The latest macroeconomic data coming from the US seems to suggest that further rate hikes by the US Central Bank are on the cards.
With inflation coming in higher than projected, the Federal Reserve plans to tighten its resolve in containing price increases.
Investors will be dismayed to know that interest rates look poised to not just rise faster, but also peak at a higher level than previously anticipated.
Higher rates spell more trouble for highly-indebted businesses as they will end up paying higher finance costs.
Hence, an effective method to protect your portfolio is to select businesses that have minimal or zero debt.
Such stocks will be insulated from the impact of higher interest rates as they rely on internally-generated cash flow to fund their operations.
Here are five stocks that may fit this bill.
VICOM Limited (SGX: WJP)
VICOM is a leading test and inspection group that provides a comprehensive range of services in the vehicle and non-vehicle testing including mechanical, biochemical, and civil engineering.
The group reported a robust set of results for 2022, with revenue rising by 7.3% year on year to S$108.3 million.
Operating profit increased by 5.4% year on year to S$32.7 million while net profit inched up 5.7% year on year to S$26.2 million.
VICOM’s balance sheet held S$60.5 million of cash with no debt as of 31 December 2022.
The inspection specialist also declared a final dividend of S$0.0332, bringing 2022’s dividend to S$0.0664.
Demand for non-vehicle testing services is expected to rise while vehicle testing demand should remain stable for this year.
HRNetGroup Ltd (SGX: CHZ)
HRNetGroup is a leading recruitment and staffing company with over 900 consultants in 15 Asian cities.
The group operates a total of 13 human resources (HR) brands including Recruit Express, HRnetOne, and PeopleSearch.
HRNetGroup reported a respectable set of earnings for 2022 with revenue edging up 3.6% year on year to S$611.8 million.
Net profit rose 3.1% year on year to S$67.5 million.
Like VICOM, the HR specialist has zero debt and holds cash of S$284.6 million on its balance sheet.
The business also generated a healthy free cash flow of S$73.7 million last year.
Boustead Singapore Limited (SGX: F9D)
Boustead Singapore Limited, or BSL, is an engineering conglomerate with four core divisions – energy-related engineering, real estate solutions, geospatial technology, and healthcare.
The engineering group had S$15.3 million in borrowings but held cash of S$387.5 million along with S$7.5 million of investment securities.
Boustead reported a downbeat set of earnings for its fiscal 2023’s first half (1H FY2023) ending 30 September 2022.
Revenue fell by 27% year on year to S$246.9 million due to a fall in revenue for both its energy engineering and real estate divisions.
Net profit after adjustments for one-off expenses fell by 28% year on year to S$13.6 million.
However, free cash flow more than doubled year on year from S$15.8 million to S$41.5 million.
Haw Par Corporation Limited (SGX: H02)
Haw Par is also a conglomerate and has four core divisions – healthcare, leisure, property, and investments.
As the owner of the Tiger Balm brand, Haw Par boasts one of the leading analgesic brands within its business.
Haw Par saw its healthcare business rebound strongly as countries opened their borders last year.
Revenue for 2022 jumped 29% year on year to S$182.1 million while net profit climbed 34.7% year on year to S$148.3 million.
The group maintained a robust balance sheet with S$334.3 million of cash and just S$28.5 million of debt.
In addition, Haw Par also held S$2.8 billion of strategic and long-term investments mainly in United Overseas Bank Ltd (SGX: U11) and UOL Group Ltd (SGX: U14).
Credit Bureau Asia (SGX: TCU)
Credit Bureau Asia, or CBA, provides credit and risk information services to a client base of banks, financial institutions, telecommunication companies, and government bodies.
CBA saw its revenue rise by 7.1% year on year to S$48.6 million while net profit improved by 7.2% year on year to S$8.4 million.
The credit risk assessor had a clean balance sheet as of 31 December with S$34.7 million of cash and no debt.
The group also generated a free cash flow of S$19.9 million for 2022.
Late last month, CBA announced that it has partnered with Credit Bureau Cambodia to launch the first cross-border collaboration between the two credit bureaus.
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Disclosure: Royston Yang owns shares of Boustead Singapore Limited.
