Singapore has recently slashed its economic growth forecast for this year to a range of 0% to 1%, down from a previous estimate of between 1.5% to 2.5%. This was on the back of rising trade tensions between the US and China that have reduced global trade flows, while the tit-for-tat tariffs have caused the prices of goods and services to rise, crimping consumer demand.
Total non-oil domestic exports for the year is projected to contract by 8% to 9% for the year, and many economists are now tipping for Singapore to fall into a technical recession (defined as two consecutive quarters of negative GDP contraction) in the third quarter. While this news may make investors worry and fret, they should remember that an economic downturn also throws up opportunities to invest in great companies at cheap valuations.
Here is a list of three companies that managed to grow despite the headwinds in the global economy.
1. Singapore Exchange Limited
Singapore Exchange Limited (SGX: S68), or SGX, is Singapore’s sole stock exchange. The group provides a platform for the trading, buying and selling of securities such as equities, fixed income and derivatives. SGX also provides listing, settlement and clearing services for listed companies.
In its recent full-year 2019 earnings (SGX has a 30 June year-end), the group reported an 8% year-on-year rise in revenue to a record S$910 million, while net profit also increased by the same quantum to S$391 million, an 11-year high. SGX has grown its derivatives division and it now forms the bulk (51%) of total revenue. As markets become more volatile and fluctuations become sharper, traders and investors will increasingly look for different ways to protect and hedge their portfolios. SGX, with its suite of derivatives, caters to this group and the bourse has seen volumes rising to record highs. As volatility continues to roil markets, SGX stands to benefit further.
2. VICOM Limited
VICOM Limited (SGX: V01) carries out testing and inspection services for vehicles. It also has a division that carries out testing and inspection in fields such as mechanical, biochemical, civil engineering and non-destructive testing. In the vehicle inspection space, VICOM has a market share of more than 75% in Singapore.
In its recent Q2 2019 earnings, VICOM reported a 3.7% year-on-year rise in revenue, driven by higher volumes of vehicle inspections. Net profit attributable to shareholders improved by 4.9% year-on-year to S$6.5 million. In addition, the group also increased its interim dividend declared from 13.46 Singapore cents to 14.11 Singapore cents.
3. Sheng Siong Group Ltd
Sheng Siong Group Ltd (SGX: OV8) is one of the largest supermarket chains in Singapore. Its retail outlet network consists of 57 stores across Singapore, and are primarily located in the heartland (HDB) areas of the island. Sheng Siong offers over 1,200 products ranging from food products to paper goods under its 18 house brands.
For its Q2 2019 earnings, Sheng Siong reported an 11.8% year-on-year rise in revenue, mainly contributed by new store openings. Costs were controlled well as gross margin increased slightly to 27.4%, while net profit increased by 7.6% year-on-year to S$18.4 million. As Sheng Siong serves the heartland consumer and sells many basic necessities, it should be fairly insulated from any macroeconomic headwinds. The interim dividend was increased from 1.65 Singapore cents last year to 1.75 Singapore cents.
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 Singapore Exchange Limited, VICOM Limited and Sheng Siong Group Ltd. Motley Fool Singapore contributor Royston Yang owns shares in Singapore Exchange Limited and VICOM Limited.