Even though the Singapore economy is as relentless as ever, the same cannot be said for the Singapore stock market.
You know things are getting serious when our minister needs to step in to initiate ideas to revitalise the local bourse.
Even though the Malaysia market might be stealing the limelight with the recent slews of IPO, I still think the Singapore market is a better place to invest.
Cue the “invest” please. Maybe there really are too much quality companies that fits the “buy-and-hold” approach in Singapore compared to the KLSE.
If you had missed the banks and the REITs, and are feeling lost on what to invest, perhaps do take a deeper look at these 14 companies out of the 200 companies screened. We screened out these 14 companies using the free cash flow yield. Taking the levered free cash flow and dividing it with the company’s enterprise value, we get the free cash flow yield. Companies that are able to achieve a higher levered free cash flow and has a lower enterprise value will rank higher than the others.
These 14 companies will be the top 20% of by FCF/EV yield will considered undervalue, while adding the gross profit over total assets will give a hint of the company’s profitability strength.
So which are the 14 companies that make the list?
QAF Limited (SGX Q01)
Some might not be aware of the company’s name, but most definitely have come across QAF’s products and brands. QAF is in the baking, distribution and warehouse business. It owns the Gardenia brand, where most of us have grew up with. I still have a soft spot for Twiggies even I am a grown up man now.
The company is net cash positive, and sports a return on assets of 3.5%. It has a free cash flow yield of 12% and a gross profit asset of 10.35%.
The company’s Malaysian factory was hit and damaged by floods, has been supporting the normalisation of production and supply of bakery products. This contributed to the overall improvement in the company’s operating performance. The bakery business might be competitive, but QAF does have a sizeable presence and brand to command a market leader position in an evergreen business model.
CSE Global Limited (SGX: 544)
CSE Global Limited is a diversified engineering and solutions provider company. It provides integrated industrial automation, information technology, and intelligent transport solutions to clients in various sectors, including energy, chemicals, utilities, healthcare, and public sectors.
Top line has been on a growth spurt since the pandemic recovery. It has a free cash flow yield of 12.6%, and a decent gross profit asset of 8.6%.
The growth spurt might just be starting, given the company’s exposure to EV and renewable energy emphasis on the ESG trend.
Fortress Minerals Limited (CATALIST: OAJ)
There are a handful of Malaysia businesses actually listed on the Singapore stock exchange. One of it is actually an iron ore mining company in the name of Fortress Minerals.
The group owns the interest of an iron ore mine in Bukit Besi, located in the state of Terengganu and sells its iron ore concentrate primarily to steel mills and trading companies in the PRC and Malaysia.
For a company involving in a cyclical and high capex business, it surprisingly sports a good free cash flow margin. Not to also mention it is also net cash, and has a free cash flow yield of 14%.
With the china markets showing signs of revival, Fortress Minerals could be riding on the revival of the long-ailing property and construction sector.
Credit Bureau Asia Limited (SGX: TCU)
Get this – even though the banks are in the business of assessing credit risk profiles before giving out loans, you might be surprised to know that in actual, banks usually get these credit profiles from a third party.
Companies like Credit Bureau Asia Limited actually agglomerate financial data of companies and individuals. These data are the subscribed by financial institutions to assess the risk and credit profile of each company or individual, before making a decision to disburse loans and borrowings.
Knowing that the banks will never take the initiative nor have the thoughts to actually work on peripherals outside of their banking and insurance businesses, credit agency businesses are actually evergreen. and its plain simple to see why Credit Bureaeu Asia sports a free cash flow margin of close to 50%.
It has a free cash flow yield of 14% and a gross profit asset 12%.
No wonder it has been named as one of the seven Singaporean companies under Forbes Asia Best Under A Billion 2024 list.
HRnetGroup Limited (SGX: CHZ)
HRnetGroup is a listed talent recruitment company based in Singapore. The company was founded in 1992, but has been aggressively growing organically and via acquisitions.
The company sports a FCF yield of 15% and a gross profit asset of 7%.
The recent job markets look challenging for the company, which explains its YTD share price movements. But from a cash flow and value perspective, the company does offer a better risk to reward ratio.
DFI Retail Group Holdings Limited (SGX: D01)
Cold Storage, Mannings, Guardian, Giant and Maxim’s Catering.
These chains and brands are owned by one company – DFI Retail Group.
