• The iEdge SG Advanced Manufacturing Index tracks the performance of more than 110 Singapore-listed stocks - which have posted diversified returns over the first seven weeks of 2024, with around one gainer for every two decliners for the period, while also seeing S$22 million in combined net institutional outflow.
   
• Over the first seven weeks of 2024, the 25 largest weights of the Manufacturing Index saw varied performances from a 31% decline for NIO to a 24% gain for Food Empire. The majority of these 25 stocks are also on average trading at P/B ratios that are at discount to their 5-year average P/B ratio.
   
• The largest Manufacturing Index weight is currently ST Engineering, which has consolidated on its 2023 gains over the past 7 weeks and scheduled to report its FY23 results on 29 Feb before the market open. For its 9MFY23, ST Engineering reported its revenue grew 12% YoY to S$7.3 billion, while it booking S$11.7 billion in new contract wins. In 2023, ST Engineering generated a 21% total return.
   
• Venture has booked the most net institutional inflow over the past seven weeks within the Manufacturing Index with S$43 million of net inflow. This follows S$292 million in net outflow in 9M23 and S$62 million in net inflow in 4Q23. Venture will report its FY23 results after the 22 Feb market close. Last year, Venture reported its 9MFY23 revenue was S$2.3 billion, a decline of 19% YoY, against a high base in the previous year, and soft customer demand and ongoing inventory destocking.
  
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Current Economic Outlook for Singapore Manufacturing

Singapore’s manufacturing sector moderated in 2023, with a 4.3% contraction, reversing the 2.7% growth in 2022. Looking forward, the Ministry of Trade and Industry (MTI) expect that as global electronics demand recovers, Singapore's manufacturing and trade-related sectors will see a gradual improvement in growth. MTI reason that the electronics and precision engineering clusters in the manufacturing sector are expected to bounce back, as semiconductor sales have exceeded expectations both globally and domestically. MTI also added last week that the wholesale trade sector's machinery, equipment, and supplies segment will also benefit from increased external demand for electronic components and telecommunications and computers. However, downside risks remain in the global economy, including escalation of geopolitical tensions, lagged effects of global monetary tightening and idiosyncratic cost shocks.

The iEdge SG Advanced Manufacturing Index is Diversified Across Multiple Industries

The constituents of the iEdge SG Advanced Manufacturing Index have contributed 18 cents into every dollar that have gone to work in the Singapore stock market over the past seven weeks. Manufacturing has a similar impact on Singapore GDP, representing 21% of the GDP in 2023, and 22% in 2022. Like the key clusters of Singapore’s Industrial Production, the constituents of the iEdge SG Advanced Manufacturing Index represent multiple industries, with the wide span of revenue classifications for Sector Criteria detailed in Section 10 of the Index Methodology document found here.  

The Index is reviewed semi-annually in March and September and Index constituents will have their Index weights capped at 10% at each semi-annual rebalance date. Since the last rebalance (and capping process) in September, Singapore Technologies Engineering’s comparative performance has seen the stock now rank as the largest  Index weight, with a current weight of 11.4%.

Over the past seven weeks the Index constituents have seen S$21.5 million in combined net institutional outflow. At the same time more stocks in the Index saw net institutional inflow than net outflow over the period, with six stocks booking net inflow for every five that booked net outflow. Within the iEdge SG Advanced Manufacturing Index, Sectors that saw more overall institutional net inflow than net outflow included Industrials, Technology (Hardware/Software) and Healthcare. On the other hand, the Consumer, Energy and Materials and Resources Sectors experienced more overall institutional net outflow. At the constituent level, Venture Corporation booked the highest net institutional inflow within the Index.

Following the strong January Singapore NODX report prior to the Friday open, the combined daily trading turnover of the iEdge SG Advanced Manufacturing Index reached its highest levels since 15 December. The 1.8% gain for the Index on Friday was also its strongest session gain since 3 November. This brought the Index decline in total return to 5.5% over the past seven weeks, following its 2.4% decline in total return in 2023 as discussed here. 

The 25 largest weights of the Index are tabled below.

Note: ADT refers to average daily turnover; NIF refers to net institutional flows; TR refers to total returns.

Source: SGX, Refinitiv (Data as of 16 February 2024).

Singapore Technologies Engineering to Report FY23 Results on 29 Feb

As noted above, Singapore Technologies Engineering currently maintains the highest weight within the iEdge SG Manufacturing Index.

