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Consumer Confidence Stable While Consumer Sectors Firmed in August

By Geoff Howie

Consumer Confidence Stable While Consumer Sectors Firmed in August

Consumer Confidence Stable While Consumer Sectors Firmed in August

  • In August, Nielsen reported that Singaporeans' consumer confidence in 2Q16 remained stable from 1Q16 at 88 points. Meanwhile, the broader MasterCard Consumer Confidence Asia Pacific Index for 1H16 also reported no change in consumer confidence from 2H15.
  • The 10 largest capitalised active stocks of Singapore's Consumer Sectors averaged a total return of 1.4% in August. The MSCI AC Asia Pacific Consumer Discretionary Index and the MSCI AC Asia Pacific Consumer Staples Index averaged a similar 1.5% total return in Singapore Dollar terms over the month.
  • At 10.4%, the average year to date total return of the 10 largest capitalised and active stocks of Singapore's Consumer Sectors doubled the average total return of the 10 largest Consumer plays of Asia Pacific.
  • Of the 20 largest consumer sector stocks listed on SGX the three stocks that saw the biggest increase in average daily turnover in the month of August compared to July were Bumitama Agri, Mandarin Oriental International and Jardine Cycle & Carriage.

Singapore's two Consumer Sectors - Consumer Staples and Consumer Discretionary – maintain an approximate 15% weight in the Straits Times Index (STI) which is similar to sector weights in the MSCI AC Asia Ex Japan Index. These sector classifications are based on Global Industry Classification Standard (GICS®) which is also used to classify sectors on SGX StockFacts. The two Consumer sectors, Consumer Discretionary and Consumer Staples, are made up of businesses that supply goods and services to consumers.

Differences of Staples and Discretionaires

Consumer Discretionary businesses include both manufacturers and services. The manufacturing side covers cars, household and leisure items in addition to textiles and clothing, while the services side includes hotels, restaurants, media and consumer retailing. Consumer Staples are more focused on food, beverage and other non-durable products and services. This can include plantations to manufacturers and packagers to food retailers.

Across Asia Pacific, there are typically three times as many Consumer Discretionary Stocks as there are Consumer Staples stocks. Consumer Staples Stocks tend to trade at higher premiums to their earnings and book values. MSCI AC Asia Consumer Staples Index trades at Price-to-Earnings and Price-to-book ratio which is approximately twice that of the MSCI AC Asia Index and the MSCI AC Asia Consumer Discretionary Index.

Over the first eight months of 2016, the Consumer Staples Sector generated a market capitalisation weighted total return of 25.1%, while the Consumer Discretionary Sector generated a market capitalisation weighted total return of 3.9%.

Market Capitalisation-Weighted YTD % Total Return of GICS® Sectors & Key Industries

New and existing constituents of the SGX S-REIT 20 Index must meet a minimum daily traded velocity of 0.10% and 0.08% respectively. Daily traded velocity is derived by dividing (i) daily traded value by (ii) free-float market capitalization. Following on from the last rebalance Parkway Life is scheduled to join the SGX S-REIT 20 Index, replacing OUE Commercial REIT on Monday 28 March.

The SGX S-REIT 20 Index, which consists of 20 constituents, have a combined market capitalisation of S$51.8 billion. In the month thus far, the Index has gained 2.0% in total return. This compares to Bloomberg Asia REIT Index which gained 0.5% in SGD basis, over the same period. The Index maintains a dividend yield of 6.3% compared to Bloomberg Asia REIT Index dividend yield of 4.5%.

Source: SGX & Bloomberg (Data as of 31 August 2016)

Consumer Confidence Reports

In early August, Nielsen reported that Singaporeans' consumer confidence for the second quarter of 2016 remained stable at 88 points, constant from the last quarter. The full report which showed that Singapore consumers had reduced spending on home improvement and clothes, yet increased on new technology and out-of-home expenses can be read here.

