The technology sector has been one of the strongest segments in the global stock market this year.
This performance is unsurprising considering the pandemic has decimated brick-and-mortar retail and wreaked havoc on businesses with physical assets and presence.
If we apply Darwinian logic to the situation, only the strongest businesses that can adapt will survive.
This shift towards technology and digitalisation should continue gaining ground as the virus is poised to permanently alter human habits and behaviour.
These shifts, together with existing trends such as artificial intelligence (AI) and the Internet of Things (IoT), are leading to a boom for technology and electronics companies.
SGX has provided a list of technology stocks that have seen increased trading volumes and interest this year.
Here are three such stocks that have performed admirably this year.
Venture Corporation Ltd (SGX: V03)
Venture Corporation is a global provider of technology solutions, products and services.
The group comprises more than 30 companies and employs over 12,000 people worldwide.
Its shares have risen by 21.3% year to date, outperforming the Straits Times Index (SGX: ^STI)’s decline of 21% over the same period.
Venture reported a downbeat set of earnings for the first half of 2020, mainly due to disruptions to global supply chains and factory lockdowns in Malaysia, Spain, US and China.
Revenue declined by 25.5% year on year to S$1.37 billion, while net profit slumped by 28.1% year on year to S$130.6 million.
The COVID-19 pandemic has delayed orders from customers operating in non-essential sectors, causing the group to defer revenue recognition to later quarters.
Despite this temporary setback, Venture generated S$265.7 million of free cash flow for the first half, while net cash position remained strong at S$833 million as of 30 June 2020.
If we look at just the second-quarter numbers, Venture did witness a rebound in May and June. The group posted year on year revenue growth of 2.9%, while net profit improved by 16.4% year on year.
An interim dividend of S$0.25 was declared, up 25% from last year’s S$0.20.
The group’s outlook remains sanguine, as it believes the recovery seen in the previous quarter can carry over to the second half of 2020.
Venture’s research and development laboratories also have plans to release several newly-developed products by early 2021.
AEM Holdings Ltd (SGX: AWX)
AEM offers application-specific intelligent system test and handling solutions.
Its customers are from the semiconductor and electronics sectors and serve the advanced computing, 5G and AI sub-sectors.
The group has posted explosive growth numbers for its first half 2020 earnings report.
Revenue was up 81.7% year on year to hit S$273.7 million, while net profit jumped 148% from S$22.3 million to S$55.3 million.
Its share price has also been on a tear, doubling from S$2.09 at the start of the year to S$4.20.
Operating cash flow for the half-year soared six-fold to S$47.3 million, and the group bumped up its interim dividend by 150% from S$0.02 last year to S$0.05.
AEM was only minimally impacted by the COVID-19 pandemic and is confident that demand for its semiconductor test solutions will remain robust.
The group had also just concluded an acquisition in July of DB Design Group, Inc, and the purchase should enhance AEM’s capabilities in its consumables business and also helps to add new North American customers.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a pure-play data centre REIT with a portfolio comprising 18 data centres.
These assets are located in key data centre hubs spanning 11 cities in eight countries.
Keppel DC REIT’s share price has risen by 41% year to date to S$2.94.
The REIT also reported a sparkling set of earnings as its operations were deemed essential services and experienced no disruption from the ongoing pandemic.
For the first half of 2020, gross revenue rose by nearly 30% year on year while distributable income increased by 38% year on year.
Distribution per unit improved by 13.6% year on year to S$0.04375 due to a larger unit base.
Gearing level was not high at 34.5% and the REIT’s average cost of debt stood at just 1.7%, along with an interest cover of 12.8 times as of 30 June 2020.
With a higher level of data traffic expected as businesses adopt cloud solutions and videoconferencing, demand for data centres is set to rise.
The global data centre colocation market is poised to grow by 15% in 2020, while global mobile data traffic is projected to increase by 31% annually from 2019 through 2025.
5G infrastructure is also coming on-site soon and will contribute further to data requirements, thereby acting as a further catalyst for the growth of the REIT.
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Disclaimer: Royston Yang owns shares in Singapore Exchange Limited and Keppel DC REIT.