Singapore’s Electronics cluster (27.4% of total manufacturing activity) demonstrates strong momentum with its 13th consecutive month of YoY output growth.
SGX’s IT Sector is an outperformer in the YTD with total returns of 33.3%, above the STI’s +11.1% and the MSCI Asia ex-Japan IT Index’s +18.4%.
Strong earnings outlook likely the key driver of IT Sector’s outperformance. Consensus expects 10 largest IT stocks* to grow earnings by 20% in 2017.
Electronics Manufacturing Output Momentum Remains Strong
Singapore’s Electronics cluster has started 2017 on a bright note, continuing its strong manufacturing output momentum. Data from Economic Development Board (EDB) showed that Singapore’s Electronics cluster’s March manufacturing output expanded by 37.7% YoY (driven by Semiconductor cluster’s +54.6% YoY). This performance resonates with robust global semiconductor sales in March, which grew 18.1% YoY (largest increase since October 2010) – click
here.
The strong momentum contributed to Singapore’s overall manufacturing output in March (+10.2% YoY), beating economists’ expectations of +7.1% (according to a Reuters poll). As a reminder, the Electronics cluster is a major contributor of Singapore’s total manufacturing activity with a 27.4% weightage.
Singapore Electronics cluster sees 13th consecutive month of YoY output growth, with Semiconductor sub-segment experiencing even more robust expansion rates.
Source: Economic Development Board (EDB) Singapore
Singapore IT Sector’s YTD total returns (+33.3%) Outperformed Regional Benchmark (+18.4%)
As the industry continues to see positive data-points, it is not surprising that the Information Technology (IT) Sector was the top-performing Sector in the year-to-date (YTD). Specifically, SGX’s IT Sector generated a capitalisation weighted total return of 4.9% in April, bringing YTD gains to 33.3% (click
here for more details). This is higher than the Straits Times Index’s (STI) total return of 11.1% and the regional benchmark’s (MSCI AC Asia ex-Japan IT Index) total return of 18.4% (or +22.6% in USD terms) over the same period.
10 Largest IT Stocks* to Grow Earnings 20% in 2017 and 12% in 2018
Post the YTD rally, the 10 largest IT stocks (which have sell-side analyst coverage) are trading at an average trailing price-to-earnings (P/E) ratio of 17.6x. However, on a forward (full-year 2017) basis, the average P/E is much lower at 14.6x. These 10 stocks have returned 53.4% in the YTD thus far.
The lower forward P/E can be attributed to the growth expectations of these companies estimated by sell-side analysts. In fact, by using a price/earnings to growth (PEG) ratio, seven out of these 10 companies are trading at below 1.0x. As a general rule of thumb, a PEG ratio of 1.0x indicates that a stock is fairly valued when compared to the expected earnings growth. A PEG ratio lower than 1.0x may also indicate that the stock is undervalued and
vice versa.
According to data from Bloomberg, consensus expects these 10 companies to grow EPS by a median of 19.9% in 2017 and another 11.7% in 2018. The strong earnings outlook is likely one of the factors driving the IT Sector’s return in the YTD.
The 10 largest IT stocks (which have sell-side analyst coverage) are listed below, sorted by market capitalisation. Click on each stock to visit its profile page on SGX StockFacts.
| Name |
SGX Code |
Market Cap S$M |
Price Last Close S$ |
P/E (x) |
P/E: Forward (x)** |
PEG (x)*** |
2017 Consensus EPS growth % |
2018 Consensus EPS growth % |
| Venture Corp |
V03 |
2,283 |
12.83 |
18.4 |
16.5 |
0.820 |
20.1 |
9.1 |
| Silverlake Axis |
5CP |
1,460 |
0.54 |
8.0 |
18.6 |
-1.089 |
-17.1 |
-34.5 |
| iFAST Corp |
AIY |
303 |
0.775 |
32.7 |
27.7 |
0.742 |
37.3 |
14.3 |
| UMS Hldgs |
558 |
264 |
0.88 |
16.7 |
14.0 |
0.705 |
19.8 |
4.8 |
| Nera Telecom. |
N01 |
230 |
0.39 |
31.8 |
16.3 |
-0.186 |
-87.6 |
50.0 |
| CSE Global |
544 |
214 |
0.505 |
12.3 |
11.5 |
1.617 |
7.1 |
9.1 |
| Valuetronics Hldgs |
BN2 |
174 |
0.84 |
12.6 |
12.7 |
0.806 |
15.8 |
9.1 |
| TeleChoice Intl |
T41 |
118 |
0.255 |
15.2 |
11.6 |
0.384 |
30.2 |
18.2 |
| Serial System |
S69 |
112 |
0.177 |
8.2 |
8.4 |
0.027 |
311.8 |
19.0 |
| AEM Hldgs |
AWX |
22 |
2.62 |
19.9 |
9.0 |
0.029 |
309.2 |
17.2 |
| Average |
|
|
|
17.6 |
14.6 |
|
|
|
| Median |
|
|
|
|
|
|
19.9 |
11.7 |
Source: SGX, Bloomberg & SGX StockFacts (data as of 9 May 2017)
Forward P/E based on full-year 2017 EPS
| Name |
SGX Code |
Total Return YTD % |
Total Return 1 Yr % |
Total Return 3 Yr % |
Dvd Ind Yld % |
GICS® Sub-Industry Name |
| Venture Corp |
V03 |
29.9 |
55.5 |
100.1 |
3.8 |
Electronic Manufacturing Services |
| Silverlake Axis |
5CP |
3.1 |
3.1 |
-17.3 |
5.2 |
Application Software |
| iFAST Corp |
AIY |
-6.4 |
-30.8 |
N/A |
3.6 |
Internet Software & Services |
| UMS Hldgs |
558 |
49.0 |
55.3 |
60.0 |
5.7 |
Semiconductor Equipment |
| Nera Telecom. |
N01 |
-1.3 |
-16.6 |
-17.3 |
2.6 |
Communications Equipment |
| CSE Global |
544 |
14.3 |
28.7 |
-1.4 |
5.6 |
IT Consulting & Other Services |
| Valuetronics Hldgs |
BN2 |
61.5 |
95.7 |
213.4 |
4.3 |
Electronic Manufacturing Services |
| TeleChoice Intl |
T41 |
2.1 |
4.1 |
27.0 |
6.3 |
Technology Distributors |
| Serial System |
S69 |
24.9 |
44.9 |
47.2 |
1.9 |
Technology Distributors |
| AEM Hldgs |
AWX |
357.0 |
709.6 |
419.0 |
0.5 |
Semiconductor Equipment |
| Average |
|
53.4 |
95.0 |
92.3 |
3.9 |
|
Source: SGX, Bloomberg & SGX StockFacts (data as of 9 May 2017)
*Based on the largest IT stocks with analyst coverage
**Forward P/E based on full-year 2017 EPS
***Calculated by dividing “P/E: Forward” over “2017 Consensus EPS growth”
IT Stocks Comprises 10% of SGX’s Securities Market
There are 76 stocks listed on the SGX which are classified under the IT sector (based on MSCI GICS® Categorisations), accounting for approximately 10% of SGX’s securities market. These 76 stocks have a combined market capitalisation of more than S$12 billion. The sector comprises companies that offer software and IT services, manufacturers and distributors of technology hardware and equipment such as communications equipment, cellular phones, computers & peripherals, electronic equipment as well as related instruments and semiconductors.
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