As we get used to living with changed habits amidst the Covid-19 pandemic, it’s also time to think of what lies ahead.
What will life be like after factoring in changes to lifestyles and routines?
Which industries and sectors will remain unscathed, or emerge stronger?
And most importantly, which companies will continue to sail on through the storm and grow stronger?
Businesses providing essential services and located in the right sector can thrive despite the gloom.
But of course, you need to be selective, too.
Assessing the changing landscape and reviewing what works and what does not are critical to making the right decision.
For compounding to happen, you need to make sure you purchase the right company and then hold it over the long-term.
Here are three stocks I am willing to buy with conviction if I had $10,000.
1. Singapore Exchange Limited
Singapore Exchange, or SGX, operates the sole stock exchange in Singapore.
While I have owned SGX since 2018, recent events have led me to add on to my position.
First off, the bourse operator reported a sparkling set of earnings for its fiscal year ended 30 June 2020 (FY 2020).
Revenue was up 16 per cent year on year, while net profit jumped by 21 per cent year on year to $472 million.
SGX also raised its quarterly dividend from $0.075 to $0.08 and emphasized that it will continue paying this level moving ahead.
This works out to an annualised dividend of $0.32, higher than the $0.305 paid out in FY 2020.
This increase is a vote of confidence in the group’s prospects and signals management’s confidence in growing the business.
On the business development front, SGX has also announced a slew of initiatives to broaden its suite of financial products.
In early August, it announced that it will pioneer Asia’s first international REIT futures.
A week after, SGX announced the launch of 13 futures in August and September to expand its all-Asia waterfront for equity derivatives.
And in late August, a long-term strategic partnership was inked with FTSE Russell to develop innovative multi-asset solutions.
Just two days ago, SGX also announced the launch of crypto indices in collaboration with CryptoCompare, providing it with a springboard into the digital currency asset class.
These initiatives will take time to bear fruit for the bourse.
It’s obvious, though, that SGX has a clear plan for boosting its capabilities and that these moves will further elevate its standing as an attractive Asian multi-asset exchange.
2. Micro-Mechanics (Holdings) Ltd
Micro-Mechanics designs, manufactures and markets high precision tools and parts used in the semiconductor industry.
The group faced some disruptions to its operations in Malaysia and the USA due to Covid-19, but operations remained largely uninterrupted as its business was deemed “essential”.
For FY 2020, Micro-Mechanics reported revenue growth of 6.4 per cent year on year while profit after tax jumped 13 per cent year on year.
Free cash flow remained healthy at $15 million despite slightly elevated capital expenditures.
The total dividend for the year was raised to $0.12 from $0.10 a year ago, reflecting confidence in the company’s future growth.
In the latest semiconductor market forecast, the world semiconductor market is expected to improve by 3.3 per cent in 2020, and then to grow a further 6.2 per cent in 2021.
This growth will be driven by increased demand for integrated circuits and memory and is poised to benefit the group.
Its plant in the USA has also recently received customer qualification for a family of ultra-critical parts used in the wafer fabrication process, and management remains optimistic in capturing more market share there.
3. Keppel DC REIT
Keppel DC REIT is Asia’s only pure-play data centre REIT.
Its portfolio consists of 18 data centres across eight countries, valued at around $2.8 billion.
With the surge in internet usage, data centres have seen a sharp increase in demand.
Keppel DC REIT saw its distribution per unit rise 13.6 per cent year on year to $0.04375, while gross revenue soared 30per cent year on year.
This niche sector remained resilient throughout the pandemic and with the increase in global mobile data traffic and enterprise spending on cloud infrastructure, the REIT is poised to remain relevant for the foreseeable future.
Merger and acquisition opportunities could fuel further growth for the REIT, and its aggregate leverage of just 34.5 per cent as of June 30, 2020 leaves ample room for gearing up further.
This article was first published in The Smart Investor. Disclaimer: Royston Yang owns shares in Singapore Exchange Limited and Keppel DC REIT.