Walter Lim, who contributed this article to NextInsight, is a 30-year-old food entrepreneur who is highly interested in value investing.
I would like to share my views on a largely neglected stock and its potential value to shareholders. Despite outstanding shares totalling 437.09mm, the stock’s 3-month daily average traded volume is only 180,000.
The traded volume is very low when compared with the public float of slightly more than 50%.
Singapore Shipping Corporation Limited is engaged in the marine industry, a sector where most companies listed on SGX are making losses.
The following table lists some shipping or marine related companies but note that their business models are very different from Singapore Shipping.
|
Company Name |
Market Cap (S$ m) |
Revenue |
PE |
Yield % |
|
Singapore Shipping Corp |
122.3 |
43.5 |
9.46 |
3.5 |
|
Samudera Shipping Line |
100.1 |
357.9 |
- |
- |
|
Jason Marine Group |
15.8 |
33.2 |
43.4 |
|
|
Penguin International |
59.4 |
57.8 |
- |
- |
|
Marco Polo Marine |
19.9 |
42.2 |
- |
- |
Evidently, Singapore Shipping has a healthy PE ratio of only 9.46 with a relatively high dividend yield of 3.5%. This dividend payout of $0.01 has been consistent every year since 2009.
In terms of revenue, the company has consistently recognised growth from FY2014 to FY2017, translating into a compound annual growth rate of 26%.
While net earnings have grown slower from FY2014 to FY2016, the most recent earnings report of Q1FY2018 (ended June 2017) indicate that growth is picking up traction again.
Profit increased 60% y-o-y to US$2.562 million.
The company has been accumulating greater cash flow and “continues to evaluate acquisition opportunities, alternatively early repayments of loans”.
Taurus Leader: An eco-friendly and fuel-efficient Pure Car Truck Carrier acquired in 2015 by Singapore Shipping Corp. Photo: companySince FY2014, the company has expanded into agency and terminal operations that provided immediate cashflow.
The acquisition of two 6,500 units of pure car and truck carriers in Aug 2014 also built up a younger fleet in its core ship owning business, which establishes a long term recurring income, and as the company notes in the FY2015 financial report, “a growth trajectory for the next decade or longer”.
The long-term charter business has been performing steadily from FY2014 to date and provides a very stable base to the earnings.
Despite the downtrend in shipping industry, agency and logistic services, the company has been able to stay profitable in this segment and register overall growth annually.
The segment will bring in more earnings once the shipping industry bottoms out.
The CEO, Ow Yew Heng, has increased his stake from 0% to 0.25% as of 2 Aug 2017. His share purchases commenced at $0.265 and the stock is currently trading at $0.295. Mr Ow is the son of the executive chairman, Ow Chio Kiat, and was appointed CEO in May 2015 at the age of 35. |
CEO Ow Yew HengIt is quite remarkable that Singapore Shipping Corporation Ltd has managed to stay profitable and even grown amidst a deterioration in the marine industry.
The company’s net gearing stands at only 83%, which is considered very low for a capital-intensive industry.
The CEO has also asserted that the company will be profitable in FY2018, in the 1QFY2018 financial statement. Singapore Shipping Corporation Ltd is definitely a neglected value stock to look out for.