Everyone should invest, at least to beat the money-eroding monster called inflation. You see, putting cash in the bank gives next-to-nothing returns. With inflation added to the fray, our hard-earned money is getting “eaten” day-by-day.
To start investing, investors can look into buying an exchange-traded fund (ETF), which simply tracks the fundamentals of a stock index. One such ETF in the territory is the Tracker Fund of Hong Kong (SEHK: 2800), as detailed here.
However, if the new investor wants to go one step further and get market-beating returns, he or she can consider picking individual shares in stock markets. Here, let’s look at two shares listed in a country not too far away from Hong Kong – that is Singapore.
Company #1: Singapore Exchange Limited
Singapore Exchange Limited (SGX: S68), or SGX for short, is the only stock market operator in Singapore, and it provides listing, trading, clearing, settlement, depository and data services. If you want to buy any stock in the country, you have to go through SGX.
In my opinion, it would be near-impossible for anyone to try to penetrate SGX’s stronghold. This characteristic gives the company a wide economic moat. A similar business in Hong Kong would be Hong Kong Exchanges and Clearing Limited (SEHK: 388).
Due to its position, SGX has an enviable net profit margin and return on equity (ROE). For its financial year ended 30 June 2019, it posted a net profit margin of 42.4% and an ROE of 35.8%. Both figures are higher than what most companies in Singapore’s stock market can achieve.
Company #2: SATS Ltd
SATS Ltd (SGX: S58) provides food solutions and gateway services solutions, mainly to the aviation industry. The food solutions segment provides in-flight catering, institutional catering, and the likes. Meanwhile, the gateway services division offers ground and cargo handling, passenger and security services, and baggage handling services, among others.
SATS has a dominant market share in in-flight catering and ground-handling services at Singapore’s Changi Airport. It also has a strong network of joint ventures and strategic alliances in Asia and beyond.
Just like SGX, SATS has a respectable net profit margin and ROE. For its fiscal year ended 31 March 2019, the company’s net profit margin was 14% while its ROE stood at 15.1%. Though not as high as SGX, the figures are still decent.
There’s potential for the figures to rise further in the future.
First, there’s the expansion of Singapore’s Changi Airport, which is expected to open Terminal 5 around 2030. Secondly, the rising middle class in Asia also provides strong tailwinds for its overall business.
And finally, SATS will be pumping S$1 billion into investments over the next three years to take advantage of the growth opportunities found in the region.