3 Singapore stocks to consider buying right now with $10k

Now with the coronavirus battering the global and local economy alike, and bank interest rates getting lower and lower, investors might be wondering where can they put their spare cash into.

Wonder no more.

If you have $10,000 that you don’t have a need for for at least the next five years …

instead of leaving them in an insurance savings plan …

you can consider putting them into stocks (if picking individual companies is your thing and you have sufficient knowledge surrounding this).

Here, let’s look at three Singapore-listed companies that investors can consider buying for their portfolio.

But first…

Before we dive into the details of the company, there are some things to consider before investing.

1. Have you paid off your high interest debt, if any?
2. Do you have adequate insurance protection?
3. Do you have your emergency funds already set up?

Also, you must make sure you don’t need the money for at least the next five years as there’s too much uncertainty in stocks over the short-term.

Now, that we have got the basics out of the way, let’s look at the chosen stocks.

(If you wish to learn how to pick stocks yourself, you can check out our investing guide .)

The rules

To pick the stocks, I had three criteria in mind.

1. They are either a) largely unaffected by the coronavirus-led economic downturn or b) are affected by the pandemic but could recover over the longer run
2. They have strong balance sheets to ensure they can withstand the tough economic conditions
3. They possess a growth element for the foreseeable future

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If I’m buying the stocks for my own portfolio, I would allocate equal amounts to each of the three stocks to keep things simple.

The companies

The first company, Micro-Mechanics, is involved in designing, manufacturing, and marketing of consumables and precision tools that are used in the semiconductor industry.

Here’s a summary of Micro-Mechanics’ historical financial growth:

• Past 5-Year Annualised Revenue Growth: 5.8 per cent
• Past 5-Year Annualised Net Profit Growth: 5.4 per cent
• Past 5-Year Annualised Dividend Growth: 18.9 per cent
• Latest Quarter Year-on-Year Revenue Growth: 17.5 per cent
• Latest Quarter Year-on-Year Net Profit Growth: 45.5 per cent
• Latest Net Cash Balance: $20.8 million

Micro-Mechanics showed resiliency in its fourth quarter ended June 30, 2020 as net profit grew to its highest level since its 2019 first-quarter.

According to the World Semiconductor Trade Statistics (WSTS), world-wide chip sales grew 6 per cent in the first six months of 2020, as compared to the first half of 2019.

Over the longer term, demand for Micro-Mechanics’ products looks to be even strong given the need for digitalisation due to the pandemic. This is on top of the demand that was existing pre-Covid-19 with the proliferation of smartphones and the Internet of Things .

The WSTS is forecasting the world semiconductor market to grow by 3.3 per cent in 2020 and a further 6.2 per cent in 2021.

At Micro-Mechanics’ share price of $2.24, it has a price-to-earnings (P/E) ratio of 21 and a dividend yield of 5.4 per cent (including special dividend).

Company #2: Singapore Exchange Limited 

Many investors would be familiar with the Singapore Exchange (SGX) as it’s the only stock exchange in Singapore. On top of providing access to stocks, SGX also provides access to derivatives and fixed income trading.

Here’s a summary of SGX’s historical financial growth:

• Past 5-Year Annualised Revenue Growth: 6.5 per cent
• Past 5-Year Annualised Net Profit Growth: 7.8 per cent
• Past 5-Year Annualised Dividend Growth: 2.2 per cent
• Latest Quarter Year-on-Year Revenue Growth: 15.7 per cent
• Latest Quarter Year-on-Year Net Profit Growth: 20.6 per cent
• Latest Net Cash Balance: $603.3 million

In SGX’s FY2020 earnings release (for financial year ended 30 June 2020), the company’s chief executive, Loh Boon Chye, said (emphases are mine):

“We achieved a strong performance in FY2020 with double-digit top line growth across all business units, leading to our revenue crossing the $1 billion mark – our highest since listing.

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''During the year, we expanded our product range and broadened our platform capabilities, while increasing the number of global customers adopting our multi-asset products and services.

''We also welcomed Scientific Beta to the SGX Group and announced the acquisition of BidFX, a cloud-based front-end trading platform for currencies, to expand our FX offering.”

With the strong performance, SGX’s annualised quarterly dividend per share has been raised to 32 Singapore cents, an increase of 6.7 per cent from 30 cents.

The bourse operator said that the higher quarterly dividend is in line with its policy of paying a sustainable and growing dividend over time, consistent with its long-term growth prospects.

At SGX’s share price of $9.14, it has a PE ratio of 21 and a dividend yield of 3.3 per cent.

Company #3: Frasers Centrepoint Trust 

Frasers Centrepoint Trust is a retail REIT with 11 shopping malls located all over Singapore, including Causeway Point and Changi City Point, and a newly-acquired portfolio of malls, such as Tampines 1 and White Sands.

Here’s a summary of Fraser Centrepoint Trust’s historical financial growth:

• Past 5-Year Annualised Gross Revenue Growth: 0.9 per cent
• Past 5-Year Annualised Net Property Income Growth: 1.6 per cent
• Past 5-Year Annualised Distribution Per Unit Growth: 1.0 per cent
• Latest Gearing Ratio: 35 per cent

Unlike Micro-Mechanics and SGX, Frasers Centrepoint Trust is more of a recovery play.

During Singapore’s circuit breaker period from April 7, 2020 to June 1, 2020, retail mall traffic almost came to a complete standstill and Frasers Centrepoint Trust was affected as well.

However, after Phase 2 started on June 19, things seem to be getting better.

In particular, Frasers Centrepoint Trust portfolio tenants’ sales in July was 3 per cent lower year-on-year, a vast improvement from June’s decline of around 31 per cent. The figure has advanced further to -2 per cent in August.

Other than the catalysts from the completed acquisition of the remaining 63.1 per cent stake in AsiaRetail Fund Limited and the recovery in retail, I believe there could be some spillover effects from the approved merger between CapitaLand Mall Trust and CapitaLand Commercial Trust.

Post-merger and creation of CapitaLand Integrated Commercial Trust (as the combined entity will be called), investors who are looking for a pure-play Singapore retail REIT could be turning to Frasers Centrepoint Trust instead.

Frasers Centrepoint Trust has mentioned recently that its current strategy is to grow its portfolio of Singapore assets.

At the REIT’s unit price of $2.39, it has a price-to-book ratio of 1.08.

This article was first published in Seedly. Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer may have a vested interest in the companies mentioned.