• Despite the challenges of the past five years and the significant impact of the FTSE ST Banks Index's 93% total return on the STI's 42% total return, the iEdge SG Advanced Manufacturing Index has achieved a similar 5-year total return of 39%.
   
• The iEdge SG Advanced Manufacturing Index achieved an 11.3% net total return from 2H24 to 23 Oct, driven by a global pivot in interest rates and a strong recovery in Singapore’s July and August Industrial Production, with top gainers including Delta SDR, Dyna-Mac, Seatrium, Jiutian Chemical Group, and SATS.
   
• Four of the 10 Index heavyweights booked net institutional inflow in both 1H24 and 2H24 to 23 Oct, including Singapore Technologies Engineering, Venture Corporation, SATS, and Thai Beverage PCL, with notable earnings developments reported in August. 
   
• Delta SDR now makes up 11% of the iEdge SG Manufacturing Index. Its units rose from S$3.10 at end 1H24 to S$5.17 by 23 Oct. The P/E ratio increased from 49x to 77x over 16 weeks. Delta Electronics reported record net profit in 2QFY24, driven by growth in power electronics for AI, data centers, and EV solutions.
   

Despite the challenges of the past five years, and the significant impact of the 93% total return of the FTSE ST Banks Index on the STI’s 42% total return, the iEdge SG Advanced Manufacturing Index has generated similar 5-year total returns to the STI at 39%.

As illustrated below, the iEdge SG Advanced Manufacturing Index, with a number of strategically important businesses was less impacted during containments measures between 2020 and 2021, however then began to underperform with the semiconductor industry slump from mid-2022 through to 2023, in addition to global trade contractions in 2023. 

The 11.3% net total return for the iEdge SG Advanced Manufacturing Index in 2H24 to 23 Oct, has coincided with a global pivot in interest rates, and on the manufacturing front, a strong recovery in Singapore’s July and August Industrial Production. The recovery pace is expected to moderate in September, with Bloomberg forecasting a much more moderate increase of 3.6% YoY, compared to the 21.0% YoY surge in August.  

The iEdge SG Advanced Manufacturing Index constituents that rank among the top two quartiles of Index weights that have posted the strongest gains in 2H24 to 23 Oct include Delta Electronics (Thailand) PCL Singapore Depository Receipt (SDR), Dyna-Mac Holdings, Seatrium, Jiutian Chemical Group and SATS. Note that Sri Trang Gloves Thailand PCL has also outpaced, however the stock ranks among the lowest quartile of stocks by trading turnover this year. 

The iEdge SG Advanced Manufacturing Index presently includes 102 constituents, each representing a stock engaged in manufacturing. To be eligible for inclusion, a company must derive at least 40% of its revenue from manufacturing-related activities. For existing constituents, this requirement is relaxed to 30%, recognizing their continued contribution to the manufacturing sector. The Thailand SDRs were included effective September 2024. 

The 10 current Index heavyweights are tabled below. 

Source: Bloomberg, Refinitiv, SGX (Data as of 23 Oct 2024). Note ADT NIF refers to Net Institutional Inflow, TR refers to Total Return. Note NIF for SDRs is omitted. 

As detailed in the table above, four of the 10 stocks booked net institutional inflow in both 1H24 and 2H24 to 23 Oct, including Singapore Technologies Engineering, Venture Corporation, SATS and Thai Beverage PCL. All four stocks did note positive earnings developments in their August reporting/updating:

• Singapore Technologies Engineering 1HFY24 (ended 30 June) revenue was S$5.52 billion, a 14% YoY increase from 1HFY23, driven by all three business segments. EBITDA rose 11% YoY to S$786 million and net profit rose 20% YoY to S$337 million. 
• Venture Corporation registered 1HFY24 (ended 30 June) revenue of S$1.38 billion, lower YoY due to softer demand in 1QFY24. The company noted that 2QFY24 revenue rose 7.6% from 1QFY24, led by the majority of its technology domains. Proactive working capital management was also attributed to a higher operating cash flow in 2QFY24, with the group recording a 1HFY24 a net profit of S$123.7 million, translating to an improved net margin of 8.9%.
• SATS reported for its 1QFY25 (ended 30 June), revenue rose 15.5% YoY to S$1.37 billion, driven by Gateway Services and Food Solutions. Gateway Services’ revenue increased 12.0% YoY to S$1.06 billion, boosted by high-tech shipments, eCommerce growth, and a shift from ocean freight due to the Red Sea crisis. Food Solutions’ revenue surged 29.3% YoY to S$310.8 million due to higher demand for inflight meals. Operating profit jumped to S$112.9 million from S$7.9 million, with the margin improving from 0.7% to 8.2% due to operational efficiencies.
• Thai Beverage PCL reported in its 9MFY24 Business Update (ended 30 June), a marginal increase in sales revenue, with a 0.5% YoY increase amidst a challenging economic environment. The Group highlighted that EBITDA growth of 2.2% was driven by the beer and non-alcoholic beverage segments, attributed to effective cost management. 
   

Delta Electronics SDR Gains Prominence in iEdge SG Advanced Manufacturing Index

Delta Electronics (Thailand) PCL SDR now makes up 11.6% of the iEdge SG Manufacturing Index, following on from its Index inclusion at capped 10% weight at the September Index rebalance. The market capitalisation of the Thailand listing is presently Baht 1.64 trillion (~S$64 billion). Click here for more on SDRs.  

Delta Electronics (Thailand) PCL SDR units have soared from S$3.10 at end of 1H24 to S$5.17 as of 23 Oct. In the 6 months since launch on April 1, it has been amongst the two most traded SDRs with daily turnover of S$100K. It has seen consistent interest from individual investors as it accounts for ~15% of total retail SDR AUM. The Delta Electronics (Thailand) PCL SDR also trades at competitive spreads of <2 ticks during overlapping hours with Thailand and prices track the underlying shares closely (+/-0.30% differentials). 

The price gains have seen the P/E ratio of the Delta Electronics (Thailand) PCL SDR increase from 49x to 77x over the course of the past 16 weeks, placing the metric closer to 83x, which is the current 1 S.D. threshold above the 5-year average P/E of 59x. The gains were achieved despite a 9% rise in the THB to USD exchange rate over the past 16 weeks, with approximately 30% of the company revenues reported to the United States.

Apart from maintaining an above average P/E ratio, Delta Electronics (Thailand) PCL has averaged ROE in the vicinity of 30% for the past eight quarters. On July 26, the company reported an all-time high for its quarterly net profit in 2QFY24. This was on the back of sales revenues and service income increasing 16.6% YoY to Baht 41.8 billion, driven by strong growth in power electronics for AI technology in data centers, cloud infrastructure investments, and a rebound in electric vehicle power solutions. Power Electronics accounted for 55% of its 2QFY24 revenue, with mobility comprising 28%. 

This offset a softer performance in fan & thermal management and industrial automation due to global economic volatility. Moreover, improved gross profit margins, and effective inventory management saw 2QFY24 net profit surge 40.6% to Baht 6.6 billion. The company is a global leader in power and thermal management, specialising in power electronics, industrial and building automation, data center infrastructure, telecom energy solutions, and EV charging, while expanding into smart energy solutions like PV systems, energy storage, and energy IoT, aligning with global trends in electrification, renewable energy, and e-mobility. Looking forward, management is focused on expanding capacity, smart manufacturing, AI, high-performance computing, and energy infrastructure, while committing to sustainability and aiming for 100% renewable electricity by 2030.

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