2014 is coming to a close. What a year it has been. Let us look back and review the three blue chips within the Straits Times Index (SGX: ^STI) that has performed the best so far this year. The nuts and crackers Sitting at the top of the list is Olam International Limited (SGX: O32). The company’s stock price has appreciated 37.5% so far this year (as of 19 December 2014). In comparison, the Straits Times Index is up by only 3.5%. In April 2013, Olam announced a set of strategic initiatives with the main aims of improving its ability to generate free cash flow,…
2014 is coming to a close. What a year it has been. Let us look back and review the three blue chips within the Straits Times Index (SGX: ^STI) that has performed the best so far this year.
The nuts and crackers
Sitting at the top of the list is Olam International Limited (SGX: O32). The company’s stock price has appreciated 37.5% so far this year (as of 19 December 2014). In comparison, the Straits Times Index is up by only 3.5%.
In April 2013, Olam announced a set of strategic initiatives with the main aims of improving its ability to generate free cash flow, reducing its leverage, simplifying its business structure, and educating the public about the workings of the firm. The strength of Olam’s business had been criticised by the short-seller Muddy Waters Research in late 2012, prior to the firm’s adoption of the strategic initiatives.
At the end of March 2014, a consortium of investors led by Temasek Holdings, one of Singapore’s sovereign wealth funds, offered to buy over all the shares of the company at S$2.23 per share (the consortium currently owns around four-fifths of the company). This is a mark of confidence in Olam by its largest shareholder (Temasek was already a major shareholder prior to the offer) and would likely have helped to dispel some of the market’s uncertainties with the company’s business.
Earlier this December, Olam announced a major acquisition of the cocoa business of Archer Daniels Midland (ADM). The move will make the company one of the world’s largest cocoa players.
The beer and the elephant
Thai Beverage Public Company Limited (SGX: Y92) had an interesting year in 2013 with its share price growing by 33% despite its profit dropping by 33%. As it turns out, the alcoholic beverages maker had enjoyed significant one-off gains in 2012; if those gains were excluded, the firm’s bottom-line would have grown by 18% instead.
As we prepare to exit 2014, Thai Beverage has had a good year – its shares have made a 26% year to date gain with its revenue and profit growing by 5% and 22%, respectively, for the first nine months of 2014 compared to a year ago.
Earlier this November, the company unveiled its “Vision 2020” strategic roadmap where it has plans to grow revenue from its non-alcoholic beverages business segment to over 50% of its overall top-line (the segment is currently just 10% of total sales). The roadmap also showcased the company’s intentions to “increase revenue contribution from outside of Thailand to over 50% [it’s barely 5% currently].” Meanwhile, other aspects of the roadmap sees Thai Beverage wanting to streamline its business structure and improve its core brands.
The taxi and the bus
The third best performing blue chip is global transport company ComfortDelGro Corporation Limited (SGX: C52) with a 23.88% gain so far this year.
From 2009 to 2013, ComfortDelGro has managed to consistently grow both its top- and bottom-line in each calendar year. With the transport outfit’s year-on-year revenue and profit growth of 9% and 8%, respectively, for the first nine months of 2014, the company looks set to continue that record.
But despite achieving consistent historical growth, investors should still be keeping an eye out for disruptive upstarts, like the Grab Taxi mobile app, which can affect the firm’s taxi business. Also, given ComfortDelGro’s size (nearly S$4 billion in annual revenue), investors might also want to think hard about where the company can grow into over the next few years.
All the three companies above have significantly outperformed the Straits Times Index this year. Is this a sign of superior performance for years to come? Or has the market been overly optimistic about these companies’ prospects? That’s an interesting question that each investor has to answer on his or her own.
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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 contributor Stanley Lim doesn’t own shares in any companies mentioned.