BT: Mid-cap SGX stocks generate best returns last year (29 May 2007)
Mid-cap SGX stocks generate best returns last year
But big caps have the highest weighted average TSR over three, five and ten years
By DANIEL BUENAS
(SINGAPORE) Singapore's largest companies give the best returns in the long run, but new figures show that mid-cap firms were last year's most outstanding performers.
Analysis by global consulting firm LEK Consulting shows that Singapore-listed companies with market capitalisation of more than $1 billion - the 'big caps' - had the highest weighted average total shareholder returns (TSR) over three, five and 10 years, while those with a market cap between $100 million and $1 billion had the best one-year TSRs.
LEK, which specialises in strategy and value management consulting, calculated the TSR of 631 Singapore Exchange-listed companies as at Dec 30, over one, three, five and 10 years. TSR includes share price gains, monthly reinvested dividends and share adjustments over specific time frames. LEK annualised its results to give an average compounded return.
The results show that big-cap companies had an average TSR of 11.1 per cent over a 10 year period, above the 10-year market average of 10.6 per cent.
By contrast, mid-cap companies registered a 5.6 per cent TSR, while small-caps (companies with market capitalisations of less than $100 million) had a negative TSR for the same period - they lost their investors 9.9 per cent of their money.
Big-caps were also the top performers for the three and five-year time periods, registering a 35.2 per cent and 26.4 per cent TSR, which were above the market averages of 33.3 per cent and 25.8 per cent.
In comparison, mid-cap firms had a 22.7 per cent TSR over three years and 24.2 per cent over five years, while the corresponding TSRs for small-caps were negative 2.9 per cent and 3.6 per cent.
Sharad Apte, managing director of LEK's South-east Asia practice, said it was not surprising that large capitalisation companies have done well, given Singapore's 'relatively captive market'.
'If you look at some of the large-cap companies in Singapore, they are effectively monopolies or have been able to take a dominant position in the Singapore market,' he said.
LEK consultant Darryn Tan pointed out that many of the largest companies in Singapore were previously government-owned, and started out with a strong fundamental base.
'What you see is a lot of these large, previously government-owned companies taking strategic directions you would expect of blue-chip companies in Western countries,' he said. 'In my opinion, that was what defined 2006 for a lot of these larger companies. They've gone beyond sitting on their laurels and are stepping up their game to go into nearby markets and more high risk but high growth approaches towards growing their business as well.'
Mr Apte also pointed to the strong growth in the property sector - which saw average one-year returns of 80.2 per cent in 2006 - which helped boost the overall performance of the market last year.
'What's shocking is the average annual return of the SGX in 2006, which at 52 per cent, was very, very high,' Mr Apte said. 'I think the numbers for Singapore are very good overall, as compared to some of the other markets in the region.' He also said that the 2006 bull market saw a record number of merger and acquisition deals, and subsequently, large speculative volume. 'Since 2006 year-end, the market has since seen some corrections and profit-taking behaviour, but returns over longer time periods of at least five years will remain the more appropriate metric for portfolio-oriented investors.'
On the relatively poorer performance of small cap companies, Mr Apte said that their small size makes them more susceptible to the 'vagaries of market whim'.
'Small caps, while having done fairly well in the bull market in 2006, have registered disappointing returns over longer-term horizons,' Mr Apte said. 'Hence, while small caps may provide some of the best one-year TSRs, this high volatility makes them far from smart medium or long-term bets.'
On a one-year basis, two of the top-three performers were small-caps - Indofood Agri Resources registered the highest TSR of 660 per cent. However, across all four time periods, small caps have consistently come in as the worst performers.
Wheelock Properties topped the three-year TSR best performers' list with a return of 111.1 per cent, while Raffles Education was first on the five-year TSR rankings at 119.9 per cent. Shipyard and shipping group Cosco Corp topped the 10-year time period with a TSR of 35.4 per cent.
