Archive for January, 2011

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


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.


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

Like Singpost, SMRT also posts extremely healthy numbers and growth despite the down turn. 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.


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 ROA (5 – 7%) with moderate leverage. Do note that economic moats are not always impenetrable and can be eroded over time.


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