Singapore Shipping (SGX:S19) Is Finding It Tricky To Allocate Its Capital

Mon, Aug 25, 2025, 6:56 PM 3 min read

If we're looking to avoid a business that is in decline, what are the trends that can warn us ahead of time? Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. This indicates to us that the business is not only shrinking the size of its net assets, but its returns are falling as well. And from a first read, things don't look too good at Singapore Shipping (SGX:S19), so let's see why.

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If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Singapore Shipping, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.054 = US$9.8m ÷ (US$193m - US$11m) (Based on the trailing twelve months to March 2025).

So, Singapore Shipping has an ROCE of 5.4%. In absolute terms, that's a low return and it also under-performs the Shipping industry average of 7.8%.

See our latest analysis for Singapore Shipping

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Singapore Shipping's past further, check out this free graph covering Singapore Shipping's past earnings, revenue and cash flow.

We are a bit worried about the trend of returns on capital at Singapore Shipping. To be more specific, the ROCE was 7.0% five years ago, but since then it has dropped noticeably. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. If these trends continue, we wouldn't expect Singapore Shipping to turn into a multi-bagger.

In summary, it's unfortunate that Singapore Shipping is generating lower returns from the same amount of capital. Despite the concerning underlying trends, the stock has actually gained 37% over the last five years, so it might be that the investors are expecting the trends to reverse. Regardless, we don't like the trends as they are and if they persist, we think you might find better investments elsewhere.