In This Article:
COSCO Shipping International (Singapore) Co Ltd. (SGX:F83), a S$1.04B small-cap, operates in the machinery manufacturing industry, which faces increasing demand of capital equipment and machinery from developing economies in Asia, Latin America and the Middle East. Capital goods analysts are forecasting for the entire industry, a positive double-digit growth of 16.54% in the upcoming year , and a massive triple-digit earnings growth over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the Singapore stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether COSCO Shipping International (Singapore) is lagging or leading in the industry. Check out our latest analysis for COSCO Shipping International (Singapore)
What’s the catalyst for COSCO Shipping International (Singapore)’s sector growth?
Machinery manufacturers face the challenge of managing a plethora of new data so that it becomes useful, adapt technology to run their supply chains and operations more efficiently, and build strategic partnerships that will help grow market share. In the past year, the industry delivered negative growth of -28.48%, underperforming the Singapore market growth of 10.78%. COSCO Shipping International (Singapore) lags the pack with its negative growth rate of -79.94% over the past year, which indicates the company will be growing at a slower pace than its machinery peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with COSCO Shipping International (Singapore) poised to deliver a -88.09% growth compared to the industry average growth rate of 16.54%.
Is COSCO Shipping International (Singapore) and the sector relatively cheap?
The machinery industry is trading at a PE ratio of 11.19x, relatively similar to the rest of the Singapore stock market PE of 13.53x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 6.13% on equities compared to the market’s 7.51%. On the stock-level, COSCO Shipping International (Singapore) is trading at a PE ratio of 10.73x, which is relatively in-line with the average machinery stock.
Next Steps:
If COSCO Shipping International (Singapore) has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is a machinery industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the capital goods sector. However, before you make a decision on the stock, I suggest you look at COSCO Shipping International (Singapore)’s fundamentals in order to build a holistic investment thesis.