The sheer size of the company gives it a moat in terms of its sheer size and the convenience it offers to its customers.
Albeit tepid sales and revenue trend, the company presents value from a free cash flow yield perspective.
Jumbo Group Limited (CATALIST: 42R)
Jumbo is one of Singapore’s household brand. It isn’t easy running and growing a listed and branded Asian cuisine that specialises in seafood, but Jumbo has certainly made it tick.
The company has been fraught with plenty of challenges, but the worst is over it seems.
Just recently, news of the group trying to expand overseas could be a catalyst to spur its share price up again. It has a good free cash flow yield of 20% with a gross profit asset of 25%, the highest among the 14 companies.
Kimly Limited (CATALIST: 1D0)
Back in Malaysia, I never would have thought coffeeshops and hawkers can be a listed business.
But coming to Singapore has definitely opened my eyes on how vital this business plays in a Singapore family’s life.
You would be surprised that Kimly sports a free cash flow yield of 22%, generating some serious cashflow.
The company has also ventured into the frozen meat products business, and is still actively on the lookout for acquisitions to grow its looming presence in Singapore.
Avarga Limited (SGX: U09)
Avarga Limited is a diversified business that has multiple business pillars. It main businesses are in the building materials, paper mills and operating a power plant in Myanmar.
The company’s business model looks evergreen on surface, but the industry that it operates in is notoriously capex intensive and holds little moat.
Nevertheless, valuation wise, it does present itself with a free cash flow yield of 22.3%.
Aztech Global Limited (SGX: 8AZ)
Aztech is leading design and electronics manufacturer, covering consumer electronics, LED lighting, telecommunications, automotive, health tech and industrial.
The company is net cash, trades at a dividend yield of 8% and has a free cash flow yield of 24%.
It could be riding on more upside as electronics slowly plays an important supporting role in the electric vehicle catalyst.
Pan-United Corporation Limited (SGX: P52)
You might have seen the familiar cement mixer truck with PanUnited’s blue and red livery on the mixer chugging down the road. But did you know the concrete that PanUnited makes is more than just the buildings and infrastructure?
PanUnited’s concrete finds itself in the aviation, healthcare and even in the waste water and waste management sector.
It has a free cash flow yield of 26%, trades at a P/E of 10x and a dividend yield of 4.8%.
Revenue does looks to be on a growth spurt, so do keep a close eye on the company!
Dyna-Mac Holdings Limited (SGX: NO4)
Dyna-mac is a Singapore-based engineering and construction group specialising in the oil and gas, petrochemical, and marine sectors. They provide a wide range of services, including engineering design, fabrication, construction, and maintenance.
Share price is up +131% YTD as South Korean contractor is looking to acquire the group at S$0.67 per share.
Most of the rally occurred over the last 6 months. And with share prices now trading at S$0.67, chances to profit for the takeover deal would have had to happen during early of this year.
PEC Limited (SGX: IX2)
PEC Limited is a engineering solutions provider, specialising in engineering, procurement and construction management (“EPCm”) and engineering, procurement and construction (“EPC”) in respect of a terminal/section of a plant/terminal.
It operates mainly in the oil and gas, petrochemical, and also pharmaceutical industries in Asia and the Middle East.
Due to its relatively low P/E of 10x, it trades at a high free cash flow yield of 43%, with a decent gross profit asset of 7.3%.
Not to also mention, it is net cash, and share prices are up 22% YTD.
Rex International Holding Limited (SGX: SWH)
Rex International is an oil exploration and production (E&P) company listed on the Singapore Exchange with operating footprints in Oman, Norway and Benin.
The company has also diversified by investing into drones and medical technology.
Due to the cyclical and volatility of the crude oil market, Rex International’s financials have also shown vast changes across the past few years.
Nonetheless, it sports the best free cash flow yield out of its 14 cohorts – a 85%!.
My verdict
There are definitely stocks out there that are still commanding good valuation based on the cashflow the business is generating. These companies have lesser coverage by analysts, and hence would be lesser known.
But every time I chance upon such companies, I am more reassured that without the initial noise and attention, the company’s valuation is definitely more attractive.
There is definitely risk of holding onto a value trap due to the obscurity and uncertainty. But if the tenants of value investing holds true, sooner or later, these stocks could slowly become the talk of the town.