ future potential
Share prices only tell us about what happened in the past, and investors need to do their own homework to be able to assess each business’ future potential. While past performance is obviously no guarantee of future performance, the presence of a strong business moat and enduring business model may allow these three companies to continue to flourish. And when the business does well, the share price will likely naturally follow.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of SBS Transit Ltd. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.