The Singapore markets are known for being stable; stocks don’t seem to move at all. But this year has been especially bad, and these 7 Singapore Blue Chip Stocks are down 10% (which is a big deal since most Singapore Blue Chip stocks only move in single digit percentages).
But where there’s crisis, there’s opportunity right?
We take a look at these underperforming blue chip stocks and highlight those that provide an opportunity for you to consider as a Singapore investor today:
| Blue Chip Stock | Sector | Ticker (SGX) | YTD share price decline | P/E ratio (times) | Dividend yield |
|---|---|---|---|---|---|
| Seatrium Limited | Offshore Marine | S51 | -34% | N.M. | Nil |
| Emperador Inc | Consumer discretionary | EMI | -20% | 31.7 | 1.5% |
| Jardine C&C | Consumer discretionary / Conglomerate | C07 | -19% | 5.9 | 6.5% |
| Mapletree Pan Asia Commercial Trust | Real estate | N2IU | -16% | N.M. | 6.8% |
| CapitaLand Investment | Real estate | 9CI | -13% | N.M. | 4.5% |
| Mapletree Logistics Trust | Real estate | M44U | -13% | N.M. | 5.9% |
| Genting Singapore | Consumer discretionary | G13 | -12% | 17.7 | 3.9% |
1) Seatrium Limited (SGX: S51)
Seatrium reported a massive $1.68 billion net loss in 2H23, a more than tenfold increase from the entire FY22, and announced that it will undertake a 20:1 share consolidation exercise.
The company also announced that it has reached in-principle settlement agreements with the Brazilian authorities in relation to “Operation Car Wash”, a probe into allegations of payoffs to secure energy-related contracts in Brazil.
The agreements include a settlement payment of 671 million Brazilian real (about S$182.4 million) in relation to the probe. In addition, it said it had also made a provision of $82.4 million for indemnity to Keppel Corporation in relation to this matter.
Seatrium also faced investigations in Singapore on the alleged corruption offences that occurred in Brazil.
Seatrium recently updated that the Attorney-General’s Chambers (AGC) in Singapore agreed to enter into a deferred prosecution agreement (DPA) with Seatrium.
As part of the terms of the DPA, the AGC is agreeable for the DPA to impose on Seatrium a requirement to pay a financial penalty of US$110 million. The AGC is agreeable for up to a maximum of US$53 million of the payments to be made by Seatrium to the Brazilian authorities to be credited against the financial penalty.
Accordingly, the amount payable by Seatrium to the Singapore authorities under the DPA will be US$57 million (equivalent to approximately S$76.5 million).
As this was a material event existing in FY23, Seatrium announced that it would adjust its financial statements in FY23 to include a provision of S$76.5 million. Consequently, there will be no material impact on FY24.
Although the DPA remains subject to the approval of the High Court of Singapore, this should largely mark an end to the saga and allow Seatrium to move forward.
We also recently covered Seatrium’s 1H23 earnings here with a conclusion that remains current.
During our coverage of Seatrium’s 1H23 earnings, we said:
“While it has to be acknowledged that Seatrium is able to execute projects well, as projects tend to span a few years, this leaves investors concerned on any further exposure to the status of the project as the macro environment changes in the short term.”
At this point, we are still not convinced that Seatrium would be a buy and may not ever be convinced until something substantial changes.”
As such, we would not recommend Seatrium until substantial changes mitigating its current risk profile are seen.
2) Emperador Inc (SGX:EMI)
ICYMI: Emperador is a Philippines-based manufacturer and distributor of brandy, whisky and other spirits. It was added into the STI in 2022, replacing ComfortDelGro. However, Emperador will be dropped from the STI, being replaced by Frasers Centrepoint Trust (SGX: J69U), just after being in the STI for just over 1.5 years.
Emperador saw its revenues increase by 10% YoY for 9M23. Net income for 3Q23 net income rose 5% YoY.
Emperador’s international business continue to experience double-digit percentage growth owing to its sustained sales of single malt whiskies across different markets globally, particularly in Asia and North America.
