2014 is coming to a close. What a year it has been. Let us look back and review three of the five worst-performing blue chips (as of 22 December 2014) within the Straits Times Index (SGX: ^STI). Rolling the dice At the very top of the list is Genting Singapore PLC (SGX: G13). The company has seen its share price decline by 28.8% to S$1.065 since the start of the year. In comparison, the Straits Times Index has advanced by 3.5%. 2014 has been a rough year for the operator and owner of Resorts World Sentosa both in terms of its share…
2014 is coming to a close. What a year it has been. Let us look back and review three of the five worst-performing blue chips (as of 22 December 2014) within the Straits Times Index (SGX: ^STI).
Rolling the dice
At the very top of the list is Genting Singapore PLC (SGX: G13). The company has seen its share price decline by 28.8% to S$1.065 since the start of the year. In comparison, the Straits Times Index has advanced by 3.5%.
2014 has been a rough year for the operator and owner of Resorts World Sentosa both in terms of its share price movement as well as its business developments.
The company hit a roadblock in June when its proposed development of an integrated resort in South Korea’s Jeju Island had to be delayed; work on the resort is now expected to start in the second quarter of 2015 . Then, in the third quarter of 2014, Genting Singapore saw its quarterly revenue and profit fall by 17% and 50%, respectively, compared to a year ago; the company’s casino brought in lower revenue and also suffered a lower win percentage, resulting in the lower profit.
Interestingly, despite Genting Singapore’s shares falling hard this year, the company is still carrying a high valuation with a price/earnings (PE) ratio of 23. For some perspective, the SPDR STI ETF (SGX: ES3), an exchange traded fund which tracks Singapore’s market barometer, has a PE of 13.5.
The oil slump
Rig builder Sembcorp Marine Ltd (SGX: S51) has been hit badly due to the sudden, sharp fall in oil prices which occurred in recent months. From a perch of around US$120 per barrel in June this year, oil is now sitting below US$60 per barrel. Consequently, Sembcorp Marine’s shares have lost some 25.4% to S$3.32 since the start of 2014.
But, the sudden weakness in the price of oil is not the only thing troubling the firm. Even when oil prices were higher, Sembcorp Marine had experienced declining margins. The company’s gross margin has dropped from more than 20% in 2010 to the low teens currently. Investors would need to keep an even tighter eye on Sembcorp Marine’s profit margins going forward now that the price of oil has declined to levels last seen in 2009.
Another oil-related casualty
Keppel Corp has also been affected by the slump in oil prices as it has a rig-building arm that contributed to some 58% of its overall revenue in 2013. If the price of oil stays low, it might just reduce the capital expenditures that drillers and explorers are wiling to spend; in the process, the growth of Keppel Corp’s rig-building business might be hampered. Besides that, Keppel Corp’s also facing pressure from a slowdown in the property markets in both Singapore and China. The development of real estate is another big part of the conglomerate’s business and it is active in both the aforementioned countries.
But it’s not all gloomy news with the firm. Throughout 2014, Keppel Corp’s various listed-subsidiaries have actually been helping to unlock shareholder value by selling off assets and spinning off some data-centre properties into a real estate investment trust.
Earlier this month, my colleague Chong Ser Jing looked at Keppel Corp’s historical valuations and found that the firm was trading at a PE ratio that’s far below its long-term average. This might mean the company’s a bargain, but as always, no one can be sure and only time will tell.
All three companies mentioned above have been facing some sort of business difficulties in 2014 which have partly contributed to their lower share prices. But although it hasn’t been a good year, it’s also worth pointing out that temporary business problems over the course of 12 months might not be that significant after all for long-term investors if the trio can overcome them and continue growing in the future. Over the past ten years, on a dividend adjusted basis, the trio have generated total returns for their shareholders in the range of 250% to 630%.
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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 owns shares in Keppel Corporation and Genting Singapore