PERFORMANCE ANALYSIS OF SINGAPORE - EXCHANGE LISTED REAL ESTATE AND CONSTRUCTION COMPANIES

Abstract

This study investigates the performance of real estate and construction companies from two different perspectives; i.e., investment performance (risk-return) analysis and financial performance (financial ratios) analysis, for the purpose of assisting investors in their decision-making and on their selection of sectors and companies to invest in. The daily share price data of the selected real estate and construction companies, the Singapore Total Market Index (TOTMKSG), the sectoral indices, as well as the Singapore 3-months Treasury Bill rate (middle rate) were extracted from Datastream® for the measurement of returns and risk-free rate. All the time-series key financial indicators, balance sheet statements and accounts were also extracted from Datastream® to compute the respective financial ratios. The analysis in this study is broadly divided into two parts.

Part I evaluates and compares the investment performance of real estate and construction sectors with other sectors of the stock market, as well as the performance of the individual real estate and construction companies. Part II uses the time-series key financial ratios to analyze the financial performance of the sample companies.

The Jensen and Adjusted Jensen indices for the All-companies portfolio confirm that, on average, real estate companies have risk-adjusted returns better than the market return. City Developments were ranked 1st for all the risk-adjusted indices, making it the best performing stock on a risk-adjusted basis over the study period. SC Global Developments, Wheelock Properties and Capitaland also achieved outstanding risk-adjusted performance indices. The Jensen and Adjusted Jensen indices for the All-companies portfolio confirm that, on average, construction companies have risk-adjusted returns better than the market return. Low Keng Huat were ranked 1st for all the risk-adjusted indices, making it the best performing stock on a risk-adjusted basis over the study period. Rotary Engineering, Hiap Seng Engineering, Koh Brothers Group and Lum Chang Holdings also achieved outstanding risk-adjusted performance indices.

Construction companies, on average, utilized a higher level of debt than real estate companies. Construction companies have achieved successful application of financial leverage which is reflected in its return on equity that outperformed those of the real estate companies. However, the earnings per share (EPS) and dividends per share (DPS) of the real estate companies outperformed those of the construction companies.