This performance is much better than that of ThaiBev (SGX: Y92) which saw lacklustre flattish revenue growth and declining profits.
Despite the lack of interest in stocks outside of the STI, Emperador, as a company, is doing well and is dual-listed on the Philippines exchange; however its P/E valuation is on the high side now.
3) Jardine C&C (SGX: C07)
Jardine Cycle & Carriage (“JC&C”) saw strong underlying profit growth of 6% in 2023, mainly supported by record results from Astra. This marks Astra’s second year of record profit, despite softer commodity prices and moderating growth in the second half of the year.
Astra contributed 12% higher profits to JC&C compared to the previous year, reflecting improved performances from most of its businesses.
Astra continued to make good progress in strategically deploying capital towards diversification away from coal. One of its entities completed the acquisition of interests in two nickel mining and processing businesses and a geothermal project..
As part of its digital transformation strategy, Astra acquired Tokobagus, a company operating the leading online used car platform in Indonesia under the OLX brand. Astra also partnered with Equinix, one of the world’s largest digital infrastructure companies, to develop data centres in Indonesia. In pursuing its healthcare strategy, Astra increased its stake in Halodoc, a leading digital health ecosystem platform in Indonesia.
JC&C’s Direct Motor Interests contributed an increase of 8%, with higher profits from Tunas Ridean in Indonesia and Cycle & Carriage Bintang in Malaysia.
The contribution from JC&C’s Other Strategic Interests was down 2%, due to lower earnings reported by Refrigeration Engineering Electrical (“REE”), offset by higher profits in Siam City Cement (“SCCC”). Truong Hai Group Corporation (“THACO”)’s profit was 57% down from the previous year, mainly due to lower automotive profits.
REE and THACO are JC&C’s Vietnamese businesses and were adversely impacted by slower economic growth. Despite the challenging environment, there are mid-term growth opportunities to seize. JC&C increased its support for THACO in the near term by investing in its five-year convertible bond. Additionally, JC&C has also increased its interest in REE from 33.6% to 34.9% through a series of on-market purchases.
We like that JC&C views itself as a strategic partner to its investees and invests through them, leveraging on their local expertise rather than having direct exposure without partners. We also like that JC&C delivered a 6% increase to dividends, in line with its underlying profit growth.
Jardine C&C’s valuation is also attractive from a P/E, P/B and yield perspective.
JC&C also made it to our undervalued stocks list in April.
4) Mapletree Pan Asia Commercial Trust (SGX: N2IU)
MPACT’s 9MFY23/24 DPU fell 10.1% YoY. Although in different asset classes, MPACT is a similar story to MLT where the Singapore assets continue to remain robust and the portfolio is being weigh down by China / HK SAR assets which account for about 31% of its net property income.
Being in an asset class with sector tailwinds does have its benefits. Festival Walk in HK SAR has a 100% committed occupancy on a 60.5% tenant retention rate, but at the price of a negative 8.1% rental reversion. This shows that MPACT has gone all out to maintain the tenant mix as part of a longer term strategy to maintain the profile of the mall and its relationship with its tenants amidst these challenging times.
Looking at the two slides above, with high occupancies and positive rental reversion in Singapore, it is also clear that Singapore assets continue to remain robust across both the business park and retail asset classes. In this regard, it is fortunate that 60% of MPACT’s NPI comes from Singapore and is also buffeted from the strong Singapore Dollar against currencies in the region.
Investor expectations on MPACT’s core Singapore portfolio have always been high, allowing the share to command a high P/B and low yield. At a 6.8% yield, the stock starts to look interesting from a valuation perspective. However, it is worth noting that MBC, its trophy business park asset in Singapore is inherently an office asset which faces sectoral headwinds.
5) CapitaLand Investment (SGX: 9CI)
CapitaLand Investment (CLI) recorded earnings per share of 3.5 cents for FY23 compared to 16.5 cents in FY22. The NAV declined from $2.96 to $2.74, mostly due to FY22 dividends being distributed during FY23.