Meanwhile, the broader MasterCard Consumer Confidence Asia Pacific Index for the first half of 2016 also reported no change in consumer confidence from the second half of 2015. The gauge is currently at a level of 59.7 which is at the high end of neutral with a level above 60 representing optimistic. The gauge is built on a consumer survey which asks respondents five questions pertaining to their six month outlook on the economy, employment prospects, the local stock market, their regular income prospects and their quality of life. The index is calculated based on percentage response figures where 0 is the most pessimistic and 100 the most optimistic – for more information click here. The Index is illustrated in the table below.

MasterCard Consumer Confidence Asia Pacific & Singapore Indices

Source: Mastercard & Bloomberg

Note the MasterCard Asia Pacific Regional Index provides a less volatile historical gauge than the individual countries that make up the Index series. For instance, in tune with its highly open economy, the gauge for Singapore has had a propensity to be more cyclical than the region since the Index was established in 1993. While the confidence in the region remained stable in the first of 2016, the biggest decline in optimism levels was observed in Indonesia, followed by Hong Kong, then Singapore.

August Performances

Singapore's Consumer Discretionary and Consumer Staples contributed 15.0% to the turnover of Singapore’s stock market in August, from 15.9% in July. The 10 largest capitalised and active stocks of the Consumer Sectors were mixed with five gainers and five decliners for the month and an average total return of 1.4% for the month. Click on the stock names below to see the full profile in SGX StockFacts.

Name SGX Code Market Cap in S$M GICS® Sector Name Total Return Month of August % Total Return First Eight Months % 10 Year Annualised Total Return % (in SGD)
Thai Beverage PCL Y92 24984 Consumer Staples -3.1 48.9 17.6
Wilmar International F34 19453 Consumer Staples 0.5 7.3 11.1
Jardine Cycle & Carriage C07 16580 Consumer Discretionary 8.9 25.2 18.4
Dairy Farm Intl Hldgs D01 13600 Consumer Staples 9.8 16.9 10.4
Genting Singapore PLC G13 8649 Consumer Discretionary -8.3 -4.7 10.5
Singapore Press Holdings T39 6010 Consumer Discretionary -0.3 -2.6 6.0
Olam International O32 5672 Consumer Staples 10.6 18.5 5.3
Golden Agri-Resources E5H 4521 Consumer Staples 0.0 7.2 7.9
Genting Hong Kong S21 3055 Consumer Discretionary -17.2 -17.2 3.4
Fraser and Neave F99 3036 Consumer Staples -0.5 4.3 9.8
Average: 1.4 10.4 10.0

Source: SGX StockFacts, Bloomberg

By contrast the next 10 biggest stocks of the Consumer Stocks were less mixed with seven gainers, three decliners and an average total return of 3.1% for the month. The MSCI AC Asia Pacific Consumer Staples Index and the MSCI AC Asia Pacific Consumer Staples Index averaged a 1.5% total return in Singapore Dollar terms over the month. Click on the stock names below to see the full profile in SGX StockFacts.

Name SGX Code Market Cap in S$M GICS® Sector Name Total Return Month of August % Total Return First Eight Months %
First Resources EB5 2820 Consumer Staples 11.8 -5.3
Mandarin Oriental Intl M04 2262 Consumer Discretionary 2.1 -13.5
Hotel Properties H15 1763 Consumer Discretionary -2.9 -9.0
Sheng Siong Group OV8 1571 Consumer Staples 8.1 29.3
Japfa UD2 1465 Consumer Staples 3.7 82.2
Delfi P34 1455 Consumer Staples -2.1 21.0
OUE LJ3 1435 Consumer Discretionary 5.7 -10.9
Bumitama Agri P8Z 1264 Consumer Staples 4.3 4.2
GL B16 1067 Consumer Discretionary -1.9 -9.1
Hotel Grand Central H18 885 Consumer Discretionary 2.3 19.7
Average: 3.1 10.9

Source: SGX StockFacts, Bloomberg

With the Consumer Sectors there two consumer plays - Sheng Siong Group and Dairy Farm International Holdings which were among the five biggest active stocks that saw the biggest jump in volume in August, compared to three month average volumes. Sheng Siong Group was also amongst the biggest volume jumpers for July as noted here.

