Comprehensive Analysis of Key Companies in the FSSTI Index

Date: 30 October 2024

Broker Name: Lim & Tan Securities

Overview of FSSTI Index Performance

The FSSTI Index closed at 3,590.4, showing a slight increase of 0.1% month-to-date (MTD) and a robust 10.8% year-to-date (YTD). This performance is in line with global indices, with the INDU Index and SPX Index showing YTD gains of 12.1% and 22.3%, respectively.

USA Market Summary

USA stocks closed mixed, with the Dow Jones falling by 0.4% while the S&P 500 and Nasdaq rose by 0.2% and 0.8%, respectively. Despite the mixed performance, there is a noticeable upward trend in major market indices, driven by investor optimism.

Key Interest Rates and Bond Yields

The 3-month SGD SIBOR remained unchanged at 3.3%, while the SG 10-year Bond Yield decreased by 0.7% to 2.9%. The US 10-year Bond Yield saw a slight dip of 0.2% to 4.2%, reflecting the ongoing volatility in the bond market.

Commodities

Gold prices increased by 0.1% to \$2,776.3, showing a significant YTD gain of 34.6%. Crude oil prices fell by 0.3% to \$67.2, reflecting a YTD decline of 6.2%. The Baltic Dry Index and Crude Palm Oil also showed declines, indicating a mixed performance in the commodities market.

Idea of the Day: Civmec Limited

Stock Price: S\$1.12, down 3 cents

Civmec Limited announced its business update for the quarter ended 30 September 2024 (Q1 FY25). The company reported a revenue of A\$262.7 million, up 7.2% from Q1 FY24. The Q1 EBITDA stood at A\$29.2 million, representing a 1.0% increase from Q1 FY24. The Q1 Net Profit After Tax (NPAT) remained unchanged at A\$15.2 million. Earnings per share for the quarter were 2.99 Australian cents.

Chairman’s Statement

Chairman James Fitzgerald expressed satisfaction with the company’s performance, highlighting the solid results and continued strong operational performance. He emphasized the company’s strategic move to redomicile its parent company to Australia, which is expected to enhance its ability to secure Australian contracts.

Key Developments

• BHP Rail Car Dumpers 4 and 6 (CD4 and CD6): Civmec was awarded the cell fabrication and assembly of CD4 and CD6 for BHP’s Port Hedland operations.
• Maintenance Awards: The company secured a 2-year term contract with Tianqi Lithium Kwinana Project Services Panel, with options to renew.

Defence Sector Expansion

Civmec has entered into a non-binding Heads of Agreement with NVL B.V. & Co. KG (Naval Vessels Lürssen) for the transfer of ownership of Luerssen Australia Pty Ltd. This strategic move is expected to support Australia’s future shipbuilding industry, with significant investments and job creation anticipated.

Financial Metrics

Capitalized at S\$569 million, Civmec trades at 9.4x forward P/E and 1.3x P/B with a dividend yield of 4.7%. The company’s Henderson Assembly Hall is a key asset, positioning it strongly for continuous shipbuilding and support work in the coming decades.

Sheng Siong

Stock Price: \$1.58, up 1 cent

Sheng Siong reported a net profit of S\$39.1 million for 3Q FY2024, an increase of 12.4% year-on-year (yoy). Revenue for the quarter rose by 5.0% to S\$363.2 million, driven by an increase in total stores and improved same-store sales.

Financial Performance

The gross profit increased by 8.4% to S\$113.8 million, with the gross profit margin improving by 1.0 percentage points to 31.3%. Other income surged by 96.5% due to the receipt of a progressive wage credit scheme grant.

Operational Highlights

Administrative expenses rose by 15.9% to S\$15.3 million, while selling and distribution expenses increased by 6.4% to S\$59.1 million, primarily due to higher staff costs. Cash flow from operating activities increased by 7.6% to S\$59.1 million.

Market Conditions

Singapore’s overall retail sales saw modest growth, with supermarkets and hypermarkets growing 2.2%. Economists are optimistic about Singapore’s economic outlook, particularly with the potential impact of U.S. Federal Reserve interest rate cuts. However, the global economic outlook remains uncertain due to geopolitical tensions and supply chain disruptions.

Future Prospects

Sheng Siong plans to continue expanding its store network, with new stores opened and more in the pipeline. The company remains cautiously optimistic, focusing on strengthening its core competencies and diversifying its supply chain to build resilience against external disruptions.

Financial Metrics

Sheng Siong’s market cap stands at S\$2.38 billion, trading at 17x forward PE and 4.6x P/B with a dividend yield of 4.1%. The consensus target price is S\$1.81, representing a 15% upside from the current share price. The company’s defensive appeal makes it a valuable addition to portfolios, especially during economic uncertainties.

Institutional and Retail Investor Activity

Institutional investors saw a net sell of S\$310.4 million, while retail investors recorded a net buy of S\$237.1 million for the week of 21 October 2024. Key sectors with significant net buys include Consumer Cyclicals, Financial Services, and Real Estate.

Top Institutional Net Buys

• SATS: S\$26.0 million
• Keppel DC REIT: S\$17.9 million
• Jardine Cycle & Carriage: S\$13.7 million

Top Institutional Net Sells

• DBS: -S\$113.9 million
• CapitaLand Integrated Commercial Trust: -S\$36.2 million
• UOB: -S\$26.5 million

Top Retail Net Buys

• DBS: S\$64.0 million
• Seatrium: S\$36.9 million
• SIA: S\$21.9 million

Top Retail Net Sells

• SATS: -S\$33.9 million
• Keppel DC REIT: -S\$14.0 million
• Jardine Cycle & Carriage: -S\$13.5 million

Conclusion

The FSSTI Index and its constituent companies continue to show resilient performance amidst global economic uncertainties. Civmec Limited and Sheng Siong are well-positioned for future growth, with strong financials and strategic initiatives. Investors should consider these companies for their portfolios, given their potential for sustainable growth and defensive characteristics.