It is often said that elephants don?t gallop. The catchy phrase was coined by investing guru, Jim Slater, who reckoned that small companies are more likely to grow faster than lumbering blue chips.
There is some truth behind the overused phrase. After all, most blue chips start out as small companies. But after a period of rapid expansion they eventually find that growth starts to slow, which is only natural. But to assume that all elephants don?t gallop is a sweeping generalisation.
I can think of plenty…
There is some truth behind the overused phrase. After all, most blue chips start out as small companies. But after a period of rapid expansion they eventually find that growth starts to slow, which is only natural. But to assume that all elephants don’t gallop is a sweeping generalisation.
I can think of plenty of large companies that have grown at a rapid pace and continue to do so. Here are a few of our home-grown Singapore blue chips that have grown their earnings rapidly over the last five years.
|Company||eps growth last 5 years*||PE|
|Sembcorp Marine (SGX: S51)||30.9%||27|
|Keppel Corp. (SGX: BN4)||21.5%||13|
|Sembcorp Industries (SGX: U96)||20.8%||21|
|Jardine Cycle & Carriage (SGX: C07)||15.8%||27|
|Olam International (SGX: O32)||13.7%||23|
It is easy to confuse Sembcorp Marine with Sembcorp Industries. That’s because the latter owns around 60% of the former. Sembcorp Marine is renowned around the world for building rigs, building and repair ships and offshore construction. Its hub is situated in Singapore but it also has operations in Indonesia and China and as far afield as Brazil and the UK.
As you would expect from a company that deals in large projects, its earnings can be quite lumpy. Nevertheless, Sembcorp Marine’s annual earnings per share (eps) growth over the last five years have been a mouth-watering 31%.
Jardine Cycle & Carriage is part of the sprawling Jardine Matheson Group. In Singapore, we probably know it best as the distributor of Mercedes-Benz, Mitsubishi, Kia and Citroen cars. The company also has a stake in Indonesia’s Astra International, which means that it is exposed to mining and the operation of plantations. Over the last five years, the company has grown profits at around 15% a year.
It seems that elephants can gallop. I can’t guarantee the ride won’t be a bumpy one but then again no investment ever is.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.