OREANDA-NEWS. There are generally two core types of consumer plays on the stock market – staples and discretionary. The Global Industry Classification Standard (GICS®) used to sort stocks on SGX StockFacts categorise staples as food, beverage, tobacco and household products and services, whereas consumer discretionary covers non-essentials.

From an economic perspective consumer staples are considered to be of an essential nature whereas consumer discretionary covers those areas considered to be of a non-essential nature. Nevertheless with a much wider business scope, it might be of little surprise that the combined market capitalisation of Asia Pacific’s primary-listed consumer discretionary stocks is almost twice that of its primary-listed consumer staple stocks.

Recent Moves of the Benchmarks

The MSCI AC Asia ex-Japan Consumer Discretionary Index includes relevant stocks from Hong Kong, Singapore, China, India, Indonesia, Korea, Malaysia, the Philippines, Taiwan and Thailand and has a combined market capitalisation of more than US\\$400 billion. In the year thus far, the Index has generated a decline of 17.6% or 16.3% including dividends.

The MSCI AC Asia ex-Japan Consumer Discretionary Index maintains a Price-to-Earnings Ratio of 11.1 and Return-on-Equity (ROE) ratio of 12.0%.

On Singapore Exchange (SGX) there are more than 100 stocks that are classified to the consumer discretionary sector. Of the 20 largest consumer discretionary stocks, six report the majority of their revenue in Singapore. These six stocks have a combined market capitalisation of S\\$18.7 billion and trade at a price-earnings ratio of 14.7. They also maintain a dividend yield of 2.3%. In the year-to-date, they have averaged negative dividend-boosted returns of 11.6%.

The table below details these six stocks that generate their revenue predominantly in Singapore. Note that clicking on a stock name will direct you to its page on StockFacts.

Name SGX Code GICS® Industry Name Mkt. Cap. in S\\$ mm % Change - Dividend Adj. YTD ROE in % Div. Ind Yld. in % P/E
Genting Singapore PLC G13 Hotels, Restaurants and Leisure 9,366 -27.5 3.6 1.3 40.6
Singapore Press Holdings T39 Media 6,332 -5.3 10.6 3.8 16.3
OUE LJ3 Hotels, Restaurants and Leisure 1,638 -11.4 6.8 1.1 8.0
Metro Holdings M01 Multiline Retail 716 1.3 13.2 2.3 4.2
Centurion Corporation OU8 Hotels, Restaurants and Leisure 326 -12.2 27.8 3.5 3.3
Global Premium Hotels P9J Hotels, Restaurants and Leisure 310 -14.5 2.8 1.7 15.6
Average       -11.6 10.8 2.3 14.7

Source: SGX StockFacts (Data as of 16 September 2015)

The 14 other stocks that generate their revenue predominantly outside of Singapore have a combined market capitalisation of S\\$25.1 billion and trade at an average price-earnings ratio of 16.4. They also maintain an average dividend yield of 4.5%. These 14 stocks have outperformed the six stocks that generate their revenue mostly in Singapore – they have averaged negative dividend-boosted returns of  4.1% in the year-to-date.

Name SGX Code GICS® Industry Name Mkt. Cap. in S\\$ mm % Change - Dividend Adj. YTD ROE in % P/E Div. Yld.in %
Jardine Cycle & Carriage C07 Distributors 10,234 -28.4 15.6 10.1 4.0
Genting Hong Kong S21 Hotels, Restaurants and Leisure 3,381 -7.1 7.5 19.8 4.5
Mandarin Oriental International M04 Hotels, Restaurants and Leisure 2,419 5.6* 5.8 21.0 1.1
Hotel Properties H15 Hotels, Restaurants and Leisure 1,949 -5.0 N/A 25.1 10.2
Asian Pay Television Trust S7OU Media 1,149 0.0 16.2 14.6 4.0
OSIM International O23 Specialty Retail 1,134 -23.0 4.0 16.2 2.7
GuocoLeisure B16 Hotels, Restaurants and Leisure 1,046 -10.1 25.0 17.0 2.4
Hotel Grand Central H18 Hotels, Restaurants and Leisure 752 -1.8 9.9 8.4 4.1
Straco Corporation S85 Hotels, Restaurants and Leisure 730 13.9 N/A 15.8 13.8
Accordia Golf Trust ADQU Hotels, Restaurants and Leisure 703 -7.9 15.1 8.4 3.1
The Hour Glass AGS Specialty Retail 504 12.8 8.2 10.9 4.0
Stamford Land Corporation H07 Hotels, Restaurants and Leisure 428 -5.8 50.5 30.1 2.0
Zhongmin Baihui Retail Group 5SR Multiline Retail 348 -2.5 14.5 14.5 8.9
Duty Free International 5SO Specialty Retail 308 1.3 3.3 17.0 1.6
Average       -4.1 14.6 16.4 4.7

Source: SGX StockFacts (Data as of 16 September 2015)* note in SGD terms

The five best performers out of the 20 in terms of year-to-date returns were Straco Corporation (+13.9%), The Hour Glass (+12.8%), Mandarin Oriental International (+5.6%), Duty Free International (+1.3%)  and Metro Holdings (+1.3%).

The Thirty-Year Club of Regional Retailing

Over three consecutive years between 1978 and 1980, the businesses of Duty Free International, the Hour Glass and OSIM International were established.

Duty Free International first stared its duty-free business in 1978. Today, Duty Free International is the largest local duty-free retailing group in Malaysia, with strategic presence at all leading entry and exit points in Peninsular Malaysia, including airports, seaport, downtown, border towns and popular tourist destinations. The Group currently operates 36 outlets comprising 34 duty-free retail outlets and two duty paid perfumery and cosmetics retail outlets located at various locations throughout Peninsular Malaysia.

In 1979, the Hour Glass was established. The Hour Glass is now one of Asia’s premier luxury retail groups with 41 boutiques in nine key cities throughout the Asia Pacific region. Meanwhile Duty Free International currently operates 36 outlets comprising 34 duty-free retail outlets and 2 duty paid perfumery and cosmetics retail outlets located at various locations throughout Peninsular Malaysia

In 1980, one year after the Hour Glass was establishment the business of OSIM was established. OSIM began as a sole proprietorship retailing an array of household goods. Subsequently in 1983, the Company was incorporated to take over the business of selling health-care related products such as hand-held massagers and foot reflexology rollers. The Group expanded rapidly and by 1987, it had established a distribution network of 10 outlets in Singapore, Hong Kong and Taiwan, marketing household goods and health-care related products. Today, across the globe, there are a total of 842 OSIM, GNC and TWG Tea outlets.

Over the past 10 years, these three stocks have averaged annualised total returns of 5.7%. They currently maintain average ROE ratio of 5.2%. ROE ratio measures net income relative to shareholders equity in percentage term. This ratio makes use of two key aspects of a stock – the recent net income generated by the company (the return) and the value of the common shareholdings of the company (the equity), over the same periods of time. It also measures the capital efficiency to generate net income using the shareholders’ equity.