For investors, it’s important that we understand the stocks which we choose to invest in. This is so that when stock prices dive due to short-term issues, we would not be shaken and choose to dump our stocks at their lows.
Companies take time to develop and produce results; during which we can expect it’s share price to undergo fluctuations as business conditions change. As investors, what we can do is to understand the business model of the company and how viable it is for the future. A company with good fundamentals and an great business model will be able to survive and outperform its competitors. Accordingly, it’s share price would also perform well into the future.
We don’t always have to look far to spot such great companies, some of them are commonly spotted as we go about our daily lives. Here are some companies you might have seen or purchased goods or services from before.
SBS Transit (SGX:S61)
Singaporeans are no stranger to SBS Transit buses. These buses can be commonly found around Singapore due to SBS Transit managing the majority of the bus routes in Singapore.
Apart from managing 61% of the market share of bus routes in Singapore, the company also manages the North East Line (NEL), Downtown Line (DTL) and the Sengkang-Punggol Light Rail Transit (SPLRT) systems which amount to a market share of about 30.6%. With public transport being such a necessity in Singapore, as well as the government moving in the direction of public transport improvements and utilization, SBS Transit should be positioned for sustainable growth for years to come.
SBS Transit has been able to achieve an average revenue growth of 7% for the past 4 years from 2016 to 2019. It suffered a drop in revenue due to Covid-19, but is still generating profits, and paying a smaller dividend.
The company has also been moving in tandem with the government’s green initiatives, and has been slowly transitioning it’s fleet to electric buses.
Sheng Siong (SGX:OV8)
Sheng Siong is one of the major supermarket chains in Singapore, the other 2 being NTUC Fairprice, and Cold Storage. With most of it’s 63 supermarkets being located near to HDB estates, and also retailing a wide range of products as well as general merchandise at low prices, it’s no wonder that Singaporeans turn to Sheng Siong supermarkets for their daily needs.
For 2020, due in part to the circuit breaker, Sheng Siong has enjoyed a bumper year, with full-year revenue growing from S$991.3m in 2019 to S$1,394m in 2020. Yet this doesn’t seem to be a one-off event, as looking back, revenue for the company has been growing at an average of 11.85% for the past 5 years, from 2016 to 2020. This bodes well for investors, as it shows that the company has been successful in expanding it’s business and driving growth.
The company has also ventured into it’s own online shopping platform to adapt to consumer demands for convenience, as well as taken to expanding it’s presence in China to break into bigger markets. This shows the mindset of the company to continue to expand and adapt to customers.
Investors will be happy to know that Sheng Siong also intends to distribute up to 70% percent of their net profits to investors to reward them for their support.
Koufu is a company which owns and manages 48 food courts and 18 coffee shops under their Koufu and Happy Hawkers brand in Singapore. They also operate over 70 FnB kiosks and outlets throughout Singapore, as well as both quick service and full service restaurant concepts.
It’s different food concepts allows Koufu to diversify and reach out to different market segments at different price points, and to tap onto up-and-coming consumer trends to drive revenue growth.
Due to Covid-19 and the circuit breaker which followed, the company suffered a drop in revenue for the year but still managed to turn a profit for it’s shareholders. The company managed to achieve an average revenue growth of 3.1% from 2017 to 2019. It’s profit before tax margin for it’s food courts and coffee shops business segment had also been improving from 12.8% in 2017 to 16.3% in 2019. Improving profit margins bode well for investors as this means management has been able to generate more profits due to economies of scale or better management of the business.
Despite the challenges posed by the pandemic, Koufu has not been on the defensive, and has recently acquired the Deli-Asia brand of FnB kiosks, and also expanded their own bubble tea beverage concept to the Philippines. The company also plans to open another 3 new food courts at different locations in Singapore.
Netlink Trust (SGX:CJLU)
Netlink Trust is a business trust which builds, owns, and operates the passive fibre network infrastructure of Singapore’s Next Generation Nationwide Broadband Network. By offering their fibre network assets to telecom operators, Netlink Trust enables telecommunication operators to minimize costs related to building and maintaining their own fibre network, and allows them to focus on offering innovative products and services to consumers and businesses without incurring high fixed costs.
The business trust has the benefit of being the only nationwide passive infrastructure provider. They provides their services to both residential and non-residential areas. They also support non-building address points such as lamp posts, traffic lights, wireless base stations, and outdoor kiosks.
While residential and non-residential segments enjoy modest growth due to their recurring income business model, the growth driver is really their NBAP segment which saw an increase of 18.9% year-on-year.
With it’s fibre network being the preferred means of broadband delivery in Singapore, as well as a critical infrastructure supporting last-mile wireless access solutions, Investors can look forward to more growth in the years to come.