The STI trades at just 10x forward earnings, far below regional benchmarks such as the Nikkei and ASX. Over half of SGX-listed stocks trade below book value — levels typically associated with distressed markets, not a AAA-rated financial centre.
Singapore’s corporates are flush with liquidity. The Big Three banks ended 2025 with CET1 ratios above 14%, while REITs remain conservatively geared at around 37%, well below their 45% cap. Capital expenditure and M&A pipelines are thin, meaning excess capital is increasingly flowing back to shareholders through dividends and repurchases.
Banks are poised to lead next year’s wave. Trading at around 1.1x book, far below regional peers, they have both valuation incentive and capital room to buy back shares. Telecoms, including Singtel with $3.3 billion in liquidity, are also expected to continue using repurchases to boost market confidence. Industrial and service conglomerates — many trading at 30–40% discounts to sum-of-parts valuations — see buybacks as the most direct way to unlock hidden value. Family-controlled giants like Jardine Matheson, sitting on strong balance sheets and trading below 0.8x book, may join in too.
Singapore’s regulatory framework, which allows companies to repurchase up to 10% of shares annually, provides clarity and shareholder-friendly flexibility. With dividend yields already near 5%, buybacks are becoming an increasingly attractive capital-return tool.
LimTan Analysts See Undervalued SMIDs and Construction Upside
While global investors often chase growth on Wall Street, Singaporeans may be overlooking compelling opportunities at home. Lim & Tan Securities analyst Nicholas Yon argues that local investors possess “on-the-ground” advantages, citing Sheng Siong as a prime example. Unlike tracking US giant Walmart from afar, Singaporeans can assess Sheng Siong directly by observing footfall and store expansion — a factor Yon says has contributed to the stock’s 60% year-to-date surge and valuation of 28 times earnings.
Despite this run-up, Yon maintains that Singapore valuations remain “very cheap” compared to the US, underscoring potential upside from the government’s Equity Market Development Programme (EQDP). The initiative aims to revive small- and mid-cap (SMID) activity, though Yon notes its long-term effectiveness remains unproven as funds will be deployed in stages over several years.
Bottom-Up, Sector-Agnostic, Cycle-Driven
Lim & Tan’s analysts adopt a sector-agnostic, fundamentals-first approach. Yon highlights how sector cycles shape opportunities: the offshore & marine slump created an attractive risk-reward setup two years ago, benefiting players like Dyna-Mac and Marco Polo Marine as energy markets recovered.
Today’s “flavour of the year” is construction. Contractors are clearing low-margin pandemic-era contracts and posting sharply higher profits. Heavyweights BRC Asia and Pan-United, along with smaller names like OKP, are seeing earnings momentum.
Yon singles out Tiong Woon Corp as a standout, citing its first-mover advantage in heavy-lift cranes for public housing projects and its niche in ultra-heavy petrochemical lifting. Tiong Woon, he notes, competes against global players like Mammoet and Sarens — even acquiring some of their assets in Thailand.
Beyond Fundamentals: Sentiment Still Rules
Yon cautions that “a good stock doesn’t guarantee profits,” noting that sentiment, emotions and market climate often overpower fundamentals. Investors should assess what will attract future buyers, evaluate the risk-reward ratio and avoid stocks where management fixates on share price rather than building a sustainable business.
He prefers meeting management before initiating coverage, saying CEOs overly focused on “cheap” valuations raise red flags. Among his top performers this year are Oiltek International — buoyed by Southeast Asian biodiesel mandates — and OKP, whose shares jumped 250% YTD before a bonus issue announcement.
His worst call, he recalls, was Starburst Holdings, which plunged 50% after its management was investigated for fraud, highlighting inherent small-cap risks. The firm was later acquired by Nordic Group.
More Upside Ahead for Construction and Rate-Sensitive Plays
Looking ahead, Yon sees further upside for construction stocks over one to two years, supported by strong public sector demand. REITs with higher interest-rate exposure may also benefit as borrowing costs decline.
Thank you
