So far in 2022 (as of 9 December 2022), the top 20 stocks with the highest net institutional inflows have a combined net buying of S$3.6 billion.
That has averaged a 35% total return for the past 49 weeks.
This is impressive considering the FTSE Asia Pacific Index’s decline of 16% in total return as well as the Straits Times Index’s 8% total return over that period.
Among the top 20 stocks, five of them are industrials stocks.
I believe it is important for retail investors to take a look at some of the industrial stocks in Singapore that have attracted the interest of institutional investors as we enter the final weeks of 2022 and prepare for 2023.
Here are the five industrials stocks with highest year-to-date (YTD) net institutional inflow.
1. Keppel Corp
Singapore’s conglomerate, Keppel Corporation Ltd (SGX: BN4), which is involved in various businesses including property, infrastructure and asset management, has the highest net institutional inflow during this period with a figure of S$389.5 million.
Keppel Corp’s Offshore & Marine (O&M) division is currently in the midst of a takeover by Sembcorp Marine Ltd (SGX: S51).
The interest in Keppel Corp is not a surprise given its strong earnings during the first nine months of 2022 (9M 2022) where revenue grew by 24%.
Following the launch of Keppel’s asset monetisation program, the Group has achieved close to S$4.4 billion and is expected to surpass the target of S$5.0 billion by the end of 2023.
Given the strong performance and net institutional inflow, Keppel Corp’s YTD total return stood at an impressive 54%.
2. Sembcorp Marine
The second largest institutional inflow in the industrials sector goes to Sembcorp Marine, a one-stop engineering solutions for the offshore, marine and energy industries.
With a net institution inflow of S$212 million, Sembcorp’s YTD total return is at 73%.
Sembcorp focuses on key capabilities such as rigs & floaters, repairs & upgrades, offshore platforms and specialised shipbuilding.
Sembcorp proposed combination with Keppel O&M via a direct acquisition with improved terms.
That has been a positive development as a recent EGM held by Keppel saw the majority of the shareholders in agreement with the proposal.
Sembcorp has had a busy year with 21 projects under execution while 12 projects are scheduled for completion and delivery, including procurement of the largest Engineering, Procurement and Construction (EPC) contract (P-82-FPSO) worth S$44.3 billion.
The Group has seen improvement in its order visibility, underpinned by high energy prices, concerns around energy security and increased demand in the energy transition towards renewables.
Currently, green energy accounts for around 34% of Sembcorp’s net book order.
3. SIA
The Singapore’s flagship carrier, Singapore Airlines Ltd (SGX: C6L), or simply known as SIA, has benefitted from the reopening of international borders and recorded its highest half year and quarterly operating profit in history.
Passenger numbers carried by SIA and Scoot rose 13 times from a year ago with passenger capacity reaching an average of 68% of pre-pandemic levels during the September quarter.
In November, SIA and Tata Sons agreed to merge Air India and Vistara with SIA investing S$360 million in Air India as part of the transaction.
The merger is expected to be completed by March 2024 and SIA will hold a 25.1% stake in an enlarged Air India Group.
The strong recovery in SIA has attracted institutional investors as net institutional inflows stood at S$97.6 million so far this year.
As a result of this, its total return YTD of 12% also outperformed the benchmark index, STI.
4. YZJ Shipbuilding
Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6), or more commonly known as YZJ Shipbuilding, is a Chinese shipbuilder with a secondary business comprising shipping leasing, trade logistics and real estate.
YZJ Shipbuilding has seen strong interest from institutional investors in 2022 with net institutional inflow reaching S$94.9 million.
This is in line with the strong financial performance of the Group with a 70% year-on-year (yoy) increase in revenue during the first half of 2022 to RMB9.7 billion, backed by higher contributions from all segments.
The orderbook stood at 143 vessels, which is worth US$10.3 billion in contract value as of November 2022. These orderbooks are slated for deliveries from now until 2026.
YTD, YZJ Shipbuilding’s total return is the highest among the five industrials stocks mentioned here at 106%.
5. Samudera Shipping
Another shipping services company that has emerged on to institutional investors’ radar is Samudera Shipping Line Ltd (SGX: S56).
YTD, there has been a net institutional inflow of S$24.3 million and the Group’s total return over this time period is at 93%.
Samudera Shipping owns and operates ocean-going ships and provide containerised feeder shipping services.
The Group recorded a strong improvement in its revenue and earnings during the 9M 2022, backed by higher container volume handled and freight rates.
Following a 127.8% yoy growth in revenue for 1H22 the group expects FY22 results to outperform FY21 significantly.
Strong performers in 2022 not guaranteed winners in 2023
It is interesting to see how these strong performers in 2022 were driven by the net institutional inflows.
However, retail investors need to be cautious as winners in 2022 could be laggards in 2023.
I believe it is important for investors to have an overview of the market performance in 2022 as we move into a new year.
By looking at the interests of institutional investors, this will help to give an overview of the market expects.
Investors need to continue to focus on the fundamentals of the business, the economic cycle that we’re in as well as the latest developments that are affecting these companies.
It will be interesting to see if the offshore players can continue to outperform in 2023 as energy prices normalise.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
