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1Q13 In Review: Which Stocks Beat The Rest? Do They Have Any Steam Left?
Hot Picks, Tradeable | 16 April 2013
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By: Simeon Ang
Articles (125) Profile

A gloomy macroeconomic environment may have put a dent in consumer and business sentiments, but it most certainly did not put a significant dent in the stock markets. In fact, for the first quarter of 2013, stock markets continued to perform better than what most analysts expected. For instance, the Straits Times Index (STI) appreciated 4.5 percent over 1Q13 despite an already impressive year in 2012.

Just which stocks fared the best during this somewhat bullish market? Do they still have room for further ascent? Let us take a look at the winners of 1Q13 in three broad categories, namely the STI components, FTSE ST Mid-Cap components and the FTSE ST Small-Cap components.

The Winners Amongst Giants – Thai Bev, SPH And StarHub
The barometer of the Singapore stock market – the Straits Times Index provides a snapshot of how various blue chips in Singapore fared. The index, reviewed quarterly, hosts names such as Singapore Airlines and Singapore Telecommunications, both local champions. In this arena, three counters stood out in terms of returns in 1Q13. Thai Beverage Public Company(ThaiBev), Singapore Press Holdings, and StarHub all recorded superior returns over their peers and the index as indicated in the graph and tables below.

Source: FactSet, chart on returns of the STI (Blue) versus SPH(Pink), StarHub (Yellow), and ThaiBev (Green)

Source: FactSet, top three stocks in the Straits Times Index with the highest returns over 1Q13 (excluding dividends)

Source: FactSet, mean and median return statistic of all STI components

ThaiBev – Acquisition Led Appreciation
Despite topping the charts for the blue chip category, does ThaiBev have more steam left in its engine of growth? Surely, its recent ascent is due in no small part to its acquisition of Fraser and Neave. Analysts feel that the inclusion of Fraser and Neave into ThaiBev’s non-alcoholic beverage business could provide further impetus for stock appreciation. In particular, CIMB feels that ThaiBev’s stable of brands, including Oishi, is poised for rapid regional growth.

Despite revising its target price for ThaiBev to $0.77 from $0.74, CIMB still feels that this amount “understates the value of its business given the strong barriers to entry from ThaiBev’s control of Oishi, Serm Suk and Fraser and Neave.”

Source: FactSet, compilation of brokers recommendations for ThaiBev

As seen from the graph above, it would seem that many analysts are still somewhat bullish on the stock. However, recent price increases have now pushed valuations very near the average target price set by analysts. Would analysts revise their valuations upwards (as CIMB has done)? Or does this imply limited upside?

ARA, Raffles Medical, GuocoLeisure – Stable Yet Volatile Winners
The mid-caps, volatile yet somewhat stable counters. Mid-caps have been known to host several defensive stocks as well as growth engines such as SMRT and Ezion Holdings. Based on this index, three counters, GuocoLeisure, Raffles Medical Group and ARA Asset Management snatched the titles of winners. Below, we see how the returns of these stocks compared with the index as a whole as well as against their peers.

Source: FactSet, chart on returns of the FTSE Mid Cap Index (Blue) versus Raffles Medical(Pink), ARA Asset(Yellow), and GuocoLeisure(Green)

Source: FactSet, top three stocks in the FTSE ST Mid-Cap Index with the highest returns over 1Q13 (excluding dividends)

Source: FactSet, mean and median return statistic of all FTSE ST Mid-Cap Index components

GuocoLeisure, The Premise Of Privatisation
Somewhat of a late bloomer, GuocoLeisure started its rapid ascent in late March to beat the early front runners. A chief contributor to this rapid ascent could be talk of a possible privatisation exercise brought about by substantial shareholder, Quek Leng Chuan. Quek had previously had his privatisation attempt blocked by two institutional shareholders. This time, Quek has started to accumulate his stake and has reached around 66.7 percent (based on an October 2012 filing by GuocoLeisure).

Aside from that, the review by Lim and Tan Securities showed that GuocoLeisure’s hotel and property assets could be in line for upward revaluation as an independent financial advisor’s report is due by the end of April 2013.

Source: FactSet, compilation of brokers recommendations for GuocoLeisure

Despite having only a solitary analyst covering the stock, it is important to note that the counter continues to trade at an undemanding valuation of around 0.8x price-to-book. Perhaps, there could be further room for growth yet.

