The Singapore stock market has underperformed over the past years when compared to the US markets as many of the stocks listed on the index have Asian exposure or have been affected by certain major events.
Here we look at why these 5 big Singapore companies have fallen so much, recording a 5 year performance of -40% to -67% and falling below the $1 price level.
| Company | Ticker | P/E ratio | share price (current) | 5 Year decline |
| Nanofilm | MZH | 36.7 | $0.96 | -67% |
| Yanlord Land | Z25 | 4.6 | $0.55 | -54% |
| Olam | Z25 | 12.9 | $0.84 | -52% |
| Frasers Property | TQ5 | 3.2 | $0.77 | -51% |
| CapitaLand China Trust | AU8U | 14.6 | $0.80 | -40% |
1) Nanofilm (SGX: MZH)
Nanofilm requires little introduction. It IPO-ed in 2020 with great expectations, hitting a high of $6.28 in 2021, only to tumble below $1.
In latest news, Nanofilm‘s new factory in Huizhou China was completed in November 2022, thus expanding its production capacity in China.
The new factory provides vacuum coating services for high-impact emerging markets such as semiconductors, microelectronics, electrical discharge machining and industrial tooling.
As part of the company’s growth strategy in South China, the opening of the Huizhou plant will see Nanofilm establish greater access and more efficient coating services for partners and businesses across Hong Kong, Shenzhen, Macau and Guangzhou.
Unfortunately, the timing was not fortuitous. There was weaker demand in the consumer electronics market. End-consumer sentiment was affected by inflationary pressures, higher interest rates and ongoing geopolitical tensions which led to reduced consumer discretionary spending that affected demand.
This was coupled with a softer than anticipated post-reopening recovery in China in 1H2023. In addition, companies started shifting their production requirements out of China resulting in a challenging market backdrop.
Despite all this, Nanofilm took the chance to invest in long-term business initiatives to drive future growth. This include costs related to new facility set-ups in Zigong and Huizhou, China, ongoing business-building expenses related to Sydrogen, as well as capital investments in new production facilities such as in Vietnam.
Due to the slower demand and investments, Nanofilm’s 1H23 revenue declined by 34% while gross profits shrank by 53%.
The company also swung into a loss position.
Nanofilm will have to demonstrate to the market how it plans to position itself, if it plans to stage a comeback in future.
2) Yanlord Land (SGX: Z25)
The property sector woes in China has plagued Yanlord Land, a Chinese residential developer. China’s economic situation remains uncertain and consumers currently have a short-term aversion to buying property as they worry that the developer may collapse.
Even though Yanlord’s focus is on high-end integrated commercial and residential property projects in strategically selected high-growth cities, they were also not spared.
In 9M23, Yanlord’s contracted pre-sales from was approximately RMB26.1 billion on a total contracted GFA of 1.02 million sqm, a decrease of 51.7% and an increase of 1.0% respectively compared to the corresponding period of 2022. The decrease in pre-sales was also attributable to a change in the product mix.
The Chinese government has been launching various measures to stimulate the economy, but market confidence has not yet fully recovered.
In the longer run, China contains huge market demand and growth potential and Yanlord hopes that this phase of market adjustment will bring the industry back to rationality.
3) Olam (SGX: VC2)
Olam has been accused of being involved in a fraud. It has allegedly funnelled US$34 billion into the Central Bank of Nigeria through its special purpose vehicles as capital importation at official rates, before round-tripping the foreign exchange by selling to other businesses at parallel market rates.
Olam has categorically denied all allegations as baseless. However, the company had to post a bond for its local director who was held in remand by the Nigerian authorities.
As Olam has not explained itself fully, perhaps due to pending investigations, the company might not fully dispel market concerns, indicating a potentially extended period of share price weakness.
The pending investigations will likely impede Olam’s ability to spin off Olam Agri by 1H 2024 and Olam Food Ingredients subsequently.
Shareholders will likely have to wait till Olam addresses the investigation in full before experiencing any potential recovery.
4) Frasers Property (SGX: TQ5)
Frasers Property (FPL) recently provided a profit guidance in advance of the announcement of its full year results. In its guidance, FPL explains that it expects fair value losses on a portion of its portfolio of investment properties, primarily its commercial properties in the UK and industrial and logistics properties in Europe. The fair value losses arose mainly due to higher capitalisation rates as a result of the higher interest rate environment.
FPL was able to maintain an overall profit due to its overall business performance as core operating earnings have not been significantly impacted as compared to the previous financial year.
This means that FPL expects to report a significant decrease in profit as compared to the previous year but will likely remain profitable.
The UK assets accounts for 10% of FPL’s total asset base while the European assets also account for 10% of FPL’s total asset base. It is also worth noting that due to the weakening British Pounds, there would also likely be a hit to FPL’s net asset value when translated to the Singapore Dollar.
The fair value loss should not come as a surprise as FPL reported net fair value loss of its business park assets in UK in its 1H23 results.
That said, not all of its assets are performing poorly. FPL has 35% of its assets in Singapore and the Singapore assets in the retail and commercial space have seen better performance and the acquisition of NEX shopping mall has provided a substantial boost to its bottom line.
FPL also has 18% of its assets in hospitality. This portfolio is sure to continue to do well with its exposure to Singapore, Australia and to a lesser extent in Europe as strong demand continues to be seen from both leisure and corporate travellers.
5) CapitaLand China Trust (SGX: AU8U)
CCT is the worst performing REIT of all CapitaLand REITs due to the worries over China’s weak consumer sentiments affecting sales turnover in its retail malls and the weak economy as well as the real estate sector implosion impeding its commercial real estate portfolio.
Despite the macro issues, CCT has actually performed relatively well. In its 3Q23 results, CCT saw revenue decreasing a mere 1.9% while net property income increased 1.2% in RMB terms. However, due to the depreciation of the RMB to SGD, NPI in SGD terms declined 8.4%.
CCT’s retail portfolio was boosted by asset enhancement initiatives completed in 3Q 2023 and better performance of key malls. CCT expects further upside with CapitaMall Grand Canyon’s AEI slated for completion in 4Q 2023. Occupancy stood at 97.8% in 3Q 2023; a new high since 4Q 2021.
Tenant sales surpassed pre-COVID-19 levels in 3Q 2023, being 6.5% higher than 3Q 2019. Retail sales of consumer goods increased 6.8% YoY in 9M 2023 due to improving essentials and lifestyle spending.
CCT’s Business Park also maintained occupancy at 90.8% despite lower business sentiments with a positive 2.9% rental reversion.
Don’t be too quick to jump into these stocks yet
There are ample reasons to explain why these 5 stocks have fallen so significantly and below the $1 threshold.
Some of these 5 stocks such as Yanlord Land and Capitaland China Trust have exhibited signs of recovery. Frasers Property has a diversified portfolio by asset class and geographic region which continues to deliver growth.
For Olam, it is necessary for the overhang arising from the investigations by the authority to be dispelled and a subsequent IPO to fully convince the market that the matter is fully resolved.
Nanofilm has been affected negatively by slowing demand at the same time as companies start shifting their production out of China and will have to demonstrate to the market how it plans to position itself.