Are you investing in the right industry?

　　● By Joshua Tay 　Does the term book-to-bill ratio sound familiar to you? Do you know the demand and supply numbers of private condominiums in Singapore for the next year ? If you do， you must have already performed some sort of industry analysis on the electronics and property industries (or sectors as commonly referred to in stockmarket terms). 　Most investment processes include some sort of industry analysis. This is important because many studies have shown that over a period of time， some industries have per-formed better than others. For example， between 1987 and 1996， banking stocks in Singapore have generated better returns than other industries such as shiprepair. Industry analyses will uncover these performance differences and help identify both unprofitable and profitable opportunities (situations) 　It is also important to note that past performance alone will not help predict future performance. The factors or conditions that helped an industry to prosper in the past will change over time. Identifying and studying these factors will provide some clues to the entry and exit points of the investments. Going back to our earlier example， economic growth is an important criterion for banks' earnings. Between 1987 and 1996， Singapore enjoyed an uninterrrupted average GDP growth of 8.9%. This allowed the banks' earnings to grow at a compound rate of 11.3% when the broader market generated only 8.5% growth. With GDP growth decelerating because of the Asian crisis， can we maintain the same sanguine outlook for the banks? 　Having determined that industry analyses are important for successful investing， the next step is to find out how we can go about doing one. There is no generic framework that is applicable to all industries， but there are commonalities which we can identify. In a free market economy， demand and supply are key determinants of price， and price is always an important contributor to any profit-driven organisation. Hence， a successful indstry ana-lysis will have to identify the underlying fac-tors driving demand and supply. 　Factors that drive demand vary across industries， and are too numerous to list. However， it is important to note that demand can be categorised as "seasonal"， "cyclical" or "secular". As the word suggests， seasonal fac-tors recur year after year. Cyclical factors， on the other hand， follow very closely to the economic cycles of the market. Secular factors are more long term in nature. Seasonality or economic cycles will have minimal impact on secular trends. 　Take an airline as an illustration. Most Singaporeans take their vacation in December. That is why airline seats are difficult to secure during that time. This is the seaso

　　nal factor because it occurs every year around the same time. Having said that， Singaporeans usually take vacations more frequently when the economy is doing well， and less so during reccessionary times. The rise and fall in demand in accordance to economic activities is the cyclical factor. Finally， the middle class population in Singapore has been rising over the last 20 years. This group is generally more affluent. Part of the lifestyle usually includes taking regular vacations to exotic destinations. Such lifestyle doesn't change annually， nor does it follow the ups and downs of economic growth. The demand for air travel will grow so long as the middle class population continues to increase. This is an example of secular demand. 　Classifying demand factors into these categories is very useful. As long-term inves-tors， we do not want to be constantly reacting to signs that are short term and volatile in nature such as seasonal， and to a lesser extent， cyclical trends. Buying and selling stocks based on these short-term trends are not only expensive (brokerage cost) but difficult to time as well. Instead， we should focus on long-term trends. They usually have a longer and more permanent impact on share prices. 　A key factor in identifying an attractive industry is pricing power. The ability of an industry to price its product at a profitable level without compromising its business pros-pect is important， and this is affected by many factors. Inelastic demand allows the tobacco producers to maintain good profits despite the rapidly rising tariffs all these years. Barriers to entry is another factor. Mobile-phone charges used to be very expensive because there was only Singapore Telecom providing the ser-vice (monopoly). With increased competition from M1， rates have been declining gradually. All things being equal， the more competitive the industry is， the lower the pricing power， and hence profits. Competition may be good for the consumers， but it seldom benefits the shareholders. 　Another factor that will impact the com-petitive environment of an industry is the cost structure. In general， indsutries with high fixed costs are more competitive than those that have high variable costs. We often hear about coun-tries being accused of 'dumping steel' onto other countries. Well， this is the case in point. Steel mills are expensive to construct. But once built， the investment costs are 'sunked'. On the other hand， the running cost to produce steel is relatively low. Since there are so many steel mills around the world (almost every country has one for strategic reasons)， supply is in abundance. As competition intensifies in the global market， recovering investment cost of the mills becomes a secondary objective for management. What is more important

