As we are approaching the final days to end this year, and with much anticipated recovery in the market in 2021, we’ll take a look at some of the growth stocks that might continue to outperform as they staged the next phase of growth in their businesses and expansion plan.
1.) Frencken Group Limited (SGX: E28)
Frencken Group is a global integrated technology solutions company that serves worldwide companies in the automotive, healthcare, industrial, analytical & life sciences, and semiconductor industries.
The company is currently on a momentum run with increasing demand, better margins mix, and increasing profile due to the proliferation of rising semi-conductor demand worldwide.
The company’s share price ended the year at $1.32, rising by more than 30% this year amidst a challenging pandemic year.
The company’s latest financial result for Q3FY20 took them to over $13m in profit with better gross margin and higher ROE.
The current valuation has reflected a 13x forward PER which is not excessive given the strong positive momentum going into 2021.
Outlook for FY2021 remains bright with accelerating demand for the 5G technology.
Nevertheless, investors might want to caution that the company will be recognizing a one-off impairment charge of $6.2m in the second half of the financial results due to the strategic change of the US MNC customer they are dealing with. This will impact the bottom line of the Group’s financial results in the second half, but the impairment is a non-cash exceptional item.
2.) Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6)
Yangzijiang shares have been under pressure lately due to the rebalancing of the MSCI on the 30th November which leads to rotational funds from institutional.
However, the company has done exceptionally well this year amidst a challenging pandemic outbreak by securing a total of USD 1.8 billion contracts. The latest win announced on the 30th December 2020, was a new order for two 24,000 TEU containerships worth USD350m.
The recent successful delivery of the six Valemax iron ore carriers also puts them on the global map as one of the top dry bulkers providers globally.
Given the positive momentum for global recovery, this will put Yangjiziang as one of the leading growth stocks to outperform in 2021.
While the company has somewhat struggled to regain its valuation before the Covid, the company has been aggressively buying back shares in the past few months. Cumulatively to date, the company has bought back 65m outstanding shares worth close to $64million. This represents 1.67% of the overall outstanding shares the company has bought back to date.
The company is currently trading at an earnings yield of about 14% (7x PER) with a dividend yield of around 5%. It has also dished out consistent dividends over the past 13 years since its public listing in 2007 with a payout ratio of between 30-40% of its earnings.
3.) Credit Bureau Asia Limited (SGX: TCU)
CBA is a relatively new player in the SGX market as it just went public a month ago.
I reviewed the prospectus listing prior to the IPO here.
In the article, I highlighted about the company’s strong cashflow generating ability and its high cash conversion ratio where they had improved quite considerably from FY2017 to IHFY20. From FY2017 to 1HFY20, the Group net operating cashflow was $10.9m, $12.0m, $19.8m, and $10.8m respectively, which translates into a cash conversion ratio of 69.7%, 72.6%, 85.0%, and 83.3%.
In FY2021, the Group had a clear trajectory plan to drive the business in Singapore for organic growth by making preparations to provide the corporate credit reporting through CBS under the commercial bureau operator license which the Group intends to apply. This will provide a good amount of synergies to its existing consumer credit reporting volume which focuses more on B2C.
The Group also has plans to penetrate the other Asian market, Cambodia and Myanmar by providing credit product offerings and consultancy services in these markets.
Despite the lofty valuations at FY20 30x PER, the share price has continued to go up by more than 30% to end the year at $1.31, since its IPO last month at 93 cents.
4.) Propnex Limited (SGX: OYY)
Contrary to what many people think will be a challenging year for properties and agencies in FY2021, Propnex Limited actually did very well amidst the challenge of a circuit breaker and lockdown in the earlier part of 2020.
Based on the Q3FY2020 URA data, overall private home prices have risen 0.8% in 3Q2020 on consecutive quarterly increase. Total private residential transactions jumped by 164.5% quarter on quarter after a brief lockdown in Q2.
The demand for housing is mainly driven by the relatively low new supply from developers and the low interest rates environment.
The Group has also benefited from online and new digital innovations through targeted marketing through virtual property expo as well as virtual showflat, which makes it easier for potential buyers to get a full view without having to physically wait for their turns.
The Group will continue to drive for technological digital innovations in a bid to reach for more masses with better productivity, which would enhance the overall Group’s profitability.
5.) Hotung Investment Holdings Limited (SGX: BLS)
Hotung Investment Holdings is a premier venture capitalist investment group that looks for promising businesses to invest and deliver returns to its shareholders.
On the last trading day of 2020, Hotung shares broke out from its previous Jun high of $1.64 to close the day on the high at $1.69.
The company has done well in the past few years delivering solid returns to its shareholders in the form of both capital gain and decent dividend payouts.
The current allocation portfolio in terms of industries are dominated by software companies related (31.7%), followed by Investment companies (29.7%), then Automotive and Cloud Services at 10.4% each.
The theme for the near term is to look for investment in the start-up tech ecosystem with the company mentioning online education and shopping, home entertainment, and fitness experience being one of their investment thesis.
The Group remained debt free with healthy cash balances and are ready to look for the next opportunity.