Famed investor Warren Buffett understands how investing works.
He said: “If a business does well, the stock eventually follows”.
This simple statement encapsulates the essence of long-term investing – the more valuable a company becomes as its profits rise, the more investors are willing to pay for it.
Simply put, a business that enjoys rising profits should result in attractive capital gains for its shareholders.
Here are four Singapore companies that recently reported higher profits that may cause their share prices to increase in tandem.
Straco Corporation (SGX: S85)
Straco Corporation is a developer and operator of aquatic-related facilities and tourism assets.
The group owns the Shanghai Ocean Aquarium (SOA), Lixing Cable Car Service and Underwater World Xiamen (UWX) in China and also the Singapore Flyer in Singapore.
For the first half of 2024 (1H 2024), Straco saw its revenue rise nearly 12% year on year to S$35.9 million.
Operating profit increased by 41.1% year on year to S$15.5 million.
Net profit soared 64.5% year on year to S$10.5 million.
Straco also generated a positive free cash flow of S$11.8 million, in line with the prior year’s free cash flow of S$11.7 million.
The main improvement for the group’s top line came from the Singapore Flyer, which saw revenue climbing 33% year on year.
The revival in the tourism industry also meant that Straco received 13% more visitors in 1H 2024 compared to a year ago.
Straco’s share price has inched up just 4.4% year-to-date from S$0.46 to S$0.48.
Management reported that China saw 295 million domestic tourist trips in the five-day May Day holiday, an increase of 7.6% year on year.
This indicates further recovery in China’s tourism sector that should carry on into 2H 2024.
Grand Venture Technology (SGX: JLB)
Grand Venture Technology, or GVT, is a solutions and services provider for the manufacture of complex precision machining, sheet metal components, and mechatronic modules.
The group owns manufacturing plants in Singapore, Malaysia, and China and serves customers in the semiconductor, electronics, life sciences, aerospace, and medical industries.
For 1H 2024, revenue rose 26.8% year on year to S$68.3 million while gross profit climbed 33.2% year on year to S$18 million.
Net profit increased by 26.6% year on year to S$4.3 million.
All three of GVT’s divisions saw better performance with year-on-year revenue increases.
Despite the strong performance, shares of GVT have only inched up 1.9% year-to-date.
Management expressed cautious optimism for a gradual improvement in semiconductor demand towards the end of 2024, with further strengthening in 2025.
The Life Sciences division should also see healthy demand and the group’s Aerospace division should continue to enjoy healthy demand as global air travel activity surpasses pre-pandemic levels.
Earlier this week, GVT announced that the group is in discussions for a potential secondary listing of its shares on Bursa Malaysia.
Credit Bureau Asia (SGX: TCU)
Credit Bureau Asia, or CBA, provides risk and credit information solutions to banks, financial institutions, multinational corporations, and government bodies.
The group reported a commendable set of earnings for 1H 2024.
Revenue improved by 12.2% year on year to S$29.6 million, driven by increased demand for risk management and business information products and services.
Net profit for 1H 2024 rose 25.1% year on year to S$5.9 million.
CBA also generated a positive free cash flow of S$13.4 million, 13.3% higher than the S$11.8 million churned out a year ago.
An interim dividend of S$0.02 was declared, 18% higher than the S$0.017 paid out last year.
Despite the strong results, the group’s share price declined by 3.3% year-to-date to S$0.88.
Management expects the trend of increased trade activities and compliance and due diligence-related searches to continue to fuel demand for its services.
In addition, Singapore’s digital banks are expanding their products and services and CBA should benefit from their customer acquisition and monitoring activities.
Frencken Group (SGX: E28)
Frencken is a technology solutions provider with customers in diverse industries.
For 1H 2024, the group reported a 6.2% year-on-year increase in revenue to S$372.7 million.
Gross profit soared 27.6% year on year to S$55.2 million on the back of a 3.2% year-on-year rise in cost of goods sold.
Net profit for 1H 2024 surged 50.3% year on year to S$18.1 million.
The business also generated a positive free cash flow of S$2.3 million, reversing the free cash outflow of S$12.4 million in 1H 2023.
Despite the strong results, Frencken’s share price slid 8.8% year-to-date to S$1.25.
The group continues to work on programs and will engage key customers for new product introductions and first article inspections across the semiconductor, analytical life sciences, and medical sectors in both Europe and Asia.
Based on the current outlook, Frencken expects to post higher revenue in 2H 2024 compared with 1H 2024.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
