Economic Moats of SGX Listed Companies

THIS ARTICLE WAS WRITTEN BY TAY JUN HAO AND FIRST PUBLISHED ON THE ASIA REPORT

Here are some locally-listed companies that possess economic moats.

Singpost

Singpost possesses a great economic moat – namely it’s the virtually the only provider of mail services in Singapore. No other close competitor exists to rival it due to regulatory constraints. In other words, as long as regulations do not change, Singpost has pretty much been given a license to print money.

Do note however that Singpost has also branched into other businesses whereby it possesses little or no economic moat whatsoever.

SPH

SPH is the dominant provider of printed newspaper and magazines in Singapore. It has done extremely well over the years. However, its economic moat has weakened somewhat in recent years with the rising popularity of the Internet.

As you can see, companies with economic moats tend to do extremely well over the years. Some of the hallmarks of economic moats (by no means exhaustive) are good ROE (>12%) and with moderate leverage. Do note that economic moats are not always impenetrable and can be eroded over time.

SMRT

SMRT is pretty much the dominant MRT operator in Singapore. It also runs certain bus routes in Singapore.

The nature of the service – being a necessity more than a luxury good guarantees this. Capital expenditures are much higher in SMRT than in other companies mainly due to the nature of the industry.

 

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We will only provide you with information relevant to value investing. You can unsubscribe at any time. Your contact details will be safeguarded.The information provided is for general information purposes only and is not intended to be any investment or financial advice.

All views and opinions articulated in the article were expressed in Jun Hao’s personal capacity and do not in any way represent those of his employer and other related entities. Jun Hao does not own any shares in the companies mentioned above.

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