To The Moon

Higher ROE Continued to Attract Higher Valuations 

The positive relationship between profitability and valuation remained evident across the SGX small and mid-cap (SMID) universe. Across approximately 220 SGX SMIDs, including S-REITs, median price-to-book (P/B) multiples increased from 0.55x in the lowest return on equity (ROE) quartile to 2.25x in the highest ROE quartile.

ROE and P/B recorded a Spearman rank correlation of 0.62. A Spearman rank correlation measures how closely two variables move together when ranked, with a reading of 1.0 indicating a perfect positive relationship. The 0.62 reading indicates a relatively strong positive association, with companies generating higher returns on shareholder capital generally also ranking among those trading at higher valuation multiples.

The findings reinforce the importance of capital efficiency in driving market recognition. While growth prospects, earnings visibility, liquidity and sector fundamentals remain important valuation considerations, companies generating stronger returns on equity generally attracted higher valuation multiples. Across the universe, median current ROE was 6.8% and median current P/B was 0.97x.

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Data as of 31 July 2026, Source: LSEG Workspace, SGX

Note the above analysis is based on approximately 220 SGX SMIDs with valid current ROE and current P/B data in the 7M26 repaired file, including S-REITs. Companies with missing current ROE or P/B data were excluded. Negative ROE observations were included in the quartile and rank-correlation analysis. 

Sustained Capital Efficiency Across Multiple Sectors

Among non-REIT SMIDs that recorded ROEs above 10% at June 2024, June 2025 and July 2026, the table highlights 15 companies with the highest ROEs as of July 2026.  The cohort generated a median current ROE of 29.8% and median current P/B of 2.9x, significantly above the broader universe median ROE of 6.8% and median P/B of 0.97x.

Data as of 31 July 2026, Source: LSEG Workspace, SGX.

The cohort comprises $Azeus(BBW.SI)$ , $PropNex(OYY.SI)$ , $SoilbuildConstr(ZQM.SI)$ , $Oiltek(HQU.SI)$ $Boustead(F9D.SI)$ $XMH(BQF.SI)$ $MoneyMax Fin(5WJ.SI)$ $Aspial Lifestyle(5UF.SI)$ $IFAST(AIY.SI)$ $VICOM Ltd(WJP.SI)$ $Micro-Mechanics(5DD.SI)$ $TJ DaRenTang USD(T14.SI)$ $Sheng Siong(OV8.SI)$ $MarcoPolo Marine(5LY.SI)$ $First Resources(EB5.SI)$.

Azeus Systems Holdings generated a current ROE of 63.7%, while PropNex and Soilbuild Construction Group generated current ROEs of 58.8% and 57.0%, respectively. Oiltek International, Boustead Singapore, XMH Holdings and MoneyMax Financial Services also maintained ROEs above 30% as of July 2026.

Spanning technology, industrials, consumer, healthcare, real estate and financial services exposures, the cohort demonstrates that sustained capital efficiency is not confined to a single market segment. Companies capable of consistently generating higher returns on shareholder capital generally also commanded stronger valuation metrics than the broader SMID universe.

S-REITs generally generated lower ROEs than the highest-returning operating companies, reflecting the sector's asset-backed and income-oriented business model. As of July 2026, Alpha Integrated REIT maintained an ROE of 13.2%, followed by $Keppel DC Reit(AJBU.SI)$ at 11.4%, $ParkwayLife Reit(C2PU.SI)$ at 9.4%, $Keppel Reit(K71U.SI)$ at 8.0%, $Landmark REIT(D5IU.SI)$ at 7.5%, $Daiwa Hse Log Tr(DHLU.SI)$ at 6.9% and $AIMS APAC Reit(O5RU.SI)$ at 6.8%. While ROE remains a useful measure of capital efficiency, S-REIT valuations are often more influenced by distribution yields, asset quality, occupancy levels, rental growth and financing costs.

How Companies Improve Capital Efficiency

For operating companies, stronger ROE is typically built through a combination of better asset use, stronger margins, disciplined balance-sheet management and focused capital allocation. Value creation levers provide a practical framework for this, with asset optimisation improving utilisation and productivity, financial optimisation lifting margins, cash flow and ROE/ROIC, and capital returns reinforcing discipline through dividends, special distributions and buybacks.

Companies can also improve capital efficiency by reallocating capital toward higher-return opportunities. Growth and transformation support future earnings through acquisitions, new business lines, ASEAN expansion and AI enablement, while portfolio actions and value unlock can sharpen strategic focus through disposals, restructuring, capital recycling, asset monetisation and business simplification.

The final step is market recognition. Clear guidance, investor engagement and enhanced disclosures can help translate stronger operating returns into improved liquidity, broader investor participation and valuation support, completing the link from capital efficiency to shareholder value.