SingFinance&rsquo s 2HFY2025 net profit rose 2% year-on-year to $20.6 million, driven by lower financing costs despite a decrease in interest income and an increase in provisions. The company plans to pay a higher dividend of 7.5 cents per share and maintains a cautious outlook for 2026.

 

Nirguan Tiruchelvam of Aletheia Capital has identified a handful of Singapore Exchange-listed stocks that he believes are &ldquo deeply undervalued opportunities&rdquo .

 

To do so, he has applied three valuation metrics to assess balance sheet strength: net cash to market capitalisation, new working capital to market cap and net-net working capital to market cap.

 

He writes in an Aug 28 note: &ldquo We identify Sing Investments & Finance (SIF), Advanced Holdings (ADV) and Koyo International as compelling opportunities among the deep-value players. ADV and Koyo International appear in at least two out of the three deep-value metrics. SIF could benefit from the rise of digital finance.&rdquo

 

Market cap to net cash

Tiruchelvam&rsquo s first rubric is to assess a company&rsquo s market cap to net cash. Should a company&rsquo s net cash exceed its market cap, Tiruchelvam writes that this implies investors are &ldquo effectively paying nothing&rdquo , or even receiving a discount for the core business.

 

He writes: &ldquo A stock trading below its net cash value is similar to buying cash at a discount. The rest of the business is thrown in for free. This offers an exceptional margin of safety.&rdquo

 

An example that &ldquo stands out sharply&rdquo among small-caps is SIF, due to what Tiruchelvam calls its &ldquo extraordinary&rdquo balance sheet strength.

 

The company, with its net cash of around $2.9 billion against a market cap of around $286 million as at Aug 28, implies a market cap to net cash of just 0.1 times versus peers&rsquo 0.5 to 0.9 times.

 

He adds: &ldquo This means investors are effectively paying only a fraction of its cash holdings, with the operating business valued at near-zero by the market. Relative to other cash-rich peers trading closer to 0.5 to 0.9 times, SIF&rsquo s valuation gap highlights a deep disconnect that could present a compelling re-rating opportunity.&rdquo

 

This possibility, Tiruchelvam notes, could come once the market begins to ascribe any value to SIF&rsquo s underlying business beyond cash.

 

On the other hand, consumer health company Cordlife Group has a net cash ratio of 0.95 times, with its $58 million net cash almost equal to its market cap of $55 million.

 

Tiruchelvam notes that Cordlife thus &ldquo ranks near the top&rdquo of peers like Trek 2000 and CFM Holdings, suggesting the market is valuing the business close to its cash pile.

 

&ldquo This may signal undervaluation if operations are stable or improve. These companies are, by any classic definition, net cash bargains. If their businesses are wound down tomorrow, shareholders could plausibly recover more than the current share price,&rdquo writes the analyst.

 

Despite this, he adds that investors &ldquo should be wary of traps&rdquo , as certain deep cash discounts are a result of legacy issues. These include litigation, poor capital allocation or management entrenchment.

 

Cordlife has been embroiled in a years-long scandal over its mishandling of cord blood units, forcing the Mainboard-listed company to pay out refunds to its customers.

 

Tiruchelvam notes that it is therefore &ldquo essential to go beyond the numbers&rdquo and assess the quality of cash, management intentions and potential catalysts.

 

Market cap to net working capital

Tiruchelvam&rsquo s second valuation method is to determine whether a company&rsquo s net working capital, which includes receivables and inventories, exceeds its market capitalisation.

 

&ldquo This suggests that even in the event of liquidation, the shareholders could recover well above current prices from short-term assets alone,&rdquo he writes.

 

He sees that several listed small- to mid-caps trade at market cap to net working capital ratios of 0.63 to 0.91 times, implying strong balance sheet support and meaningful downside protection. These include Baker Technology, Cordlife Group, Gallant Venture, Koyo International, Sing Holdings and AP Oil International.

 

Although Tiruchelvam notes that these firms would deliver value even if liquidated at book value, thus offering investors both safety and upside optionality, &ldquo caution is warranted&rdquo .

 

Excessive inventories or weak receivables, he adds, could reduce the quality of net working capital and limit actual cash conversion.

 

Market capitalisation to net-net

The analyst&rsquo s third metric, market capitalisation to net-net, is &ldquo one of the strictest measures&rdquo of value, which entails current assets minus total liabilities.

 

Tiruchelvam notes that this method assumes fixed assets and intangibles are worthless and focuses only on current assets net of all liabilities.

 

He writes: &ldquo Companies trading at or below this level are considered deeply undervalued. There are potential liquidation gains even in worst-case scenarios.&rdquo

 

In this space, he once again identifies Sing Holdings, AP Oil International and Koyo International, as a large share of their market caps is backed by liquid assets after liabilities. This offers strong balance sheet resilience and margin of safety.