Much of the lower earnings was attributable to lower valuation of its properties. Cash PATMI was 15.3 cents, comprising operating PATMI of 11.1 cents and 4.2 cents of portfolio gains from asset recycling.
Of note was the Lodging Management fee-related earnings (FRE) which increased 28% YoY with nearly 9,600 units turning operational. Riding on robust rebound of international travel, RevPAU grew 20% from a year ago, driven by higher occupancy and average daily rates across most geographies.
As CLI approaches its FY24 deployed funds under management (FUM) target of S$100 billion, CLI also announced today it will target to double its FUM to S$200 billion in the next five years.
The increase in FUM was mainly due to the acquisition-led growth of CLI’s listed and private funds, additional capital raised for existing funds, as well as the establishment of new funds during the year.
Inherently, a property investment platform is plague by existing macro risks on both the economic and operational front. Financially, the high interest rate environment takes a toll while office occupancies and rental prices have continued to pull down a portfolio that is diversified across asset classes.
6) Mapletree Logistics Trust (SGX: M44U)
MLT is one of the few REITs that has seen a DPU increase this year. For its 9M FY23/24, revenue increased 0.2% while net property income fell 0.2%. The increased revenue was due to higher number of properties in its portfolio as well as higher contribution from existing properties in Singapore. Growth was partly offset by weaker performance in China. The strong SGD also continued to diminish the value of foreign returns.
However, distribution increased by 0.7% due to MLT’s distribution of divestment gains. Excluding the divestment gains in both 9M FY23/24 and 9M FY22/23, DPU would have fallen about 4%.
MLT is focusing on portfolio rejuvenation with over S$900 million in acquisitions of modern assets and over S$200 million in divestments announced / completed. Portfolio metrics remained resilient at 95.9% occupancy and 3.8% positive rental reversions.
The portfolio achieved positive rental reversions across the markets ranging from 3.6% in South Korea to 9.1% in Singapore, except for China which registered negative rental reversion of 9.4%.
Just like CLI, MLT face similar issues. Additionally, its China and HK SAR portfolio accounts for nearly 42% of asset under management. While it is the underperforming part of the portfolio, this could be a revival story should the assets in China & HK SAR revitalise.
7) Genting Singapore (SGX: G13)
Genting Singapore’s FY2023 performance has demonstrated a strong recovery, particularly with Resorts World Sentosa (“RWS”) bouncing back to levels nearing the pre-pandemic period.
Genting Singapore’s revenue increased 40% YoY, indicating that the post pandemic recovery is gathering momentum, although there is expectation of some potential headwinds. The strong increase in revenue translated to an 80% YoY increase to net profit.
RWS delivered an Adjusted EBITDA representing around 86% of pre-Covid Adjusted EBITDA. For 4Q23, gaming revenue growth continued to be robust while non-gaming revenue was impacted by various factors such as the strong Singapore dollar, persistently high airfares and accommodation costs, and the slower recovery of Chinese outbound travel.
Looking ahead, Genting Singapore will be a beneficiary of Singapore’s robust hospitality scene. The hospitality scene in 1Q24 was likely stronger than 1Q23 due to the Taylor Swift Concerts and will continue to be robust in 2024 as Singapore continues to attract visitors.
On 18 Mar, China’s embassy in Singapore issued a warning to Chinese citizens in Singapore not to gamble overseas, stating that it was illegal in China and overseas. Genting Singapore’s share price surprisingly was unaffected by the news; this could be due to the lack of clarity on the possible impact.
At the current valuation, we think Genting Singapore is fairly priced and not very attractive.
Genting Singapore also has substantial capital expenditure to be incurred from its RWS 2.0 expansion, which would limit its dividend payouts. Moreover, RWS would also have to deliver returns on its expansion.
Is it time to load up on Singapore Blue Chip Stocks?
Many of these stocks are down and out. Some are actually performing better than previous years but have also seen its share price decrease due to the broader environment.
We zoomed in on Singapore blue chip stocks that had underperformed the most. Of the 7 stocks we covered, Jardine C&C and Mapletree Pan Asia Commercial Trust are two of our preferred buys on the basis of their merits as explained above.