　　is to keep the production ongoing and sell the steel at a price that can at least cover the variable cost component. These mills will definitely be loss-making， but at least they can continue to operate and not generate serious unemploy-ment for the economy (steel industry is very labour-intensive). 　Having looked at the fundamental issues， do we always buy into an industry with positive trends developing? The answer is 'no'. Con-fused? Here is why. The key to any successful investments is to stay ahead of what the market is discounting. Suppose we are bullish on the outlook of the residential property sector because owning a home is every Singaporean's dream and the island has limited landsupply. But this view is widely observable. Further-more， most of the residential property stocks have already outperformed the market by huge margins. These are signs that the marke has probably discounted the positive conclusion of our analysis. As such， the investment upside is probably limited. Conversely， if our conclu-sion unearths new information from the gene-ral market， we may have discovered something interesting here. 　To confirm that we have a good find， check out the valuation to see if it is attractive. There are many valuation tools， but the commonly used ones are Price/Earnings (PE)， Enterprise Value/EBITDA*， Price/Book(P/B)， and Dis-counted Cash Flow (DCF). Make a cross-industry comparison as well as historical com-parison. Going back to our property example. If our conclusion is new to the market， the industry is trading at the lower end of its histo-rical PE band， and it is also very attractive on PE terms versus the other industries in Singapore...bingo! 　In conclusion， I would like to leave you with a brain teaser. Imagine this is 1996 and you are an investor looking at the Dynamic Random Access Memory (DRAM) industry:

　　DRAM is a semiconductor chip used in most electronic products such as personal computers. The business is cyclical in nature because corporate and private consumption of PCs usually rises when the economy is doing well. There are， however， two secular trends that underpin the growth in the industry. First， more and more people are buying PCs for their home and oiffice. Second， the requirement of DRAM per PC is also on the rise as processing power of computer increases exponentially. On the competitive issue， the cost to build a wafer fab is extremely high (about US$1b)， and the technology is usually state-of-the-art. Besides capital and technology， there are no other significant barriers to entry. Margin for the industry had been very good because o supply shortage. This probably explained why share prices outperformed the market in 1995. The historical five-year PE band for selected stocks in the industry between 1991 and

　　1995 was about 10 to 100. The average PE during the period was 30. The industry is currently trading at a PE in the low teens. 　Would you invest in this industry?

       你是否選對投資領域?

　　你對“訂貨與帳單比例”這個名詞熟悉嗎?你知道新加坡私人公 寓在明年的供需數(shù)據嗎?如果你知道，那么你肯定已針對電子業(yè)和房 地產業(yè)作了行業(yè)分析(或者是股票市場所慣用的“組別”)。

　　大多數(shù)投資都帶有行業(yè)分析的成分。這當然重要，因為許多研究 顯示，經歷時日有些行業(yè)會較其他來得出色。例如，從1987至1996年 之間，新加坡銀行股所創(chuàng)造的回報率便較其他行業(yè)來得高，比如修船 業(yè)。行業(yè)分析可將它們的差別表現(xiàn)暴露無遺，也讓我們辨別它們到底 盈利與否。

　　需要注意的是，過去的成績并不能幫我們預測未來的表現(xiàn)。促使 某項行業(yè)在過去蓬勃發(fā)展的因素或情況，將會隨著時間而改變。辨別 和研究這些因素，可為投資的進退決定提供線索�；氐角懊娴睦�子， 經濟增長是銀行盈利的重要標準。從1987到1996年之間，新加坡取得 了8.9%的持續(xù)平均經濟增長。這使銀行盈利取得11.3%的復增長，而 整體市場的增長卻只有8.5%。當經濟增長因亞洲危機而下跌時，我們 的銀行業(yè)是否還能維持這種樂觀局面呢? 　　既然我們知道行業(yè)分析對投資的成敗關系重大，下一步便要知道 如何進行。沒一種方法可以普遍應用于所有行業(yè)，但我們還是可以從 中找到一些共同點。在自由市場經濟中，供需是決定價格的關鍵，而 價格則對盈利機構貢獻良多。因此，成功的行業(yè)分析，便須對那些影 響供需的基本因素作出辨別。

　　影響需求的因素因行業(yè)而異，可是不勝枚舉。然而，我們須知， 需求可以分為季節(jié)、周期或長期。顧名思義，季節(jié)因素每年重復，而 周期因素則與市場的經濟周期密切相關。長期因素卻是長期的。季節(jié)性或經濟周期兩者對長期趨勢的影響都不大。

　　以航空公司為例。多數(shù)的新加坡人都習慣于在12月度假。這就是 為什么在那時候較難訂到機位。這是季節(jié)因素，因為它在每年的同一 時間發(fā)生。然而，新加坡人在經濟情況良好時經常度假，而在經濟衰 退時則減少。供需情況依經濟活動而變化是周期因素。另外，過去20 年來新加坡的中產階層大為增加。這群人一般上較為富裕，他們經常 到國外度假。但這種生活方式不會每年改變，或者隨著經濟增長而起 伏。所以，只要中產階層人口繼續(xù)增長，航空的需求便會上升。這 是長期需求的一個例子。