Finding The Winners Amidst The Froth – Innopac, Blumont, Sino Grandness
And finally, we come to the small caps. Easily, the most volatile of stocks, the small caps have kept some investors at bay owing to the increased perceived risks. However, as an investment guru once said, “with risk, comes reward”. It is thus not utterly surprising to see the first two of the top three performing stocks in the FTSE ST Small-Cap index more than doubling in value within a short period of one month.

The top three stocks, Innopac Holdings, Blumont Group and Sino Grandness Food Industry Group, all demonstrate the possible rewards available to investors who are brave enough to venture into the small cap realm. Below, the graph represents how the three stocks fared against the index, while the two tables show how each stock fared and how to compared with their peers.

Source: FactSet, chart on returns of the FTSE Small Cap Index (Blue) versus Blumont(Pink), Sino Grandness(Yellow), and Innopac(Green)

Source: FactSet, top three stocks in the FTSE ST Small-Cap Index with the highest returns over 1Q13 (excluding dividends)

Source: FactSet, mean and median return statistic of all FTSE ST Small-Cap Index components

Sino Grandness, A Pre-IPO Investment?
Truly, it is difficult to be sure of the basis for the ascent of the top two small cap counters. In turn, to ascertain if those counters have further room for ascent would require near fortune-telling capabilities. However, Sino Grandness does seem to have something going on for it.

According to analysts at Maybank Kim Eng, Sino Grandness has a very specific catalyst for its price appreciation. This catalyst takes the form of the impending listing of its beverage subsidiary, Garden Fresh, in Hong Kong by October 2014. According to Kim Eng, the successful listing of Garden Fresh could make Sino Grandness a far more valuable company. In its base scenario, Kim Eng assumes that Garden Fresh could be worth about $360 million.

Source: FactSet, compilation of brokers recommendations for Sino Grandness

Indeed, Sino Grandness is currently trading at an low price-to-earnings ratio of about 5x and valuations do appear cheap. Kim Eng chips in with an opinion that investing in Sino Grandness now, could be akin to a pre-IPO investment in Garden Fresh.

Monetary Policy To Blame For Appreciation?
With stocks appearing to have had a good run of late, could this be a sign of better things to come? Or are the appreciating stock prices just a side effect of the massive amounts of liquidity flowing in the market right now?

While my guess is as good as yours, it is a basic investment premise that investing in fundamentally good counters will reap rewards for investors in the long run. Perhaps the three I have shared with you in this article could be worth a look or two?

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Simeon, an LSE graduate, is currently the editor of Aspire. He specialises on topics surrounding trading psychology, politics and macroeconomics.

Please click here for more information about this author.

Thai Beverage Public Co  0.900 -0.010 -1.10%   
Business: [FY18 Turnover] Spirits (46.1%), beer (41.1%), non-alcoholic beverages (7%), food (5.8%).

Insight: May-19, 1H19 revenue rose 26.1% to THB142.6b mainl... Read More
Singapore Press Hldgs  2.080 +0.01 +0.48%   
Business: Co is S'pore's main newspaper & magazines publisher that also has investment in properties. [FY18 Turnover] Media (66.7%), property (24.7%), others (8.6%).

Insight: Apr-19, 1H19 operating revenue fell 3% to $477.6m ... Read More
StarHub  1.320 -- --   
Business: [FY18 Turnover] Mobile (34.9%), sale of equipment (22.4%), enterprise fixed (21.6%), pay TV (13.2%), broadband (7.9%).

Insight: May-19, 1Q19 total revenue rose 6% to $596.8m attr... Read More
GL  0.780 -- --   
Business: Co holds a portfolio of hotels, as well as a range of other investments. [FY18 Turnover] Hotels (92.2%), oil & gas (7%), ppty devt (0.8%).

Insight: Apr-19, 9M19 revenue rose 1.9% due to higher reven... Read More
Innopac Hldgs  -- -- --   
Business: Co principally engages in investments of marketable securities, financial instruments and investment properties.

Insight: May-19, 9M19 revenue slid 56.3% due to decreased r... Read More
Blumont Group  -- -- --   
Business: Co provides contract sterilization and polymerization services. [FY18 Turnover] Sterilisation (99.3%), property (0.7%).

Insight: Feb-19, FY18 revenue increased 6%. Total expenses ... Read More

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