Singapore’s stock market is traditionally known for being home to a wide range of dividend-paying, or “yield”, stocks.
That’s because the city state’s companies tend to be more mature. Therefore, they grow revenue at a slower rate than high-growth companies (which are most often seen in the technology sector).
However, that doesn’t mean Singapore is completely devoid of growth options for investors. Some growth-oriented stocks have recently been listing on the Singapore Stock Exchange (SGX).
Here’s one company that listed on the SGX last year that is catching investors’ attention after it posted an impressive revenue increase of over 50% year-on-year in 2020.
Building future tech
That company is Nanofilm Technologies International Ltd (SGX: MZH), an advanced materials and nanotechnology products specialist that counts the consumer electronics, communications and auto industries as clients.
Nanofilm has production facilities in Singapore, as well as China, Japan and Vietnam. The company actually has its origins in academia, having being founded in 1999 as a tech spin-off from Nanyang Technological University (NTU).
Nanofilm has three main divisions; Advanced Materials, Nano Fabrication and Industrial Equipment. For example, much of its proprietary know-how is utilised in products such as optical sensors for cars, solar panels, and tablet computers.
These are all exciting, long-term industries with large total addressable markets (TAMs) relative to Nanofilm’s current revenues.
On a revenue and profit basis, its Advanced Materials division is by far the largest, having contributed nearly 83% of overall revenue in 2020.
Sticking with its first earnings release as a public company, Nanofilm expanded revenue in 2020 by 53% year-on-year to S$218 million.
Starting off strong
After having gone public in October of 2020 at a price of S$2.59 per share, Nanofilm shares are now trading at around S$4.63 a pop – up more than 75% from its listing price.
Its earnings results were impressive given the lack of innovative, fast-growing companies that are available to investors on Singapore’s stock market.
Although its Industrial Equipment division saw revenue fall slightly, this was more than made up for by its other two business units.
This was driven by increased adjusted EBITDA and margins, or in other words its profit as well as profit margins (see below).
Source: Nanofilm Technologies 2020 earnings presentation
Set up well for future growth
Nanofilm isn’t standing still, either. The company is investing heavily in future growth opportunities, as it raised it spent S$79 million on capital expenditure in 2020 – up nearly 70% from 2019’s figure.
With a solid net cash position of S$185 million and positive operating cash flow of S$97 million, Nanofilm seeks to tap opportunities in an advanced materials market that’s estimated to be worth US$24.3 billion by 2023.
One thing to be aware of, though, is customer concentration risk. In its IPO prospectus, Nanofilm revealed that its largest end customer accounted for 56.5% of its revenue in 2019.
Although this percentage may have fallen in 2020, it’s one area to monitor for Nanofilm in future.
Overall, the company is one example of an exciting, fast-growing stock in Singapore’s market and I think it’s definitely worth looking into if long-term investors want growth exposure in the local stock market.
Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.
