There’s always a silver lining, even during Phase 2.
Investors would do well to remember this as they navigate the current investing landscape to look for resilient companies.
This is not the first time Phase 2 has happened.
Last year, some businesses bucked the trend and reported significant higher net profits.
Of course, the caveat here is that you should assess if these earnings are sustainable or just a one-off occurrence.
That’s why it’s important to look at a company’s competitive moat, a concept popularized by investment guru Warren Buffett.
When a business possesses a unique competitive advantage, investors can feel more certain that it will be able to continue reporting healthy numbers.
Here are three companies that posted a significant year on year rise in net profit.
iFAST Corporation Limited (SGX: AIY)
iFAST is a financial technology company that owns and operates a platform for clients to purchase a variety of securities such as unit trusts, shares and bonds.
The group enjoyed a surge in net inflows of client assets of S$1.3 billion in the first quarter of 2021 (1Q2021), which pushed its assets under administration (AUA) to a record high of S$16.11 billion.
Net revenue jumped by 51.4% year on year to S$28.5 million while operating profit more than doubled year on year to S$10.3 million.
Net profit after tax soared by 142.5% year on year to S$8.8 million.
The strong set of results led the group to raise its interim dividend from S$0.0075 to S$0.01.
iFAST attributes the good performance to its strong integrated wealth management platform.
The group is focused on growing its AUA further and recently acquired a fund management business from DWS Singapore Investments Limited.
This transaction involved the transfer of seven authorised retail funds for around S$3 million.
The assets under management for these mutual funds amounted to approximately S$600 million, and iFAST believes this partnership with DWS can help to lower costs and offer greater accessibility to its clients.
Wilmar International Limited (SGX: F34)
Wilmar is a leading blue-chip agribusiness group with an integrated business model that encompasses the entire commodities value chain.
The group has over 500 manufacturing plants and an extensive distribution network spanning China, India and 50 other countries and regions.
For its 1Q2021 business update, the commodities giant reported a 30.6% year on year jump in revenue to US$14.3 billion, with all core divisions reporting higher year on year growth.
China, a key market for Wilmar, has demonstrated a strong recovery from the lockdowns of the prior year, resulting in healthy demand for food products from food processing industries.
Net profit doubled year on year to US$450 million, though this was due to a reversal of losses on hedging derivatives recorded in the fourth quarter of 2020.
Core net profit grew 38.3% year on year to US$423.7 million, still a respectable result.
Higher palm oil and sugar prices are expected to benefit the group’s oil palm plantation and sugar milling divisions, respectively.
Propnex Ltd (SGX: OYY)
Propnex is Singapore largest listed real estate agency with 9,.373 salespersons as of 3 May 2021.
The group provides a variety of real estate services such as property brokering, training and property management.
For 1Q2021, the group reported a 63.3% year on year jump in revenue to S$220.6 million, driven by increased transaction volume.
The Urban Redevelopment Authority recently reported that private home prices in Singapore had risen for a fourth straight quarter, inching up 2.9% for the first three months of 2021.
Disruptions caused by the pandemic have also helped to boost rents for both private and public housing.
Low vacancy rates and a restricted supply of newly completed homes due to labour constraints have worked to support rental rates as foreigners extend their stay due to the inability to travel.
Amid this backdrop, Propnex reported a near doubling of its net profit to S$16.2 million compared to a year ago.
Free cash flow also improved for 1Q2021 at close to S$13 million compared to S$8.7 million a year ago.
The low interest rate environment and optimism over the pending recovery should sustain home sales and prop up the group’s revenue and net profit.
However, with the continued rise in property prices, investors should be mindful that the government could step in with cooling measures to prevent prices from rising too quickly.
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Disclaimer: Royston Yang owns shares of iFAST Corporation Limited.