A key tenet in investing is to monitor the underlying businesses of the stocks that you own.
The health of the business enables you to determine if the stock will do well as the share price eventually follows the growth of the business.
Hence, a useful metric to look at is the company’s growth in profits and whether it is generating positive free cash flow.
Higher profits make a business more valuable while copious amounts of free cash flow enable it to pay out consistent dividends.
Here are three Singapore companies that recently reported higher year-on-year profits and this trio of stocks could be perfect for your buy watchlist.
Sheng Siong (SGX: OV8)
Sheng Siong is one of the largest supermarket chains in Singapore and operates a chain of 74 outlets across the island.
The group provides a wide array of products including live and chilled produce, daily necessities, and essential household products.
For the third quarter of 2024 (3Q 2024), revenue rose 5% year on year to S$363.2 million.
Gross profit improved by 8.4% year on year as gross margin inched up to 31.3% for the quarter from 30.3% in the previous corresponding period.
Net profit stood at S$12.4 million for 3Q 2024, up 12.4% year on year.
Sheng Siong also posted a healthy financial performance for the first nine months of 2024 (9M 2024).
Revenue increased by 4% year on year to S$1.1 billion while net profit climbed 8.7% year on year to S$109.1 million.
Free cash flow generation was healthy at S$141.3 million for 9M 2024, nearly 13% higher than the previous year.
The retailer opened a total of four new stores in 9M 2024 and aims to open at least three new stores per year.
One new store at Bishan was opened in October 2024, bringing the total number of new stores opened year-to-date to five.
For 9M 2024, HDB released a total of 17 shops for tender of which Sheng Siong was awarded four with four pending outcomes.
The group acquired Jelita Property last month and plans to open a new store at Toa Payoh before the end of this year.
There is also one more HDB tender to be put up in 4Q 2024.
Micro-Mechanics (Holdings) Ltd (SGX: 5DD)
Micro-Mechanics (Holdings), or MMH, manufactures high-precision tools and parts for the wafer fabrication and assembly processes of the semiconductor industry.
The group owns five operating facilities in Singapore, Malaysia, China, the Philippines, and the US.
MMH released a strong set of earnings for the first quarter of fiscal 2025 (1Q FY2025) ending 30 September 2024.
Revenue inched up 2.5% year on year to S$16.2 million while gross profit increased by 6.5% year on year to S$8.2 million.
Net profit improved by 14% year on year to S$3.1 million.
The business also generated a positive free cash flow of S$3.2 million for the quarter.
In the second half of fiscal 2024, MMH completed a restructuring program for its US subsidiary and implemented cost optimisation initiatives.
As a result, the group’s wafer fabrication equipment (WFE) division logged a profit before tax of S$213,000 for 1Q FY2025, reversing a net loss the previous year.
Management believes that the global semiconductor industry is in the advanced stages of inventory rebalancing and should continue to recover.
The World Semiconductor Trade Statistics (WSTS) forecasts that global semiconductor sales will grow by 12.5% in 2025 to reach US$687 billion.
This projection bodes well for MMH’s business but management warns that the health of the global semiconductor sector may not correlate exactly with the group’s fortunes.
Japfa Ltd (SGX: UD2)
Japfa is a vertically-integrated agri-food company that produces feed for poultry, swine, and aquaculture.
Its operations include upstream (feed and breeding), midstream (fattening), and downstream (distribution).
For 9M 2024, the group saw a significant improvement in its financial results.
Revenue edged up 3.7% year on year to US$3.4 billion.
Operating profit more than doubled year on year to US$293 million while net profit came in at US$87.5 million, reversing the net loss of US$22.7 million a year ago.
The better performance was due to steady feed margins across Japfa’s key markets, higher swine volumes and prices, and lower production costs in poultry and swine operations in Vietnam.
In line with the better performance, an interim dividend of S$0.01 was declared.
Management will continue to strengthen its downstream business through the development of its poultry processing and consumer products businesses.
Japfa has also made pertinent investments to set up a strong base as it believes in the long-term growth in protein consumption.
The group established a robust swine breeding pyramid with its farms and genetic programs and also built a new slaughterhouse in 2022 in line with its downstream strategy.
Average GDP per capita growth is projected at 7.6% for emerging Asian markets, providing ample room for further growth in the business.
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Disclosure: Royston Yang owns shares of Micro-Mechanics.
