OREANDA-NEWS. June 19, 2015. As discussed in a Market Update in May (click here), constituents of the  FTSE Value-Stocks ASEAN Index must pass a proprietary value screening process which use P/E ratios, dividend yields, return on equity, operating profit margin, net gearing and a unique contrarian factor. The stated objective of the FTSE Value-Stocks ASEAN Index is to identify quality and overlooked value stocks listed in ASEAN exchanges. As there are a maximum of 50 stocks in the index, the largest capitalised stocks that meet  the criteria will be chosen.

Singapore lists 11 stocks that help to make up the regional FTSE Value-Stocks ASEAN Index. The 11 stocks represent six different industries – banks, distributors, industrial conglomerates, machinery, real estate investment trusts (REITs) and real estate management and development.  The 11 stocks also include seven stocks of the Straits Times Index (STI) and four stocks of the FTSE ST Mid Cap Index, which were discussed in yesterday’s SGX My Gateway Report (click here). According to SGX StockFacts, the average free float ratio of these eleven stocks is 60.5%.

The average 12 month price decline of the 11 stocks is 6.2%, and average dividend yield is 4.0%. The individual dividend yields are illustrated in the chart below for the 11 stocks. These yields are based on dividends per share distributed over the past 12 months and the last close price for the respective stock.

Dividend Yields SGX-listed constituents of the FTSE Value-Stocks ASEAN Index

Source: SGX StockFacts

The recent price performances of these stocks are detailed in  the table below. Clicking on each constituent name will link to the respective profile page in SGX StockFacts. Four of the 11 stocks have traded at 12 month lows in June, while six of the stocks traded at 12 month highs in April and May.  The 11 stocks trade with an average P/E of 10.3 which compares to the STI P/E ratio of 14.9.

SGX-listed constituents of the FTSE Value-Stocks ASEAN Index

Name

SGX

Code

 GICS® Industry Name Mkt. Cap.in S\\$ mm 12M %Price Change Price vs. 12M High in % Price vs. 12M Low in % 12M High Date 12M Low Date
Oversea-Chinese Banking Corporation O39 Banks 39,941 5.7 -8.2 6.9 16-Apr-15 7-Nov-14
United Overseas Bank U11 Banks 36,724 1.9 -8.5 6.5 27-Apr-15 28-Oct-14
Keppel Corporation BN4 Industrial Conglomerates 15,297 -21.9 -24.5 6.5 29-Jul-14 15-Dec-14
Jardine Cycle & Carriage C07 Distributors 12,859 -20.0 -24.2 0.5 9-Jul-14 9-Jun-15
City Developments C09 Real Estate Management and Development 8,766 -8.0 -12.0 5.4 10-Apr-15 14-Oct-14
Sembcorp Industries U96 Industrial Conglomerates 7,003 -26.5 -29.2 1.0 23-Jul-14 10-Jun-15
Sembcorp Marine S51 Machinery 6,057 -28.2 -30.1 5.1 25-Jul-14 9-Jun-15
UOL Group U14 Real Estate Management and Development 5,474 3.0 -14.2 12.3 27-Apr-15 17-Oct-14
Yangzijiang Shipbuilding (Holdings) BS6 Machinery 5,403 33.0 -7.5 34.3 21-May-15 16-Jul-14
Mapletree Logistics Trust M44U Real Estate Investment Trusts (REITs) 2,790 -2.6 -10.3 2.7 20-Apr-15 10-Jun-15
CDL Hospitality Trusts J85 Real Estate Investment Trusts (REITs) 1,613 -4.1 -9.6 0.9 30-Jan-15 12-Aug-14

Source: SGX StockFacts (Data as of 15 June 2015)

The FTSE Value-Stocks ASEAN Index’s 50 stocks are made up of stocks listed on the Indonesia Stock Exchange, Bursa Malaysia, the Philippine Stock Exchange, Singapore Exchange (SGX) and the Stock Exchange of Thailand. The ground rules for the index can be obtained here. The Index is free float weighted and constituent stocks are capped at 5% weightings to avoid over-concentration in any one stock. More than half the index weighting is represented by the Financials Sector through banks and real estate.

As maintained by the Index Rules, each security must be a current constituent of the FTSE Global All Cap Index and the securities from an ASEAN Country will be eligible for Index inclusion on the size, liquidity and free float investability screens.

Constituents of the FTSE Value-Stocks Indices must also pass a proprietary value screening process which includes valuation, quality, and contrarian factors.

  • Contrarian Factors – in avoiding ‘going with the herd’ the screen excludes stocks with consensus analyst “buy” calls.More specific information can be found in Section 5.1 in the Index ground rules here.
  • Quality Factors - screening is designed to reduce value traps and focuses on ‘quality’ so that highly leveraged and thin profit companies are avoided. Screens are based on three year average ROE, operating profit margin and net gearing. More specific information can be found in Section 5.2 in the Index ground rules here.
  • Valuation Factors – screening is designed to help select relatively undervalued constituents. Both dividend yield and forecast P/E is taken into account. More specific information can be found in Section 5.3 in the Index ground rules here.

As stated in the Index Rules, from the ASEAN Investable Universe, the companies passing through all the screenings above are ranked by PE ratio and the 50 companies with the lowest P/E ratio are selected to be the constituents of the Index. Value Partners is responsible for undertaking the Index screening review of the Index.