Copyright © 2005 Singapore Press Holdings Ltd. All rights reserved.
But big caps have the highest weighted average TSR over three, five and ten years
By DANIEL BUENAS
(SINGAPORE) Singapore's largest companies give the best returns in the long run, but new figures show that mid-cap firms were last year's most outstanding performers.
Analysis by global consulting firm LEK Consulting shows that Singapore-listed companies with market capitalisation of more than $1 billion - the 'big caps' - had the highest weighted average total shareholder returns (TSR) over three, five and 10 years, while those with a market cap between $100 million and $1 billion had the best one-year TSRs.
LEK, which specialises in strategy and value management consulting, calculated the TSR of 631 Singapore Exchange-listed companies as at Dec 30, over one, three, five and 10 years. TSR includes share price gains, monthly reinvested dividends and share adjustments over specific time frames. LEK annualised its results to give an average compounded return.
The results show that big-cap companies had an average TSR of 11.1 per cent over a 10 year period, above the 10-year market average of 10.6 per cent.
By contrast, mid-cap companies registered a 5.6 per cent TSR, while small-caps (companies with market capitalisations of less than $100 million) had a negative TSR for the same period - they lost their investors 9.9 per cent of their money.
Big-caps were also the top performers for the three and five-year time periods, registering a 35.2 per cent and 26.4 per cent TSR, which were above the market averages of 33.3 per cent and 25.8 per cent.
In comparison, mid-cap firms had a 22.7 per cent TSR over three years and 24.2 per cent over five years, while the corresponding TSRs for small-caps were negative 2.9 per cent and 3.6 per cent.
Sharad Apte, managing director of LEK's South-east Asia practice, said it was not surprising that large capitalisation companies have done well, given Singapore's 'relatively captive market'.
'If you look at some of the large-cap companies in Singapore, they are effectively monopolies or have been able to take a dominant position in the Singapore market,' he said.
LEK consultant Darryn Tan pointed out that many of the largest companies in Singapore were previously government-owned, and started out with a strong fundamental base.
'What you see is a lot of these large, previously government-owned companies taking strategic directions you would expect of blue-chip companies in Western countries,' he said. 'In my opinion, that was what defined 2006 for a lot of these larger companies. They've gone beyond sitting on their laurels and are stepping up their game to go into nearby markets and more high risk but high growth approaches towards growing their business as well.'
Mr Apte also pointed to the strong growth in the property sector - which saw average one-year returns of 80.2 per cent in 2006 - which helped boost the overall performance of the market last year.
'What's shocking is the average annual return of the SGX in 2006, which at 52 per cent, was very, very high,' Mr Apte said. 'I think the numbers for Singapore are very good overall, as compared to some of the other markets in the region.' He also said that the 2006 bull market saw a record number of merger and acquisition deals, and subsequently, large speculative volume. 'Since 2006 year-end, the market has since seen some corrections and profit-taking behaviour, but returns over longer time periods of at least five years will remain the more appropriate metric for portfolio-oriented investors.'
On the relatively poorer performance of small cap companies, Mr Apte said that their small size makes them more susceptible to the 'vagaries of market whim'.
'Small caps, while having done fairly well in the bull market in 2006, have registered disappointing returns over longer-term horizons,' Mr Apte said. 'Hence, while small caps may provide some of the best one-year TSRs, this high volatility makes them far from smart medium or long-term bets.'
On a one-year basis, two of the top-three performers were small-caps - Indofood Agri Resources registered the highest TSR of 660 per cent. However, across all four time periods, small caps have consistently come in as the worst performers.
Wheelock Properties topped the three-year TSR best performers' list with a return of 111.1 per cent, while Raffles Education was first on the five-year TSR rankings at 119.9 per cent. Shipyard and shipping group Cosco Corp topped the 10-year time period with a TSR of 35.4 per cent.
Copyright © 2005 Singapore Press Holdings Ltd. All rights reserved.
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