Billion Dollar Club: SUPER BIG CAP COMPANIES

Big cap BDC

In its most recent annual report card ended March 31, Temasek reported a record portfolio value of $434 billion, a 11.6% increase over the preceding year. Despite the increasingly international nature of its portfolio, the major driver of this growth is the hefty gains of the so-called Temasek portfolio companies (TPCs) — entities in which Temasek holds a controlling stake. As a whole, they accounted for $178 billion of the portfolio value, or 41% of the total. 

These TPCs not only figure prominently in Temasek’s portfolio but also continue to dominate the Singapore stock market. For legacy reasons, these TPCs are already established market leaders in their respective industries. As the ebb and flow of the global economy continues, some of them, with astute management and a bit of external push, will help make these TPCs a more prominent sector of the local market than ever. The business activities of the likes of DBS Group Holdings, Singapore Airlines, Singapore Telecommunications, and Singapore Technologies Engineering permeate every minute and day of Singaporeans’ lives; their shares are among the most widely held among investors here. Unsurprisingly, a couple of these “stalwarts”, as described by Temasek’s executives, are the big winners of the BDC, as they outshine their peers when the measurements are applied.

At last year’s Billion Dollar Club (BDC), DBS dominated, sweeping all categories in the super big cap companies’ sector, which has been created to recognise this special class of winners whose market capitalisation of $10 billion and above puts them head and shoulders above the rest. This time round, DBS is compelled to share somewhat — Singapore Technologies Engineering, another renowned local blue chip. Besides taking weighted ROE into account, ST Engineering also won for returns to shareholders. DBS, meanwhile, continues to secure growth in profit after tax (PAT) and record overall sector wins.

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Banks generally had it good when US-led rate hikes were in place to wrestle down inflationary pressures. DBS can command a particular advantage given its access to a vast pool of Singdollar deposits, which helped keep its funding costs down and enabled it to make a larger margin on its lending. However, DBS has proven that its steady earnings growth is possible through its ability to capture other sources, such as non-interest fee income from trading and wealth management. With the visibility of growing earnings, DBS can then pay generous dividends that beat the yields of some riskier assets. 

In no time, DBS became the market darling as investors could not get enough of this stock, making it among the best global performers. From September 2009 to the end of September this year, DBS has outperformed not just the other two local banks but also HSBC and Standard Chartered Bank. Its performance throughout this period is similar to the S&P 500 on an annual basis, but when measured in Singapore dollars, DBS did better. 

In the most recent 1HFY2025 ended June, DBS reported near-record net interest income, fees, and treasury customer sales, while market trading performance was the strongest in four years. With a net profit of $5.72 billion for the first six months of the year, unchanged from 1HY2024, DBS is likely to successfully defend its $10 billion annual net profit for the third consecutive year. Meanwhile, its market cap has reached new highs of more than $150 billion, widening its lead over the rest.

ST Engineering, like DBS, was created by the government in the country’s formative years to serve a basic need. For DBS, it was to finance SMEs; for ST Engineering, it was to become more self-sufficient in the production of weapons to equip its fledgling armed forces, so that sovereignty could be defended. 

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Over the years, ST Engineering expanded its capabilities, beginning to manufacture increasingly sophisticated weapons and platforms, not just simple 5.56mm bullets.

Eager to grow beyond the military market, the company has built up an extensive presence in the commercial aircraft maintenance, repair and overhaul space. This business was hit when the pandemic grounded global air travel, but it is now back and growing steadily. In addition, ST Engineering has built capabilities in shipbuilding, electronics, artificial intelligence, traffic management, and more — winning numerous contracts from clients far and wide. 

All the while, the company has been careful to maintain its capabilities in manufacturing weapons such as 40mm grenades and 155mm artillery shells. Such capabilities came in very useful when the war between Russia and Ukraine broke out, which, along with changes in US politics, led to a pick up in the global cadence of rearmament. 

Coupled with growth in new orders across the board, ST Engineering has been announcing ever-bigger record books, and when those orders translate into earnings growth, investors have begun to take to this stock. The substantial gains in ST Engineering’s share price were further boosted when the company, which maintains an active investor relations programme, set ambitious growth targets across various areas.