Transport Stocks On the Move with 11% Gains in early November

• Global rotation from momentum to value stocks, mostly driven by vaccine developments, has seen Singapore’s 10 most traded transport-related stocks gain 11% in the November MTD, in-line with the gains of the top quartile of global transportation stocks by market value.

• SATS has been the strongest gainer of the 10 Singapore stocks, gaining 34% over the past 11 sessions, with S$68 million of net institutional inflow. While the stock has declined 21% in the 2020 YTD, its long-term annualised total return since listing in May 2000 is 8%.

• The most defensive of the 10 stocks in the 2020 YTD was Catalist-listed GKE Corporation, an integrated warehousing and logistics solutions provider which gained 14% in 2020 YTD while reporting a turnaround net profit in FY20 (ended 31 May) of S$4.7 million, following a net loss of S$2.1 million in FY19.

The mixed performances of Tranportation and Logistics Stocks in the 2020 year can be characterised through a small airline business with 10 aircraft, nine aircraft serving passengers with one providing cargo services. The passenger side of the business has been severely impacted through social lockdowns to contain the Coronavirus, which has extended to engineering, catering, hospitality and tourism businesses. Meanwhile, cargo operations have continued to function, providing continued demand for the supporting logistics and warehousing businesses.

However global passenger operations dwarf cargo operations. In 2017, Oliver Wyman estimated that of 25,000 commercial aircraft in service, just 2000 aircraft provided cargo services. Hence, robust global cargo and logistics demand has only partially offset the impact of the large decline in passenger services.

As flagged six weeks ago, the biggest driver of markets in 4Q20 will continue to be the social and economic impacts of containing COVID-19 in addition to vaccine developments (click here for more). The past week’s coronavirus vaccine developments are consistent with WHO projections in early October, and have further fueled sector rotations which tentatively began last month and gathered pace following the US Election (click here for more).

This has seen Singapore's most traded transportation stocks rally 11% over the past 11 sessions, in line with the 10% gains of the top quartile of global transportation stocks by market value.

Most Defensive Stocks of Industry Drawed Net Institutional Inflows in 2020 YTD

Combined, Singapore’s 10 most traded stocks with exposure to transportation and logistics services have seen a combined daily turnover of close to S$110 million a day in the 2020 year through to 16 November. More than 90% of that turnover was contributed by four constituents of the Straits Times Index (“STI”) – Singapore Airlines, ComfortDelgGo Corp, Singapore Tech Engineering And SATS. 

Together the 10 stocks have averaged an 18% decline in total return over the period.

The two most defensive stocks in the year to date were Catalist-listed GKE Corporation, and STI constituent Singapore Tech Engineering with respective total returns of 13.9% and 0.4%. Both these stock were also recipient of net institutional inflows in the year to date.

While Singapore Tech Engineering is typically associated with manufacturing, Aersopace was its biggest revenue generator in FY19. In its FY20 (ended 31 May), GKE Corporation continued to focus efforts in its profit-generating divisions and was rewarded with a S$4.7 million net profit attributable to shareholders, a reversal from a net loss attributable to shareholders of S$2.1 million in FY19 (for the FY20 Annual Report, click here). Founded in 1995, by Mr Neo Kok Ching, GKE Corporation’s vision is to become one of the largest integrated warehousing and logistics solutions providers in Singapore.

Recent Rotations to Key Industry Stocks

With subtle signs of rotation into SATS in October (click here for more), the rotational flows accelerated in early November, with the stock rallying 33.9% so far this month on S$68 million of net institutional inflow. Singapore Airlines and ComfortDelGro Corp also saw net institutional inflows of S$25 million and S$11 million respectively in the November month-to-date, while averaging 15.6% gains. The trio had previously seen a combined net institutional outflow of S$1.2 billion over the first 10 months of 2020.

As discussed above, Singapore Tech Engineering has seen net institutional inflows in the year-to-date, and coinciding with the rotation, has seen net institutional outflows in the month-to-date.

The performance of the 10 most traded Singapore stocks with exposure to the transportation and logistics industry are tabled below and sort by highest trading turnover in the 2020 year to date.

This article was first published on SGX.com, Market Updates on 17 November 2020.