Inflation has been at the top of everyone’s mind this past year.
The rise in the prices of goods and services has been persistent, hitting 5.5% in both January and February, the highest level in 14 years.
Although the inflation rate has declined slightly to 5% in March, the government still expects core inflation to range between 3.5% to 4.5% for 2023.
With inflation raging, the money sitting in your bank account looks certain to erode in value.
Investing, however, can help you to stay ahead of inflation as businesses can price their products higher to keep up with this scourge.
Companies with strong competitive moats can command robust pricing power that enables them to charge their customers more.
We throw the spotlight on four such companies that can ensure your investment portfolio does well even during tough times.
VICOM (SGX: WJP)
VICOM is a leading provider of inspection and technical testing services for vehicles and in non-vehicle fields such as mechanical, biochemical, and civil engineering.
The group has a dominant market share of 73% in the vehicle inspection market as of 2022.
Hence, VICOM has the pricing power to shift its inspection prices upwards to keep up with the inflation rate.
Just last year, the inspection specialist raised its car inspection fees by 5% to S$67.41 from S$64.20.
Should inflation prove persistent, VICOM has the option to further raise inspection fees.
The group recently released a healthy set of earnings for its 2023 first quarter (1Q 2023).
Revenue rose 6.6% year on year to S$27.8 million while net profit improved by 8% year on year to S$6.9 million.
VICOM also maintained a clean balance sheet with S$59.6 million of cash with zero debt.
Kimberly-Clark (NYSE: KMB)
Kimberly-Clark, or KMB, is a consumer products behemoth whose products are sold in more than 175 countries.
The company manufactures and sells tissue paper, napkins, diapers and similar products under popular brands such as Kleenex, Scott, Cottonelle, and Huggies.
KMB reported a respectable set of earnings for 1Q 2023, with sales inching up 2% year on year to US$5.2 billion.
Net profit increased by 8% year on year to US$566 million.
The company’s brands are popular and highly sought after, allowing it to maintain pricing power in the face of inflation.
For 2023, KMB estimates that it can enjoy 2% to 4% organic sales growth while its earnings per share should see a 6% to 10% year on year increase.
In addition, the company is also a powerful dividend payer with its recently-declared quarterly dividend of US$1.18 per share.
KMB has the enviable record of raising its dividend for 51 consecutive years and this year represents the 89th consecutive year that the business has doled out dividends.
Singapore Airlines Limited (SGX: C6L)
Singapore Airlines, or SIA, is Singapore’s flagship airline.
The group is benefitting from border reopenings and a surge in bookings for air travel and holidays as pent-up demand brings in higher volumes.
Recently, the carrier reported a record-high net profit of close to S$2.2 billion as bookings soared and passenger load factor hit new all-time highs.
With China’s reopening, the airline looks set to continue to report strong numbers as Chinese tourists will want to travel and visit Singapore again.
The airline also has the pricing power to raise fares in line with sharply-higher demand.
SIA is also increasing its fleet from the current 195 aircraft to 201 by the end of its fiscal 2024 (FY2024) ending 31 March 2024.
The membership base for its popular KrisFlyer program also saw a 44% increase from FY2020 to FY2023 to 6.7 million members.
NetLink NBN Trust (SGX: CJLU)
NetLink NBN Trust designs, builds, owns and operates the passive fibre network infrastructure for Singapore’s nationwide broadband network (NBN).
This ownership affords the group a natural monopoly and it is the only player that is supplying fibre network connectivity to residential households in Singapore.
NetLink NBN Trust is also undergoing a regulatory review where its future return on its regulatory asset base is expected to be higher due to rising interest rates and rampant inflation.
For its fiscal 2023 (FY2023) ending 31 March 2023, NetLink NBN Trust reported a 6.8% year on year increase in revenue to S$403.5 million.
Net profit climbed 19.7% year on year to S$109.3 million, and distribution per unit inched up 2.1% year on year to S$0.0524.
The trust’s residential fibre connections have risen from 1,464,000 in FY2022 to 1,485,000 in FY2023, while non-building address points have jumped from 2,404 to 2,706 in the same period.
The government plans to ramp up its build-to-order projects to cater to increased demand, increasing the number of concurrent projects to 150 by 2025.
This initiative should allow NetLink NBN Trust to steadily increase its residential fibre connections as more HDB estates come onstream.
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Disclosure: Royston Yang owns shares of VICOM and NetLink NBN Trust.