Singapore Technologies Engineering is a global technology, defence and engineering group with businesses across the aerospace, smart city, and security segments. The company has a global presence with operations spanning across Asia, Europe, the Middle East and the US, serving customers in more than 100 countries.

Singapore Technologies Engineering shares closed on 16 February at S$3.91, with the Refinitiv Consensus Estimates Target price currently at S$4.26. With S$0.16 per share distributed in dividends in 2023, the stock currently maintains an indicative dividend yield of 4.1%.

After the Singapore Technologies Engineering reported revenue increased 17% year-on-year in FY22 (ended 31 Dec), its 9MFY23 revenue was reported to increase 12% to year-on-year to S$7.3 billion in its 3QFY23 business update. The Business Update did not provide a net profit update, which was down 6% year-on-year in FY22 and up 0.2% year-on-year in 1HFY23.

For its 9MFY23, Singapore Technologies Engineering noted it has benefited from the continued recovery in the aviation industry, with air travel inching closer to pre-COVID levels in the latter half of 2023. By revenue segment, Commercial Aerospace revenue increased 30% year-on-year to S$2.8 billion (39% of total revenue), while Defence and Public Security revenue decreased 1% to S$3.1 billion (42% of total revenue) and Urban Solutions & Satcom revenue increased 13% (19% of total revenue). The company also noted that it is in progress of undergoing an organisation transformation through a workforce reduction, which will result in a lower cost base.

For the 9MFY23, Singapore Technologies Engineering highlighted it had made significant new contract wins for its strong order book, with S$11.7 billion contract wins in 9MFY23 taking the order book to S$27.5 billion as of 30 September. The S$11.7 billion in 9MFY23 contract winds was segmented S$3.9 billion to Commercial Aerospace, S$6.2 billion to Defence and Public Security, and S$1.6 billion to Urban Solutions & Satcom.

Singapore Technologies Engineering will report its FY23 results before the 29 February open. After generating a 21.2% total return in 2023, the stock has marginally gained by 0.5% over the past seven weeks. The stock has also booked the fourth highest net institutional inflow within the Index since the end of 2023, after Venture Corporation, Yangzijiang Shipbuilding (Holdings) and SATS.

Venture Corporation to Report FY23 Results on 22 Feb

As noted above, Venture Corporation has booked S$43 million of net institutional inflow over the past seven weeks. This follows S$292 million in net outflow in 9M23 and S$62 million in net inflow in 4Q23. The stock is also at present the fourth largest weight of the iEdge SG Advanced Manufacturing Index after Singapore Technologies Engineering, Yangzijiang Shipbuilding (Holdings) and Wilmar International.

Venture Corporation designs and develops a variety of products and solutions for a wide range of customers across life science and genomics, healthcare and wellness, and test and measurement instrumentation. Headquartered in Singapore, the Group comprises more than 30 companies worldwide with Centers of Excellence in Southeast Asia, Northeast Asia, America, and Europe.

After Venture Corporation’s net profit rose 18% year-on-year in FY22 (ended 31 Dec), its 9MFY23 net profit was reported to decline 25% year-on-year back in its 3QFY23 business update. The 9MFY23 decline in net profit was on the back of 9MFY23 revenue declining against a high base in 9MFY22, in addition to soft customer demand and ongoing inventory destocking. Over a five-year period, the 9MFY23 revenue was lower against the corresponding period in FY22 but higher compared with FY20 and FY21.

Venture Corporation also maintains its net cash position has improved over the past four years, reaching S$956.5 million as of 30 September. It highlighted back in November that it continues to generate strong cash flow through operating performance and working capital optimisation.

Venture Corporation shares closed on 16 February at S$13.99, with the Refinitiv Consensus Estimates Target price currently at S$15.115. With S$0.75 per share distributed in dividends for each of the past four financial years, Venture Corporation currently maintains an indicative dividend yield of 5.4%. That indicative yield was as high as 6.6% back on 30 October 2023, however the current indicative yield has moderated following a 23% share price gain over the ensuing 3 to 4 months.

Management noted in November its new product introductions with both existing and new customers are on track to be rolled out in 2024, adding that the adoption of Venture module solutions by its life science and industrial customers was also picking up pace, which will complement its core Electronic Manufacturing Services (EMS++) business going forward.

Venture Corporation will report its FY23 results after the 22 February close. After generating a decline in total return of 16.2% in 2023,  the stock has gained 2.8% over the past seven weeks.

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