Near the end of July Sheng Siong Group reported unaudited consolidated earnings results for the second quarter and six months ended June 30, 2016. For the six months, the company reported profit at S$ 31.6 million compared to S$ 27.7 million a year ago. The company also noted that revenue increased by 5.5% year on year in second quarter of 2016 of which 6.0% was contributed by the new stores and 2.2% by comparable same store sales from the old stores despite lacklustre demand, but was reduced by 2.7% due to the temporary closure of the Loyang Point store.

Dairy Farm International Holdings also reported consolidated unaudited earnings results for the six months ended June 30, 2016 with profit after tax attributable to shareholders of the company was US$ 199.3 million or 14.74 cents per diluted share against US$ 191.5 million or 14.16 cents per diluted share a year ago.

Turnover & VWAP Comparisons – August to July

The three stocks of the 20 stocks tabled above that saw the biggest increase in average daily turnover in the month of August compared to July were Bumitama Agri, Mandarin Oriental International and Jardine Cycle & Carriage. Meanwhile the three stocks with the biggest increase in their volume weighted average price (VWAP) in August compared to July were Jardine Cycle & Carriage, First Resources and Sheng Siong Group.

Name August Avg Daily T/O in S$M August VWAP S$ July Avg Daily T/O in S$M July VWAP S$ Change in Avg Daily T/O % Change in VWAP %
Thai Beverage PCL 19.0 1.027 21.6 0.979 -12.1 4.9
Wilmar International 19.0 3.085 32.9 3.153 -42.4 -2.2
Jardine Cycle & Carriage 17.7 42.632 11.6 36.905 53.3 15.5
Dairy Farm Intl Hldgs 4.2 9.374 2.9 9.136 48.0 2.6
Genting Singapore PLC 10.0 0.760 12.5 0.783 -20.3 -2.9
Singapore Press Holdings 12.6 3.815 21.6 3.860 -41.9 -1.2
Olam International 1.8 1.960 1.8 1.889 -2.4 3.8
Golden Agri-Resources 8.3 0.367 8.2 0.355 1.3 3.4
Genting Hong Kong 0.5 0.360 0.8 0.382 -36.1 -5.8
Fraser and Neave 0.1 2.110 0.1 2.093 -22.4 0.8
First Resources 5.09 1.762 4.83 1.556 5.4 13.2
Mandarin Oriental Intl 0.14 1.807 0.08 1.834 71.4 -1.5
Hotel Properties 0.01 3.438 0.01 3.432 -33.3 0.2
Sheng Siong Group 3.91 1.043 2.58 0.940 51.6 11.0
Japfa 1.91 0.810 1.91 0.848 -0.2 -4.5
Delfi 0.68 2.327 0.64 2.351 6.1 -1.0
Delfi 0.68 2.327 0.64 2.351 6.1 -1.0
OUE 1.36 1.584 0.90 1.527 52.2 3.7
Bumitama Agri 0.51 0.714 0.20 0.730 152.2 -2.2
GL 0.11 0.797 0.23 0.809 -53.7 -1.5
Hotel Grand Central 0.03 1.326 0.05 1.302 -33.3 1.8

Source: SGX

Earnings Reports for Three Sector Leaders

The three largest capitalised stock of the Consumer Sectors - Thai Beverage PCL, Wilmar International and Jardine Cycle & Carriage have reported half year financial results recently which are summarised in SGX StockFacts (click here).

On 11 August, Thai Beverage PLC reported unaudited consolidated and separate earnings results for the second quarter and six months ended June 30, 2016. For the six months, on consolidated basis, total income of THB 101,034,737,000 compared to THB 85,428,012,000 a year ago. Profit before income tax expense was THB 17,396,049,000 compared to THB 14,994,825,000 a year ago. Profit attributable to owners of the company was THB 14,366,077,000 or THB 0.57 per basic share compared to THB 12,437,641,000 or THB 0.50 per basic share a year ago.