 

Tiruchelvam writes: &ldquo These elevated ratios suggest ample liquidity and a strong margin of safety. It positions itself for potential re-rating as markets begin valuing underlying business fundamentals beyond liquid assets.&rdquo

 

&ldquo By contrast, firms with ratios above 1.0 trade below their net-net value may carry hidden risks from long-term liabilities,&rdquo he adds.

 

Other ways of realising value

Beyond pure metrics, Tiruchelvam also sees that recognising stocks for their &ldquo intrinsic worth&rdquo could come about from a &ldquo contrarian or asymmetrical approach&rdquo by investors. This could include factors such as a company&rsquo s corporate actions, sector recoveries and balance sheet monetisation.

 

One of the most consistent avenues for unlocking value has been through corporate actions, he adds.

 

Privatisations are a recurring feature of the Singapore market, particularly among family-controlled or state-linked firms, says Tiruchelvam.

 

He cites the privatisation of shipping and logistics provider Goodpack by the US-listed private equity firm KKR & Co in 2014 at an enterprise value (EV) to earnings before interests, taxes, depreciation and amortisation (ebitda) ratio of about 12 times an example of &ldquo crystallising value for shareholders&rdquo who had &ldquo endured years&rdquo of undervaluation.

 

&ldquo Similarly, Singapore Press Holdings (SPH) underwent a high-profile restructuring in 2021, spinning off its media assets before being taken private by the Cuscaden Peak consortium,&rdquo adds Tiruchelvam.

 

The unlocking of assets can also act as a catalyst. He notes that Boustead Singapore, which has historically traded at a &ldquo steep&rdquo discount to its net asset value (NAV), successfully spun off Boustead Projects in 2015, thus &ldquo allowing the market to assign a clearer valuation&rdquo to its industrial real estate portfolio.

 

He adds: &ldquo Shareholder returns can also be boosted through buybacks and special dividends, as demonstrated by UOL Group, which bought back stock in 2020 when it was trading at approximately 0.6 times book value, helping to narrow the discount.&rdquo

 

Recoveries

Another way to value realisation arises can come from sectoral recoveries and cyclical upturns.

 

&ldquo Depressed cyclicals on SGX have often rerated sharply when industry conditions improved. Yangzijiang Shipbuilding illustrates this dynamic. The company traded at less than five times earnings in 2019 to 2020, only to more than double in value as the global shipbuilding cycle turned upwards,&rdquo writes Tiruchelvam.

 

Another example is Keppel Corporation, &ldquo long burdened&rdquo by its exposure to the offshore and marine sector, has since benefited from restructuring efforts and the rebound in oil services.

 

Policy tailwinds can provide an additional catalyst, with the analyst citing public works contractors OKP Holdings with its order book expansion and share price support during the 2016 to 2019 surge in infrastructure spending by the Land Transport Authority as a beneficiary.

 

Of course, the strength of a company&rsquo s balance sheet is another &ldquo vital lever&rdquo for value unlocking, with Tiruchelvam noting that many deep value companies on SGX possess &ldquo hidden asset bases&rdquo that are not adequately reflected in market valuations.

 

According to him, real estate player Ho Bee Land is one such company, trading at around 0.4 times book value. The company owns a high-quality portfolio of London office assets that &ldquo could be monetised&rdquo to close the gap with NAV, he adds.

 

Tiruchelvam writes: &ldquo Hwa Hong Corporation followed a similar trajectory. It was long neglected by the market despite trading at a steep discount to its assets. It was eventually privatised in 2022 at a premium.&rdquo

 

At the same time, companies with large net cash balances also offer downside protection while providing optionality for future growth or capital return. Technology players Frencken Group and Valuetronics fit this profile, as both traded close to or below net cash levels during the Covid-19 downturn, offering investors &ldquo asymmetric upside&rdquo as operations normalised.

 

Improved governance and market recognition have also served as catalysts for certain stocks.

 

Enhancements in corporate disclosure, transparency and alignment with minority shareholders can lead to increased institutional interest, notes Tiruchelvam.

 

He writes: &ldquo Yangzijiang Financial&rsquo s spin-off in 2022, which separated its investment management arm from its core shipbuilding operations, exemplifies how structural changes can strengthen governance and unlock value.&rdquo

 

Finally, index inclusion provides another avenue for re-rating, with the analyst noting that Frasers Logistics & Commercial Trust (FLCT) enjoyed greater liquidity and valuation support following its entry into the FTSE Straits Times All-Share Index, a market capitalisation weighted index that tracks the performance of companies listed on SGX that are within the top 98% by market capitalisation.

No dividend has been declared for the six-month period

 

[SINGAPORE] Mainboard-listed Sing Investments & Finance (SingFinance) : S35 +4.8% on Tuesday (Aug 5) posted net profit of S$21.7 million for its first half ended June, a 35 per cent increase from S$16.1 million in the year-ago period. 

 

Earnings per share for the period stood at S$0.1835, compared to S$0.1361 in H1 2024. 

