OREANDA-NEWS. Despite the drop in oil prices, the MSCI World Transportation Index has declined 11.9% in the 2015 year thus far, while Singapore’s 10 largest transport stocks by market value have averaged a 4.5% price decline and averaged negative dividend-inclusive returns of 1.4%.

Transportation, Oil & Growth

Last year, in the space of six weeks spanning October and November, the price of WTI Crude Oil futures declined from \\$85/bbl to \\$73/bbl.  The move was matched by the MSCI World Transportation Index gaining 13.8%.  However, more recently the performance of the transport sector has been less a function of fuel costs and more a function of the movement of people and goods, or in other words, simple economic demand.

Hence, the effect of low crude oil prices on the sector has not been as linear as the relationship to basic economic demand. With growth outlooks dominating global policy-maker agendas in recent months, the MSCI World Transportation Index has been moving more in tandem with the price of WTI Crude Oil futures. While the correlation coefficient of 0.22 is low, the relationship of the two markets have reverted to October 2013 levels when WTI Crude Oil futures were trading at US\\$110/bbl, and the global economy was buoyant amidst a raft of growth-stimulating policies. The MSCI World Transportation Index is presently more correlated to the world’s growth drivers – the MSCI United States Index (0.87), the MSCI Japan Index (0.64) and the MSCI China Index (0.37) – than inversely correlated to the price of oil.

Singapore’s Transport Sector

The 10 largest active transportation stocks listed on Singapore Exchange (SGX) by market value have a combined market capitalisation of S\\$41.8 billion. This includes four components of the Straits Times Index (STI) – Singapore Airlines, Hutchison Port Holdings Trust, ComfortDelGro Corporation, and SIA Engineering Company. The other six are SATS, Singapore Post, Neptune Orient Lines, CWT, SMRT Corporation and China Merchants Holdings (Pacific).

The MSCI World Transportation Index is made up of the largest transportation stocks globally, with a combined market capitalisation of US\\$979.6 billion. As noted above, this index has declined 11.9% in the year thus far. It trades at a price-earnings (P/E) ratio of 15.8 and maintains a dividend yield of 2.4%.

In comparison, these 10 largest transport stocks listed on SGX trade at an average P/E ratio of 19.4, which reflects the average price investors are willing to pay for every dollar these 10 stocks earn. By averaging a price loss of 4.5% and negative dividend-boosted returns of 1.4%, the 10 transport stocks have averaged three-year total returns of 31.5%. These 10 stocks also maintain an average dividend yield of 4.4%

Among the 10 stocks categorised to the transportation sector, the five best performers in the year-to-date were CWT, SATS, ComfortDelGro Corporation, China Merchants Holdings (Pacific) and Neptune Orient Lines. In terms of trading activity, ComfortDelgro Corporation was the most active in terms of average three-month turnover, whereas China Merchants Holdings (Pacific) had the lowest average three-month turnover.
The table below details the 10 largest transport stocks and is sorted by market capitalisation. Note that clicking on a stock name will take you directly to its page on SGX StockFacts.

Name SGX Code Mkt. Cap. in S\\$ mm % Price Change YTD % Change - Dividend Adj. YTD % Change - Dividend Adj.  [3 Years] Div. Ind Yld. in %
Singapore Airlines C6L 11,500 -15.3 -14.0 0.7 2.2
Hutchison Port Holdings Trust NS8U 6,662 -16.4 -9.8 9.9 8.6
ComfortDelGro Corporation C52 6,013 7.7 10.7 83.9 3.0
SATS S58 3,873 14.8 17.4 52.8 4.0
SIA Engineering Company S59 3,818 -19.4 -17.6 -7.3 4.3
Singapore Post S08 3,773 -8.6 -5.7 84.8 3.7
Neptune Orient Lines N03 2,107 -3.6 -3.6 -25.7 N/A
SMRT Corporation S53 1,796 -25.3 -24.4 -25.1 2.8
CWT C14 1,207 25.6 30.1 75.7 3.5
China Merchants Holdings (Pacific) C22 1,036 -4.2 2.8 65.0 7.5
Average     -4.5 -1.4 31.5 4.4

On average, the stocks were trading 22.8% below their 12-month highs and 11.6% above their 12-month lows. The five stocks trading closest to their 12-month highs were SATS, ComfortDelGro Corporation, CWT, Singapore Post, and China Merchants Holdings (Pacific).

The next 10 largest capitalised stocks that represent the transport sector after those in the table above are Keppel Telecommunications & Transportation, Tiger Airways Holdings, SBS Transit, Vibrant Group, Rickmers Maritime, Poh Tiong Choon Logistics, Singapore Shipping Corporation, Samudera Shipping Line, Ramba Energy, and Manhattan Resources.