Singapore listcos offer opportunities for investors to ride the commodities wave

SINGAPORE-LISTED commodity stocks might give investors solid returns in the near term amid a shift in the broader industry, especially since a number of them are currently trading at a discount to their book values. 

Based on data compiled by the Singapore Exchange (SGX), the local stock market has a total of 22 active commodity stocks, ranging from palm oil producers to coal and gold miners and oil exploration companies. Eight of these stocks have booked positive total returns in the year to date. 

Rubber company Sri Trang Agro-Industry recorded the highest total returns so far this year, at 25.4 per cent. The company is a fully integrated rubber group, with operations in upstream or rubber plantations, midstream or processing activities, and downstream or glove production. 

For FY2023, Sri Trang booked a net loss of 434.4 million baht (S$16.1 million), due to the impact of the El Nino weather phenomenon and a continued oversupply in the glove industry that crimped its margins. 

However, the group said it was working on expansion throughout its supply chain. For instance, it is looking at maintaining profitability and gaining market share for its midstream segment, and its annual installed production capacity will reach 4.12 million tonnes by end-2025. 

Palm oil companies such as TSH Resources, Bumitama Agri and Golden Agri-Resources have also booked positive total returns so far this year, despite weaker crude palm oil prices and lower average selling prices on a year-on-year basis. 

Bumitama Agri, for one, has emerged as a top pick in the regional plantations sector for analysts due to its superior productivity, high-quality plantations and continued focus on maximising current plantations. 

Cocoa ingredients seller JB Foods is another company that suffered on the back of shifts in commodity prices. The group booked an increase in cost of sales for FY2023, due to higher cocoa prices. The company said it would manage and monitor the execution of cocoa bean deliveries by its suppliers in a timely manner.

SGX market strategist Geoff Howie noted that despite a total return of minus 5 per cent so far this year, Malaysia-based iron-ore concentrate producer Fortress Minerals has generated annualised total returns of 8.8 per cent since its listing on the Catalist board in March 2019. 

The company’s chief executive, Ivan Chee, said that while the iron-ore price index is determined by market forces, Fortress Minerals expected high-grade ore to command a premium over lower grades, given its higher iron content and low number of impurities. This enhances production-efficiency levels for steelmakers.

Demand for iron ore also remains robust, said Chee, and Fortress Minerals is actively expanding production at its existing mine and diversifying its revenue streams. 

Howie said Fortress Minerals is also executing its strategic growth plans to broaden and diversify its revenue streams. The company is ramping up its production capabilities in the mining of several metals including manganese, copper, nickel and zinc.