 

Revenue dipped marginally by 1 per cent to S$73.1 million from S$73.7 million previously. 

 

No dividend was declared for the six-month period. 

 

Net interest income and hiring charges climbed 17 per cent to S$35.6 million from S$30.4 million, on the back of a 23 basis points expansion in net interest margin, which rose to 2.15 per cent from 1.92 per cent previously. 

 

Non-interest income rose 53 per cent on the year to S$5.2 million from S$3.4 million. This was driven by higher contributions from its fees and commissions as well as rental segments, which clocked 107 per cent and 16 per cent of income growth, respectively. 

 

The lender&rsquo s non-performing loans ratio stood at 0.2 per cent, down from 0.3 per cent in the same period the previous year. 

 

SingFinance highlighted that growth is likely to ease in the second half of the year as trade flows normalise in the wake of the front-loading spike in trade activity during H1, when businesses rushed orders ahead of expected tariffs. 

 

Noting that interest rates have declined as inflation continues to ease, the lender said it will continue to seek opportunities to grow its business while managing risk exposures. 

Net interest income rises 27% year on year to S$34.2 million

 

SING Investments & Finance (SingFinance) posted a 21 per cent increase in net profit to S$20.3 million for the half-year ended Dec 31, 2024, from S$16.8 million in the corresponding period a year ago. This comes as the lender&rsquo s revenue edged 3 per cent higher year on year to S$77.1 million, from S$74.7 million.

 

SingFinance&rsquo s board recommended a final dividend of S$0.065 per share for shareholders&rsquo approval at the company&rsquo s next annual general meeting, up from a final dividend of S$0.06 per share that was declared in the year-ago period.

 

Net interest income and hiring charges for the half-year rose 27 per cent year on year to S$34.2 million, due to loan growth and an expansion in net interest margin. Net interest margin was up 41 basis points at 2.06 per cent for the half-year, from 1.65 per cent in the previous corresponding period. Non-interest income for the period recorded a 25 per cent year-on-year rise to S$3.9 million, on a 68 per cent increase in fees and commissions to S$1.9 million. The lender&rsquo s non-performing loans ratio came in at 0.2 per cent, down from 0.4 per cent in the year-ago period.

 

In its earnings release on Thursday (Feb 20), SingFinance noted that central banks in several major economies have begun cutting policy rates as inflation nears their set targets. &ldquo However, uncertainties persist on the timing and extent of declines in inflation and interest rates, due mainly to potential policy changes from the newly elected government administrations and their effects on tariffs and international trade.&rdquo

 

SingFinance said that it continues to see growth opportunities in Singapore, even as significant challenges and uncertainties for both the local and global economies remain.

As at June 30, the group&rsquo s capital adequacy ratio stood at 15.9%, down from 17.0% as at Dec 31, 2021. Photo: Stock image

 

Sing Investments & Finance has reported earnings of $19.7 million for the 1HFY2022 ended June, 7.3% higher than earnings of $18.3 million in the corresponding period the year before.

 

During the six-month period, interest income and hiring charges increased by 6.9% y-o-y to $39.7 million.

 

Interest expense fell by 20.9% y-o-y to $6.2 million.

 

Net interest income increased by 14.4% y-o-y to $33.5 million due to interest in suspense write-back from a final settlement of credit exposures to a corporate customer.

 

Net interest margin (NIM) increased by 0.34 percentage points y-o-y to 2.49%.

 

See also: KORE reports 1HFY2022 DPU of 3.02 US cents, down 4.4%

 

Excluding the write-back, Sing Investments & Finance&rsquo s NIM would have stood at 2.1%, 0.05 percentage points lower y-o-y, as the loan yield declined while the group continued to adapt to market competition.

 

During the 1HFY2022, non-interest income fell by 33.2% y-o-y to $2.3 million.

 

Total income stood 9.4% higher y-o-y at $35.8 million.

 

For the period, earnings per share (EPS) stood at 24.98 cents on a basic and diluted basis.

 

As at June 30, the group&rsquo s capital adequacy ratio stood at 15.9%, down from 17.0% as at Dec 31, 2021.

 

Cash and cash equivalents stood at $185.9 million.

 

On June 25, Sing Investments & Finance (SIF) managing director and chief executive officer Lee Sze Leong acquired 16,500 shares of the company for a consideration of S$23,925.

 

At S$1.45 per share, this increased his total interest in the licensed finance company, from 30.41 per cent to 30.42 per cent.

 

Mr Lee has served as director of SIF since February 1989 and was appointed to his current role in January 1997.

 

He also serves as the non-executive chairman of Sing Holdings.

 

Back on April 22, SIF reported a net profit after tax of S$8.0 million for its Q1FY21 (ended March 31), an improvement of 94.3 per cent compared to the same period last year, primarily attributed to lower funding costs, a decrease in operating expenses as well as write back of loan allowances.