The article first appeared on Investor-One on 6 August 2021. Click here for more of such articles. Return on Asset (“ROA”) is a financial metrics that measures the profitability of a particular company in relation to its total assets. This financial metrics allows investors and analysts to have an idea on how efficient a company's management is at using its assets to generate earnings. The higher the ROA number, the better, as this indicates that the company is earning more profit on less investment. In this article, we will be looking at 5 companies that has achieved a ROA of above 10% for the past 3 years:

• HC Surgical Specialists Limited (SGX: 1B1)
• TalkMed Group Limited (SGX: 5G3)
• UMS Holdings Limited (SGX: 558)
• PropNex Limited (SGX: OYY)
• Fortress Minerals Limited (SGX: OAJ)

1) HC Surgical Specialists Limited (SGX: 1B1)  HC Surgical Specialists Limited (“HC Surgical”) and its subsidiaries is a medical services group primarily engaged in the provision of endoscopic procedures, including gastroscopies and colonoscopies and general surgery services with a focus on colorectal procedures across a network of 18 clinics located throughout Singapore. Source: ShareInvestor WebPro  For the past 3 financial years, HC Surgical’s ROA has been fluctuating between 11.5% and 27.0%, attributed to the earnings’ fluctuations across the years. Apart from that, HC Surgical’s total assets has been on a rise, mainly due to a higher fixed asset and cash and short-term investments. HC Surgical’s share price last traded at S$0.545, with a market capitalization of S$81.14 million. 2) TalkMed Group Limited (SGX: 5G3)  TalkMed Group Limited (“TalkMed”) is a Singapore-based investment holding company. Its principal activities are the provision of medical oncology services and stem cell transplant services. The Company's segments include Oncology services and Stem cells services. Its doctors provide tertiary healthcare services in the fields of medical oncology, stem cell transplant and palliative care to the oncology patients in the private sector in Singapore through Parkway Cancer Centre (“PCC”). Source: ShareInvestor WebPro  For the past 3 financial years, TalkMed’s ROA has been hovering around between 21.7% and 33.7%. After the rise in ROA for FY2019, TalkMed experienced a decline in ROA for FY2020, mainly due to lower earnings, while partially offset by a lower amount of total assets in the financial year. TalkMed’s share price last traded at S$0.40, with a market capitalization of S$528.04 million. 3) UMS Holdings Limited (SGX: 558)  UMS Holdings Limited (“UMS”) is a one-stop strategic integration partner providing equipment manufacturing and engineering services to Original Equipment Manufacturers of semiconductors and related products. The Group is in the business of front-end semi-conductor equipment contract manufacturing and is also involved in complex electromechanical assembly and final testing devices. The products that UMS offers include modular and integration system for original semiconductor equipment manufacturing. Source: ShareInvestor WebPro  After recording an ROA of 15.6% in FY2018, it suffered a decline in the next 2 financial years to around 11.7%. The drop in ROA was attributed to the lower earnings against a backdrop of a higher total assets for FY2019 and FY2020. On the other hand, its ROA also rebounded to 12.7% as of March 2021 trailing 12 months. UMS’s share price last traded at S$1.61, with a market capitalization of S$858.82 million. 4) PropNex Limited (SGX: OYY)  As an integrated real estate services group, PropNex Limited (“PropNex”) key business segments include real estate brokerage, training, property management and real estate consultancy. The Group has an established presence in Singapore’s residential market, even as it continues to expand its suite of real estate services in Singapore and grow operations regionally. PropNex currently has presence in Indonesia, Cambodia, Malaysia and Vietnam. Source: ShareInvestor WebPro As a result of a lower earnings and higher total assets, PropNex’s ROA for FY2019 decline to 12.9%. Since then, it has rebounded to around 15.0% in FY2020. This can be attributed to the higher earnings achieved even as its total assets grew by 24.7% year-on-year to S$192.70 million. PropNex’s share price last traded at S$1.92, with a market capitalization of S$710.40 million. 5) Fortress Minerals Limited (SGX: OAJ)    Fortress Minerals is a high-grade iron ore concentrate producer based in Malaysia. The Group is principally in the business of exploration, mining, production and sale of iron ore concentrates. The Group presently produces magnetite iron ore concentrates with TFe grade of 65.0% and above, mined from the East, Valley and West Deposits in its Bukit Besi Mine, which is in Terengganu, Malaysia. Fortress Minerals sells its iron ore concentrates primarily to steel mills and trading companies in the People’s Republic of China (“PRC”) and Malaysia. Source: ShareInvestor WebPro  Despite registered a growth in earnings for FY2020, Fortress Minerals’ ROA declined slightly to 16.5%. This was mainly due to the growth in total assets outpacing the growth in earnings. However, with the surging earnings outpacing the growth in its total assets in FY2021, Fortress Minerals’ ROA jumped by more than 80% year-on-year to 30.4%. Fortress Minerals’ share price last traded at S$0.62, with a market capitalization of S$310.00 million.

Conclusion 

To conclude, ROA is one of the favourite indicators to show how efficient the company is utilising its total assets on hand to generate profits/earnings. The most effective way to analyse the ROA of a certain company is to compare with its peers in the same industry. This will allow investors to have a clearer picture on whether the company is performing well. Like what you read? Subscribe to our Telegram channel here to receive first-hand updates.

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