Singapore stocks: Once bitten, twice shy

[Wildreamz]

Thanks for all the replies.

Actually, the context in the course of the discussion and my post is more of fundamentals catching up with undervalued stocks, and not the other way round. I should have been clearer, apologies.

Cld perhaps China Sunsine be an example for discussion ? Why is it trading at such valuations  low P/E, P/B, etc and I think for long periods of time ? Will it one day trade consistently at a higher valuation, e.g. 10x - 15x P/E henceforth ? Wld it have been any different if there were more international investors or if it was listed in other markets like US ?

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Financial Summary 2021 - 25
https://www.chinasunsine.com/wp-content/...3D335A.pdf

Financial Summary 2017 - 21
https://www.chinasunsine.com/wp-content/...88.1.0.pdf

While I'm not intimately familiar with the company, I notice that it is a microcap (market cap US$300mil) based in China (political risk, geopolitical risk, S-Chip/Corporate governance risk etc.) selling a niche product (rubber accelerators) that isn't experiencing tremendous growth (export volume, domestic rubber sales etc seems flattish to down in the last 7 years). Margins does look decent, but does require Capex (not asset-light kind of business).

Combining all these factors, it would be unlikely to command high valuation nor high shareholder returns long term IMHO, unless someone have further insights on managements future plans or their product roadmap. Especially in the current political landscape (East-West decoupling etc).

Perhaps other buddies could have further insights.

[dreamybear]

I wonder if local companies looking to go public will generally explore overseas listing first before settling on a local listing.

Hope the revival of interest in local stocks comes soon.

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https://www.straitstimes.com/business/co...us-listing

https://sias.org.sg/latest-updates/comme...ck-market/

[weijian]

Hi dreamybear,

I agree with Mr David Gerald that the local bourse hasn't regain its mojo after the penny stock saga of 2013. A stock market is generally reflective of the local economy and so, it is what it is. That said, I do think the local bourse SGX (disclosure: I am a shareholder for more than a decade now) has punched above its weight - having many non-Spore domiciled companies listed here and based on the numbers from SGX's derivative business, it is the offshore center of choice for certain commodities, foreign exchange and index futures. And none of these are Sporean in nature.

As for local stocks that list themselves elsewhere, one of the main reasons that I see would be the "stringent" rules imposed by SGX for listing in terms of track record/profitability. For example, section210(2) of SGX rulebook details some qualitative requirements for a mainboard listing - and that would include profitability, historical track record and engaging similar business model/Mgt etc. There are some exceptions for life sciences/mining firms.

https://rulebook.sgx.com/rulebook/210

I suspect some of the local companies who have majority operations in Spore but listed elsewhere (eg. Propertyguru), do not qualify based on the listing requirements, regardless of whether they want to list here or not. In other words, it could be also a case of "Do you qualify" than "Do you want".

Let us use Grab as an example. Grab started out as MyTeksi in Malaysia, before it moved its incorporation/HQ to Spore. Folks were applauding the authorities in Spore and condemning the one in Msia. When Grab listed on Nasdaq via a SPAC in US in 2021, people started to condemn the Spore authorities, whom were just the recipient of applauds a little while ago. Fast forward 2 years, Grab Holdings is down 75% from its IPO price. While that is much better than the performance of the 2013 penny stocks, it is probably much worst off than many asset-heavy/low ROE/family dominated/poor governance "value" traps on SGX.

In an alternate universe where Grab listed via a primary listing on SGX SPAC, I wonder how locals will respond when they are staring at a 75% loss with no dividend panadols?

There are pros and cons to every approach, and we have to accept the pros/cons as a package. Plenty of folks make money on Nasdaq, plenty lost too. Plenty of people make money on SGX, plenty didn't too. One thing I am very sure of - Markets are definitely not made with the primary purpose for minorities to get rich.

[Mushy]

Just to include here another article reported in the Straits Times yesterday.

Quote" He added that the company, which has 100 employees, is choosing not to list on the SGX due to its low liquidity, weak valuations and a lack of interest in tech start ups from investors here."


I also want to add a personal comment on the 2013 peny stock saga. This keep being highlighted as 1 main reason for the poor performance of local market. I personally doubt if the situation today would be much different if it never happened.

In all media that I read since 2013, they always portray the case as 8 billion dollars wiped off the market in a short time. Instead, we should be concerned how the market (or authorities) allow those 8 billion dollars of value to be there in the first place. The market did not lose 8B of value, it was not there in the first place.

[CY09]

Another angle to think of is that Asians have a tendency of keeping wealth in the property market rather than the stock market. This depsite now property at leveraged givens about 5% yield while there are companies here giving about 6-7% dividends on blue chip status.

The aversion to stocks and fondness to the property market means less cash is channelled to the Singapore stock market unlike the US's. Maybe there needs to be a mass advertising of companies in Singapore which are providing higher yields than proeprty investors investing and renting out their condos

[weijian]

@Mushy,
I agree with you that local valuations were probably not impacted by the penny stock saga. I suspect people like to confound observations that can form plausible cause-effect relationships. But that said, the saga definitely had an impact on animal spirits extending to trading liquidity/interest on the local bourse - And I have numbers to back me up since I am a SGX shareholder and have hold historical records of daily security trading volume/value. Back of envelope calculations, trading volume/value had a permanent 30-40% dent post-saga, or maybe could we explain that penny stocks made up 30% of trading volume/value back then?

@CY09,
Spore situation is not too different from China, I suppose. And both countries are made up of majority ethnic Chinese and were controlled by one political party since independence! (ok, I am not going to wade into a political discourse here).

And I really don't think there is a need to do advertisement. I see myself a net buyer of stocks in the foresable future and I definitely don't want high valuations. That said, a part of me definitely wish for high valuations for stocks that I have "full allocation" on!