Conglomerates are so-named because they comprise many different divisions that are not linked to one another.
Investors may find such corporate structures unwieldy and tough to analyse.
There is some truth to this as it can be complex and time-consuming to peel back the layers to get a better understanding of a conglomerate’s operations.
Despite this difficulty, there are obvious merits to owning conglomerates.
The first is that you can immediately gain access to different industries without separately investing your money in different stocks.
Such a move helps you to instantly diversify your portfolio without spreading your money among a smattering of different stocks.
Conglomerates are also much more resilient during downturns as their different divisions can help to cushion the impact of a slowdown.
The good news is that conglomerates also pay out a dependable dividend to boot.
Here are three Singapore conglomerates that can buffer your portfolio during a recession and provide a steady stream of passive income.
Boustead Singapore Limited (SGX: F9D)
Boustead Singapore, or BSL, was established in 1828 and is a global infrastructure-related engineering and technology group.
The group has four distinct divisions – energy engineering, real estate, geospatial technology, and healthcare, within the fold.
BSL reported a resilient performance for its fiscal 2023 (FY2023) ending 31 March 2023.
Revenue dipped by 11% year on year to S$561.6 million while core net profit (excluding one-off and exceptional items) slid by 3% year on year to S$31.5 million.
Both the energy engineering and real estate divisions saw revenue decline year on year for FY2023 as these industries were still hobbled by the pandemic at the beginning of the fiscal year.
On a brighter note, the real estate division reported a sharp 92% year-on-year jump in profit before tax with the losses at its Healthcare division shrinking by 78% year on year.
BSL also generated a free cash flow of S$74 million, 44.5% higher year-on-year compared with the S$51.2 million a year ago.
The group has proposed a final dividend of S$0.025, taking the FY2023 dividend to S$0.04, similar to the year before.
The same core S$0.04 was also paid out in FY2021, and this was even higher than the S$0.03 paid for FY2020, demonstrating the consistency of the group’s total dividend.
BSL’s project order backlog has been boosted to S$556 million, more than double the S$274 million disclosed at the end of FY2022.
Haw Par Corporation Limited (SGX: H02)
Haw Par has been listed on the Singapore Exchange since 1969 and recently celebrated its 50th anniversary in 2019.
The conglomerate has four core divisions – healthcare (represented by Tiger Balm’s range of analgesic balms and ointments), leisure, property, and investments.
Haw Par saw a recovery in 2022 as revenue jumped 29% year on year to S$182.1 million.
Net profit jumped 34.7% year on year to S$148.3 million.
Its core healthcare division saw a 31.8% year-on-year improvement in revenue as economies reopened and more sporting events were held worldwide.
Segment profit for the division soared 88.5% year on year to S$40.2 million, lifting the segment’s profit margin from 17.1% to 24.5%.
Operating cash flow for the group more than doubled year-on-year from S$18.8 million to S$40.9 million, with free cash flow for 2022 coming in at S$21.2 million.
A total dividend of S$0.30 was paid out for 2022, similar to what was paid in 2021.
Haw Par also paid out the same level of dividends for 2020 and 2019, showcasing its reliability in maintaining its dividend despite tough economic conditions.
Straits Trading Company Ltd (SGX: S20)
Straits Trading Company, or STC, was incorporated in 1887 and is a conglomerate with operating and financial interests in resources, property, and hospitality.
This includes a 52% stake in tin producer Malaysia Smelting Corporation Berhad (SGX: NPW), as well as various stakes in property investment and development companies.
Total revenue for 2022 increased by 33% year on year to S$527.6 million.
Net profit for STC more than doubled year-on-year from S$234.3 million to S$551.3 million.
The group has maintained its interim dividend of S$0.08, similar to a year ago.
For 2021, the group had also declared a distribution-in-specie worth around S$0.50, taking the total dividend to S$0.58 per share by value.
This interim dividend of S$0.08 for 2021 was also an increase from the S$0.06 paid out in 2020.
The conglomerate has also generated consistent free cash flow over the years.
2022’s free cash flow of S$59 million was a 65.1% year-on-year improvement over 2021’s S$35.8 million.
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Disclosure: Royston Yang owns shares of Boustead Singapore.