On the same day, Wilmar International announced its unaudited consolidated earnings results for the second quarter and six months ended June 30, 2016. For the quarter, the group reported the first-ever quarterly loss, due to challenging operating conditions as flagged in the prospects in the previous quarter. Net gains in non-operating items reduced overall losses marginally to US$220.1 million in second quarter of 2016 against US$193.2 million profit a year ago. The losses were largely attributed to the manufacturing business within Oilseeds and Grains which was affected by the highly volatile soybeans market. In addition, unfavourable weather conditions which delayed harvesting in Australia and accounting mark-to-market losses on sugar hedges resulted in weaker performance by the Sugar segment. For the six months, the company announced profit before tax was US$135 million compared to US$558 million for the same period a year ago.

On 5 September, Jardine Cycle & Carriage announced earnings results for the first half ended June 2016. For the period, the company reported revenue of $7,703 million against $8,237 million a year ago. Underlying profit was $332 million against $361 million a year ago. Net profit was $328 million against $359 million a year ago. Net income fell, despite higher automotive profits, as weak commodity prices adversely affected its heavy equipment, mining contracting and agribusiness operations, alongside a significant increase in loan-loss provisions at Permata Bank.

Recent Listings

The three most recent Consumer plays to list on SGX include Katrina Group, the Reverse Takeover (RTO) of China Star Food Group and Jumbo Group.

Katrina Group ended August at S$0.315 after making a debut on 26 July following an initial offer price of S$0.210. Katrina Group is a Singapore-based F&B group with multi-cuisine concepts. The Group's brands serve cuisines of different ethnicity, ranging from Indonesian, Thai, Hong Kong, Yunnan, northern Chinese, and Mexican to Vietnamese, catering to a wide spectrum of patrons and market segments.

The RTO of China Star Food Group made its debut on 20 April at S$0.230 ended August at S$0.240. China Star Food Group Limited produces and sells sweet potato snack food products in the People’s Republic of China. In the first eight months of 2016 Jumbo Group generated a 40.2% total return.

Regional Comparative Returns

As noted above, the 10 largest capitalised active stocks of Singapore’s Consumer Sectors have averaged a 10.4% total return in the first eight months of 2016, which coincided with their average annualised 10 year returns at 10.0%. By comparison the average annualised 10 year return for the current 10 largest capitalised stocks of the Consumer Sectors across Asia Pacific was 6.8%. These stocks are Toyota Motor Corp, Japan Tobacco Inc, Kweichow Moutai Co, Honda Motor Co, ITC, Nissan Motor Co, Sony Corp, Seven & I Holdings Co, Fast Retailing Co and Wesfarmers.

Source: SGX, Bloomberg

The evolution of Singapore’s Consumer Sectors has coincided with its status as a highly multicultural economy which is home to many regional businesses and diverse consumer preferences. More than two-fifths of the revenue generated by the stocks within Singapore’s Consumer Sector is reported to be received outside of Singapore, mostly to the Asia Pacific region which is home to approximately 3.7 billion people.

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Geoff Howie
Geoff Howie

Mr Howie is the Singapore Exchange's Market Strategist - and the key contributor to the educational content and market insights of SGX My Gateway. He is also part of the Associate Faculty at SIM University,  educating students on the fundamentals of investing. 

He previously held lead broking and strategist roles across the Asia Pacific offices of a large international futures broker. Outside of his 15 year career in the financial markets he has also served as the Treasury Adviser to the Leader of the Queensland Liberal Party in Queensland Parliament.

Following High School in Hong Kong, he attended University of Queensland, receiving a Bachelors and Master's degree in Economics, the latter extending into deferred PhD work after receiving the highest grading for first-mover research and modelling conducted on the Shanghai economy.

Mr Howie's other notable achievements include receiving two Hong Kong Securities Institute Outstanding Achievers awards for the 2005 year.