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Expansion in the digital economy is critical for any nation today, and Singapore has proven its worth in this arena. As a result, the prospects for Singapore ICT (information and communications sector) stocks have begun to look promising.
According to government data, Singapore’s digital economy nearly doubled in five years and reached 100bn Singapore Dollar (SGD; $73 bn) in 2022. The digital economy contributed to over 17% of the nation’s gross domestic product in 2022, compared to the 13% clocked in 2017. The report also highlighted that widespread adoption of cloud computing and artificial intelligence by corporates are among the key tech-driven developments over the past five years.
“The expansion of the digital economy has come on the back of increasing adoption of digital technologies by enterprises, which in turn contributed to the robust growth of tech manpower,” opined Singapore’s Infocomm Media Development Authority. It also highlighted that digitalisation in Singapore is growing at a rate faster than its overall economy.
Leading the growth was the ICT sector, which accounted for about a third of the country’s digital economy, or 5.4% of the total GDP. According to Global Data, the Singapore ICT market was worth $58.13 bn in 2022 and is projected to grow at a CAGR of 18.70% to reach $137 bn by 2027. Among the factors that have fuelled the growth of Singapore’s ICT sector are the nation’s digital policies and its strategic national projects and initiatives. Singapore has been an early adopter of 5G technology and the government’s smart nation drive has benefitted it too.
Singapore’s ICT sector is an advanced and high-value enterprise market whose growth is likely to be driven by software and services spending. For the past five years, Singapore’s government has invested around $16 bn in ICT, while in 2023, the government would spend an estimated $3.3 bn. 30% of this estimated spend is dedicated to applications developed on the Government Commercial Cloud (GCC).
Despite strong growth prospects, several Singapore ICT stocks have been slightly volatile due to near-term pressure from the global tech slump and rising interest rates environment. The slowdown in the chip industry was also concerning for companies in the sector. However, experts opine that the long-term outlook remains intact as artificial intelligence (AI), the Internet of Things (IoT), and machine learning (ML) will become indispensable in times to come.
Top Singapore ICT stocks to consider
The technology boom in Singapore is likely to continue gaining momentum. Thus, investors looking to capitalise on this trend can watch out for these three stocks from the information and communications sector.
Singapore Telecommunications Limited
Commonly known as Singtel, Singapore Telecommunications is a conglomerate offering wireless telecommunication services. Its offerings include a diverse range of services including fixed, mobile, data, internet, TV, and digital solutions.
In its recent Investor Day event, the company announced that its main business goals over the next three years include enhancing the return on invested capital to low double-digits by the end of fiscal year 2026. The company further emphasised raising cost synergies and leveraging better 5G rollout management to lower its capital intensity ratio.
For the fiscal year ending March 2023, the company’s operating income climbed 40.4% over the year to 1003 mn SGD ($732.09 mn). Additionally, Singapore Telecommunications saw a year-on-year revenue decline of 4.7%, totalling 14.6 bn SGD ($10.66 bn).
With a market capitalisation of 39.45 bn SGD ($28.79 bn), the company is listed on the Singapore Stock Exchange (Z74.SI). Its shares dropped 4.3% over the past one year. Singapore Telecommunications boasts a PE ratio of 18.38 and a price-to-book ratio of 1.46.
AEM Holdings Ltd.
AEM Holdings is a supplier of testing equipment for semiconductors and electronics used by advanced global manufacturers. AEM says that its products can cover multiple stages of the testing process and cater best to advanced engineering to high-volume manufacturing. The company has manufacturing plants located across Singapore, Malaysia, Indonesia, Vietnam, China, and Finland.
For the fiscal year ending December 2022, the company saw a year-on-year increase of 53.9% in its revenue earnings, reaching 870.49 mn SGD ($635.17 mn). During that same period, its operating profit came in at 110 mn SGD ($80.29 mn), clocking in a 47.6% growth.
AEM Holdings shares are traded on the Singapore Stock Exchange (AWX.SI). The company currently holds a market capitalisation of 1.09 bn SGD ($0.79 bn). In the last 12 months, AEM Holdings stock has experienced a rise of 12.26%. Additionally, its shares are characterised by a PE ratio of 17.60 and a price-to-book ratio of 2.33.
Digilife Technologies Ltd
Formerly known as SEVAK Ltd, Digilife Technologies offers operator products and services, as well as distribution and managed services for information communication and technology. The company offers business service integration and hardware infrastructure across Southeast Asia for the corporate and government sectors. Its operations span across Asia, North America, and Europe.
The company saw a 9% year-on-year increase in its net profit, reaching 0.14 mn SGD ($0.10 mn) in the first half year ended June 2023. During this same period, Digilife’s revenue witnessed a 5.3% year-on-year decline, amounting to 108.7 mn SGD ($79.34 mn).
Digilife Technologies, with a market capitalisation of 26.5 mn SGD ($19.34 mn), has its shares traded on the Singapore Stock Exchange (BAI.SI). Over the past year, the company’s stock has experienced a 75.21% surge. Digilife Technologies shares have a price-to-earnings ratio of 63.23 and a price-to-book ratio of 0.96.
Editor’s note: All stock movement figures as of October 17, 2023.
