It is natural to feel unnerved by the fast pace of interest rate increases that have happened in the past 15 months.
It was only back in March 2022 when interest rates were hovering close to zero.
Fast forward to today, and the US benchmark interest rate is now between 5% and 5.25% as the central bank hiked rates aggressively to combat inflation.
Many businesses are poised to feel the strain from higher finance costs as they take on new loans or refinance existing ones.
But if you are worried about whether high rates could affect your investment portfolio, it may be time to look for stocks that either have low debt or no debt.
We highlight four such Singapore stocks that can provide your portfolio with a safe harbour during this economic storm.
VICOM Limited (SGX: WJP)
VICOM is a leading provider of inspection and technical testing services.
The group offers a comprehensive range of testing and inspection services for vehicles and in fields such as mechanics, biomedical, and civil engineering.
VICOM has traditionally held no debt on its balance sheet.
For 2022, the group reported a clean balance sheet with S$60.5 million of cash and no debt.
Its net profit for the year also rose 5.7% year on year to S$26.2 million, and the group declared and paid out a final dividend of S$0.0332.
Its fiscal 2023’s first quarter (1Q 2023) business update was encouraging, with revenue rising 6.6% year on year to S$27.8 million and net profit improving by 8% year on year to S$6.9 million.
VICOM’s cash level remained high at S$59.6 million and the group also generated a free cash flow of S$4.4 million for the quarter.
Haw Par Corporation Limited (SGX: H02)
Haw Par is a conglomerate with four divisions – healthcare, leisure, property and investments.
Its healthcare division manufactures and sells the Tiger Balm brand of topical analgesics that are distributed in more than 100 countries.
For 2022, Haw Par reported a strong set of earnings with revenue climbing 29% year on year to S$182.1 million as countries reopened their borders and sports activities resumed.
Net profit jumped by 34.7% year on year to S$148.3 million.
Haw Par’s balance sheet was robust, with S$334.3 million of cash, S$295 million of investments in debt securities, and S$2.8 billion of strategic, long-term investments.
Total debt stood at just S$28.5 million as of 31 December 2022, and finance expenses took up just 0.3% of revenue for the year.
Sheng Siong Group (SGX: OV8)
Sheng Siong is a supermarket operator with a total of 68 stores around Singapore.
The group sells a wide variety of items and also offers more than 1,600 products under its 23 house brands.
The retailer’s 1Q 2023 earnings were a mixed bag as gross profit improved while net profit dipped as the group saw a high base effect in 1Q 2022.
Investors, however, can rest assured that Sheng Siong will not be affected by higher interest rates as its balance sheet as of 31 March 2023 contained S$283.1 million of cash and zero debt.
Sheng Siong also generated a positive free cash flow of S$13.9 million for the quarter and plans to bid for more HDB spaces to open new stores this year and grow its business further.
SIA Engineering Company Ltd (SGX: S59)
SIA Engineering, or SIAEC, provides maintenance, repair and overhaul (MRO) of aircraft, engines and related components.
The group recently released its fiscal 2023 (FY2023) earnings that saw revenue surge 40.6% year on year to S$796 million.
However, SIAEC reported a slightly higher operating loss of S$26.3 million due to a corresponding increase in expenses required to sustain this higher activity level.
Net profit came in at S$66.4 million, slightly lower than FY2022’s S$67.6 million, aided by the recognition of S$77.8 million in the share of profits from associates and joint ventures.
Investors should be relieved to note that the MRO provider’s balance sheet contains negligible debt of just S$2.5 million along with cash and short-term deposits of S$633 million.
A final dividend of S$0.055 was also proposed for FY2023, the first dividend proposed after two years without any payments.
SIAEC sees the reopening of China’s borders as a positive development for the full recovery of the aviation sector but is also mindful of potential recession risks along with geopolitical tensions.
If you’re looking to invest in 2023, our latest FREE report can guide you. It shows you how to find dividend stocks in SGX, and a nearly fool-proof way of building your portfolio. Many people love dividend investing, but few truly know how to profit from it consistently. Click the link here to download our new report and discover the secrets!
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclosure: Royston Yang owns shares of VICOM Limited.
