The market is in turmoil, it is easier to identify stocks that have delivered negative returns, however there are a few defensive stocks which have beaten the odds and delivered positive YTD share price returns. Here we share 5 of them and some reasons why we think these 5 companies are able to do so.
| Company | Ticker (SGX) | Market Cap (S$’b) | P/E ratio (times) | YTD returns (%) | Dividend Yield (%) | Dividend payout ratio (%) |
| Jardine C&C | C07 | 11.8 | 9.0 | 46.4 | 4.2 | 48 |
| Sembcorp Industries | U96 | 5.1 | 7.2 | 43.0 | 2.4 | 32 |
| Sheng Siong | OV8 | 2.4 | 17.6 | 6.8 | 4.0 | 75 |
| Centurion Corp | OU8 | 0.3 | 3.8 | 4.6 | 2.2 | 16 |
| OCBC Bank | O39 | 54.3 | 10.8 | 3.3 | 4.7 | 52 |
1. Jardine C&C (SGX:C07) +46.4%
Jardine C&C is the best performer of the lot featured here as the company’s share price staged a strong recovery in 2022, in part because of the company’s strong FY21 and 1H22 performance and the share’s perceived undervaluation when compared to the broader market.
Jardine C&C’s FY21 and 1H22 performance has been robust, with FY21’s underlying earnings per share and Revenue just a couple of percentages off FY19 and 1H22 performance recording new highs when compared to FY19 levels. Dividends have also been reinstated substantially as earnings recovered.
This strong performance was substantially contributed by Astra, the Indonesian conglomerate and also the largest component of JC&C’s portfolio of investments and THACO Group, the Vietnamese conglomerate.
Jardine C&C has also been a structural play on the South East Asian transformation and growth theme. In 2021 and 1H22, Indonesia and Vietnam economies outperformed and consequently this was reflected in Astra’s and THACO performance.
Astra saw growth in sectors such as Automotive, financial services, heavy equipment and construction, infrastructure and logistics, and Agribusiness while THACO’s automotive segment which has a substantial share of the Vietnam automotive market also did well.
Jardine C&C’s portfolio of companies is expected to continue doing well, but as it is a macro-themed play, any significant changes to the South East Asian economies in which it operates in will be quickly reflected in its performance.
2. SembCorp Industries (SGX:U96) +43%
We recently covered SembCorp Industries here in July 2022 where we considered whether it was time to sell or hold SembCorp. We thought that it was probably time to sell SembCorp given its strong performance and from the point of our coverage, SembCorp increased by about 17% before falling significantly with the broader market and currently sits 4% below the levels at which our coverage occurred. This can be considered an outperformance in the current market.
SembCorp has been resilient as oil and natural gas prices remain elevated due to the Russia situation although prices have come off its highs as the macroeconomic environment slows down. Higher commodity prices have led to higher profits in its utilities segment as costs are being passed through.
The company has also been executing its new business model as part of its strategic transformation plan. Moving forward, this will be the key item to watch, as the company has to grow the scale of its green portfolio profitably.
3. Sheng Siong (SGX:OV8) +6.8%
Sheng Siong, operates a ore essential product business as one of Singapore’s top retailers, with more than 64 supermarkets island wide which are primarily located in the heartlands of Singapore.
In Sheng Siong’s recent 3Q22 earnings report, the company saw a mere 4.5% decline to profits as a 4.2% decline in revenue was offset by a slightly larger 4.8% decline in cost of sales. This was attributable to a continued reopening from COVID-19. With the slight decline in 3Q22, the company now has a 9M22 performance that is in line with 2021. This is still 72% higher than 2019 which could indicate that Sheng Siong has a positive structural growth.
While there are downside risks such as inflation, should a recession affect the average consumer, Sheng Siong may benefit from a switch to dining in, similar to what occurred during the COVID-19 pandemic, as customers seek to reduce the cost of living.
To support Singapore’s retail operations and further improve its margins, Sheng Siong built a customised central distribution centre in Mandai Link which currently supplies more than 70% of the goods to the supermarkets and also has food processing capabilities, warehousing and cold store facilities.
4. Centurion Corp (SGX:OU8) +4.6%
For the uninitiated, Centurion owns, develops and manages quality, purpose-built workers accommodation assets in Singapore and Malaysia, and student accommodation assets in Australia, South Korea, the UK and the US with a portfolio of 36 operational accommodation assets totaling approximately 65,077 beds as of 1H22.
For 1H 2022, Centurion’s revenue increased 40% to $90.5 million on the back of strong revenue contributions from the portfolio of purpose-built workers accommodation (“PBWA”) and purpose-built student accommodation (“PBSA”) across Singapore, UK and Australia.
The revenue growth was derived mainly from two Quick Build Dormitories which commenced operations progressively since June 2021 and improved occupancy of the Purpose-Built Dormitories portfolio.
With the strong top line performance, profit from its core business operations grew by 35% to $32.4 million
In Singapore, many companies in the construction, shipyard and process sectors rely on migrant workers as a key part of their workforce. The reopening of the Singapore borders and economy has underpinned these sectors, with the government authority estimating that Singapore’s construction sector will likely return to near pre COVID-19 levels in 2022.
Many large construction and shipyard contracts tend to be on a multi year basis. As such, companies in these sectors are hiring more such workers and these workers tend to be housed at these dormitories. Hence, capacity demand for dormitories will likely remain robust.
Similarly, for the student accommodation assets which are in the UK, US and Australia, students are returning with the lifting of travel restrictions and will underpin the strength of these assets.
5. OCBC Bank (SGX:O39) +3.3%
Although OCBC Bank’s YTD returns of 3.3% is the lowest in this list, it has also outperformed the broader STI Index benchmark which has declined nearly 5% this year.
OCBC Bank delivered strong 1H22 and 2Q22 performance with 2Q22 net profit 28% higher than 2Q21’s and 9% higher than 1Q22’s. Net interest income reached a new high from loan growth as OCBC benefitted from rising interest rates. Despite the market volatilities, there was net new money inflows into its wealth management business as well as healthy new insurance sales. Total deposits on hand also increased while allowances were lower.
Although there it is clear that the global economy is facing greater uncertainties, OCBC expects Asia will continue posting economic growth and OCBC gave a positive outlook for FY2022, noting that South-East Asian markets will likely post steady recovery this year. China, one of OCBC’s core market meanwhile, should benefit from accommodative fiscal and monetary policies, and gradually easing lockdowns.
Resilient stocks can help your portfolio
These five stocks have been defensive, showing resilience in the face of a potential recession, Companies like Jardine C&C and OCBC are benefiting from structural strength in its core markets in South-East Asia which can only be delivered due to the companies’ strength. Sheng Siong and Centurion are defensive plays due to the products and service it provides with demand expect to continue to be robust. SembCorp Industries has benefited from its defensive utilities portfolio, supported by higher commodity prices and optimism over its strategic transformation
On top of the positive YTD share price returns, all 5 companies also have a dividend yield of between 2% and 5% which adds on to the total returns, outperforming the broader market. We have shared a few attributes why these companies have outperformed the markets, follow us if you would like to learn more on how to identify these companies.