　　將需求因素加以歸類非常實用。作為長期投資者，我們不須經常 因季節(jié)性或周期性這些短期、多變的訊號作出反應�；�于這些短期因 素來買賣股票不只昂貴(手續(xù)費)，而且時間也難以拿捏。因此，我 們應該將焦點集中在長期趨勢。這項因素通常會對股價產生長遠和持 久的影響。

　　價格是尋找具有吸引力行業(yè)的重要因素之一。一個行業(yè)如果能將 產品定在盈利水平卻又不致于影響商業(yè)前景很重要的，但這點受到許 多因素的左右。缺乏彈性的市場需求，使香煙制造商得以維持良好的 盈利，即使在關稅持續(xù)上升的情況下。行業(yè)障礙是另一項重要因素。

　　流動電話的收費一度非常昂貴，因為只有新電信提供這項(壟斷)服 務。當M1帶來競爭后，收費率便逐漸下降。在正常情況下，行業(yè)越競 爭，價格就越便宜，而盈利也是。競爭可能對消費者有利，但對股東 來說好處不多。

　　另一項對行業(yè)競爭環(huán)境大有影響的因素是價格結構。一般上，固 定成本高昂的行業(yè)會較變動成本高昂的行業(yè)更有競爭力。我們常聽聞 一些國家向另一些國家“傾銷鋼鐵”而遭來非議，而這正是問題所在 。鋼鐵廠的建造極為昂貴，可是一旦建成，投資成本便“沉淀”下來 。而另一方面，生產鋼鐵的變動成本卻相對低廉。既然全球有許多鋼 鐵廠(基于戰(zhàn)略理由，幾乎每個國家都有)，供應非常充足。當全球 市場競爭加強，爭取投資成本的回籠已成為管理層的次要目標。更重 要的卻是讓生產維持下去，并以只求收回變動成本的賣價將鋼鐵賣出 。這些鋼鐵廠肯定會虧損，但最少它們可以繼續(xù)營運，而且不致于帶 來嚴重的失業(yè)問題(鋼鐵工業(yè)極為勞動密集)。

　　考慮了基本因素后，我們所要投資的行業(yè)是否應從趨勢樂觀方面 下手?答案是“不”。如果你感到莫名其妙，以下就是解釋。在投資 上取得成功的關鍵，是跑在市場的前端。例如，擁有房屋是每一個新 加坡人的夢想，而且這個小島土地有限，所以我們對于住宅產業(yè)前景 看好。但是這項觀點已被普遍認同。此外，大多數(shù)住宅產業(yè)股票的表 現(xiàn)已經遠遠超越市場。由此可知，市場可能已將我們的結論加以消化 。因此，投資盈利可能有限。相反的，如果我們的結論是超出一般觀 點，那我們可能有所發(fā)現(xiàn)。

　　要確定我們是否有所發(fā)現(xiàn)，讓我們從估價中來證實。估價的方式 眾多，但較為常用的是本益比、企業(yè)價值/稅前盈利和現(xiàn)金流量貼現(xiàn) 。我們要作出全行業(yè)的比較和歷史比較�；氐椒康禺a的例子，如我們 的結論在市場上仍屬新穎，這行業(yè)又在本益比歷史波動的下限交易， 而與新加坡其他行業(yè)相比這本益比也非常具有吸引力……那我們中獎 了! 　　最后，大家來動動腦筋。假設這是1996年，而你又是一個關注動 態(tài)隨機存取記憶體的投資者： 　　動態(tài)隨機存取記憶體是應用于電子產品的半導體晶片，如個人 腦等。這項業(yè)務基本上屬于周期性，因為企業(yè)和個人對個人電腦的消 費常隨著經濟繁榮而增加。然而，有兩項長期因素支撐著這行業(yè)的增 長。首先，越來越多家庭和公司購買個人電腦。其次，由于電腦的處 理能力大量提升，使每臺電腦對動態(tài)隨機存取記憶體的需求不斷增加 。從競爭角度而言，建造晶圓代工廠的成本極為高昂(約10億美元) ，而科技則十分先進。除了資本和科技，便沒有其他顯著的行業(yè)障礙 。由于供應短缺，所以這項行業(yè)的利潤向來不錯。這就是為什么在 1995年這行業(yè)的股價超越市場。從1991到

　　1995年之間，這行業(yè)內某些 股票的5年本益比歷史波動大約是介于10至100。而在這期間的平均本 益比是30。目前這行業(yè)是在本益比偏低的范圍內交易。

　　你會在這行業(yè)投資嗎?

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