Gong Xi Fa Cai & Welcome to the year of the Rabbit!
Here are 5 stocks to benefit from this year’s Chinese New Year!
Chinese New Year is a period where many people will be travelling around and enjoying the reunion steamboat meal with their family esp. now that Covid is a yester-year thing…
This festival season is more revered in China with many people travelling across the cities back to their hometowns. The recent Covid relaxation measures in China would definitely bode well for the businesses too!
Without further ado, here are 5 stocks to Huat Big Big for Chinese New Year – Read on to find out more~
#1 Jumbo Group
Ah! Who can forget about the spicy and luxurious chili crabs from Jumbo! Jumbo Group (JG) is a food & beverage company mainly involved in providing seafood for customers in Singapore, China, Taiwan, Thailand, Vietnam and Korea.
Other than that, it has also branched out into other F&B offerings such as Bah Kut Teh, Teochew food, and wantan noodles. A majority of its business is still located in Singapore, where it generates about 54.1% of its revenue.
However, China is fast emerging as a major source of revenue for JG, where its share of revenue has increased to 38.8% in 2021 from 21.7% in 2020. With the easing of travel restrictions in China, watch out for the boom in Chinese consumer demand for chili crabs!
In terms of financial performance, JG has finally turned a corner in the second half of 2022 (2H 2022) with revenue growing by 81.3% to SGD70.0 million. It has also returned to profit at SGD4.1 million for the 2H 2022 compared to a loss of SGD4.4 million in 1H 2022. Things are looking up for JG for the upcoming Chinese New Year then.
JG is currently trading at a price-to-book (PB) ratio of 4.6 times and could be worth your time to look at for the following reasons:
- Multiple revenue sources from different countries and business segments
- Solid reputation as a F&B company especially in Singapore
- High exposure to the China market where the re-opening could boost revenue significantly
#2 Sheng Siong Group
How would the things that you want to buy for Chinese New Year arrive at your doorstep then? Sheng Siong Group (SSG) is an online grocery company that sells and delivers groceries to you, and operated by the reputable Sheng Siong Supermarket.
SSG sells everything under the sun when it comes to groceries including seafood, meat, vegetables, food products, and all sorts of general merchandises. During festive seasons, supermarkets are sure to draw in the crowd!
Being a supermarket, SSG did not really suffer during the pandemic as most people still need basic necessities. Revenue increased from SGD991 million in 2019 to SGD1.4 billion in 2021. Meanwhile, profits almost doubled from SGD75.8 million to SGD 133.1 million over the same period.
SSG currently has a BUY call from analysts with an average target price of SGD1.89. This implies an upside of 14.5% from its current share price. This company might be worth a look at for the following reasons:
- One of the biggest supermarket companies in Singapore. Market Cap of SGD2.5 billion.
- High return on asset at about 19.4%. Higher when compared to sector average of 4.6%.
- Reputable brand for average Singaporeans to recognise.
In terms of valuation, SSG is currently trading at a PE ratio of 18.5 times, slightly lower than its historical average of 20.6 times. Its dividend yield currently stands at a respectable 3.8%.
#3 Wilmar International Limited
You always need cooking oil, and who better to provide them than Wilmar International Limited (WIL). WIL is a an agribusiness group in Singapore that is mainly involved in the palm oil industry, producing edible food and cooking oils.
WIL has over 500 manufacturing plants and has wide-ranging distribution networks that cover the main countries of China, India, and Indonesia. It is no surprise then WIL could receive increased orders for its products from consumers in China during the Chinese New Year.
WIL’s financial performance continue to be impressive post pandemic. Revenue grew by 26.7% from SGD39.7 billion in 1H 2021 to SGD50.3 billion in 1H 2022. Meanwhile, WIL has also been great at maintaining profitability, generating positive profits even during the pandemic. Profit after tax of WIL grew by 53.2% from SGD1.2 billion to SGD1.8 billion over the same period.
In the market currently, WIL has a BUY call from most analyst and the highest target price of SGD5.01. This implies an upside of about 25%. Hence, WIL could be an attractive investment opportunity for the following factors:
- Low valuations currently which could make for an attractive opportunity to take it up.
- Largest agri-food company by market capitalisation. Ranked 6th largest company in Singapore.
- High exposure to China markets, with the re-opening and Chinese New Year events bringing in increased demand for food products.
WIL is currently trading at a price-to-earnings (PE) ratio of 8.2 times, much lower when compared to its historical average of 13.2 times (2017 to 2021). It also has a healthy dividend yield of 3.8%.
#4 Genting Singapore
A trip to Genting Singapore (GS) might be a good way to spend your Chinese New Year! Genting Singapore is part of the wider Genting Group that operates integrated resorts which have casinos, theme parks, hotels, retail, and MICE facilities.
You might know Resorts World Sentosa, and its many offerings of SEA Aquarium, Adventure Cove Waterpark, and Universal Studios theme park.
GS, being a stock that is very reliant on tourism whether from Singapore and other countries, are gradually recovering from the pandemic. Revenue grew by 19.5% from SGD 554.8 million in 1H 2021 to SGD 663.1 million in 1H 2022. Meanwhile, GS has not made a loss in any of its financial years even during the pandemic.
Currently, GS has an OVERWEIGHT investment call from analysts and its highest upside is about 20%. Hence, it could be an attractive stock to get into for the following reason:
- One of the few integrated resorts player in Singapore.
- 12th biggest company in Singapore with a market cap of SGD11.9 billion.
- Stand to benefit from Chinese tourism coming in for year 2023.
GS is valued at a PB ratio of 1.5 times and has a dividend yield of 1.0% currently.
#5 Yihai International
Hotpot. Images of rich soups and bountiful vegetables and meat come into mind. What better way to celebrate Chinese New Year than to have hotpot with your family and friends.
As a subsidiary of Haidilao (HKEX: 6862), Yihai International (HKEX: 1579) is a hotpot condiments firm involved in the production of hotpot packet soup bases and also other composite food items. Its soup bases ranges from the ever-popular spicy vegetable oil (Mala) to the more traditional mushroom and tomato.
Fun fact: the Co-founders of Yihai are actually the same as Haidilao and that explains why the branding rights are the same!
While they are set up to supply soup packs to Haidilao retail outlets, its main key advantage is that it is able to scale up and supply to other Hotpot players as well.
That is why you can even see many supermarkets like NTUC Fairprice, Giant and Sheng Siong selling these ‘Haidilao’ brand condiment packs which are actually manufactured by Yihai International.
Yihai’s revenue actually grown by 47.5% from 2019 to 2021. Meanwhile, it has also managed to maintain a healthy profit margin of 14.4% in 2021.
As it stands, Yihai has a HOLD call from most analysts and could be trending upwards due to the following factors:
- Increased demand for hotpot products from consumers in China during Chinese New Year.
- The re-opening of China’s borders could increase the influx of Chinese tourists to Hong Kong.
Yihai is currently trading at a high PE ratio of 34.3 times where its historical average is around 53.9 times, as investors are positive on the prospects of hotpot in China and around the world. Its dividend yield stands at 0.9% currently.
The upcoming Chinese New Year heralds a return to normalcy for many of us after 3 years of pandemic. Consumer demand is expected to be resilient in light of this and many companies are ready to take advantage of this trend.
Sharpen your mind, do your research and invest accordingly to increase your returns in the year of the rabbit… Huat Ah!