The Straits Times Index Adds Emperador Stock: 3 Things Investor Should Know

September 7, 2022

Investors have just learnt that global liquor producer, Emperador Inc (SGX: EMI), has been added to Singapore’s Straits Times Index (STI).

This is an exciting development in the market since we have not seen a lot of changes in the STI constituents. In addition, Emperador had only just listed in late July.

So, here are three things that investors should take note of regarding the latest STI constituent stock.

1. Emperador is the largest brandy and spirits company in the Philippines

Emperador is the largest brandy and spirits company in the Philippines with a large portfolio of globally-recognised whiskies and brandies.

The company is also listed on the Philippines Stock Exchange and its controlling shareholder is Alliance Global Group Inc, which is led by Chinese Filipino billionaire Andrew Tan.

For brandy, Emperador is the world’s top selling brandy by volume. It also owns the biggest and oldest brandy maker in Spain, Bodegas Fundador.

Meanwhile, its whisky portfolio comprises of Dalmore, Jura and Tamnavulin, which are among the top 20 single malts globally.

Emperador also owns the fifth-biggest scotch whisky maker in Scotland, Whyte & Mackay.

Source: Emperador Inc’s Investor Update (June 2022)

2. Inclusion into STI will add liquidity and institutional interest

STI is the largest index focused on Singapore stocks and it tracks the performance of the top 30 companies listed on the Singapore Exchange.

The key metrics taken into consideration to assess the inclusion of a stock into the STI are:

  • Market capitalisation
  • Free float
  • Trading liquidity

There are various Exchange-Traded Funds (ETFs) that track the movements of the index, such as the SPDR Straits Times Index ETF (SGX: ES3) and Nikko AM Singapore STI ETF (SGX: G3B).

Both ETFs have assets under management (AUM) of S$1.6 billion and S$613 million, respectively.

The inclusion of Emperador in STI will take effect on 19 September 2022. We should see an adjustment made by these ETF funds, which should reflect fund inflows into Emperador.

This will boost liquidity and interest in Emperador among other institutional investors as well.

3. Emperador’s “CPI” growth strategy

Source: Emperador Inc’s Investor Update (June 2022)

Emperador has a growth strategy in place, dubbed as the “CPI”, which stands for Contemporise, Premiumise and Internationalise.

Under the premiumisation strategy, Emperador is rolling out its strategy targeting both the US and China markets.

The Group also targets to expand its business to the international market with 50% sales and profit targeted to come from outside its home market of the Philippines by 2025.

Would I buy Emperador?

While I see a surge of interest in Emperador shares in the near term, the broad bear market sentiment could dampen the performance over the short term.

Personally, I would add Emperador into my portfolio given the resilience of the alcohol beverage business even during a recessionary period.

However, investing in alcohol stocks may not be as straightforward as grabbing a glass of your favourite whisky.

In fact, I think the likes of Diageo PLC (LSE: DGE) could be a better alternative for investors looking to add an alcoholic beverage company to their portfolio.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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