3 Blue Chips That I Am Cautiously Optimisitic About

The 30 shares that make up Singapore’s market benchmark, the Straits Times Index (SGX: ^STI), are commonly known as the blue chips.

But while this group of shares have a commonality in that they are all some of Singapore’s largest public-listed companies, not every one of them may have bright business prospects.

Here are three blue chips in particular that I think may just see brighter days ahead.

Going international

Alcoholic beverages maker Thai Beverage Public Company Limited (SGX: Y92) has had a long track record of steady growth: Over the past 10 years, it has managed to grow its revenue and operating profit at compound annual rates of 6% and 4%, respectively.

In that decade under study, Thai Beverage has been operating predominantly in Thailand only but that might change soon with the company having set its sights firmly on international growth.

Thai Beverage had unveiled a six-year strategic roadmap, called Vision 2020, near the end of 2014. One of the company’s goals for the roadmap is to have international sales make up 50% of total revenue by 2020.

With just 5% of Thai Beverage’s annual revenue of THB 162.79 billion (around S$6.553 billion) in 2014 having come from outside Thailand, there may just be some serious room for growth ahead. That’s especially so after the 2013 acquisition of Fraser and Neave Limited (SGX: F99) by Thai Beverage back in 2013 has given the latter distribution networks for consumer products in other parts of Asia to tap on.

The potential of 250 million people

Jardine Cycle & Carriage Ltd (SGX: C07) may be better known among Singaporeans as a distributor of cars and other vehicles in Singapore, but the main bulk of its revenues and profits actually come from its majority stake in Astra International, the largest automotive group in Indonesia.

From 2006 to 2014, Jardine Cycle & Carriage has seen its revenue more than double from US$7.2 billion to US$18.7 billion; over the same time period, the firm’s profit has nearly quadrupled from US$224 million to US$820 million.

With a growing middle class in Indonesia and car-ownership being one of Indonesians’ greatest desires, it seems like there’s a lot more new business for Astra, and by extension Jardine Cycle & Carriage, to win.

Prime assets at a discount

Those who work in Singapore’s central business district (CBD) are likely to be very familiar with One Raffles Quay and Marina Bay Financial Centre, two relatively new and prime commercial buildings located in the heart of the area. What might not be that well-known about the two assets are that a Hong Kong-based company, Hongkong Land Holdings Limited (SGX: H78), actually owns sizeable stakes in them.

As an owner of prime retail and commercial real estate, Hongkong Land also owns 12 other properties in the heart of Hong Kong’s CBD (an area known as Central) and they include The Forum, Jardine House, and Chater House. In addition to that, the company has a handful of prime real estate in other parts of Asia too.

Over the past 10 years from 2005 to 2014, Hongkong Land has seen the average rent of its portfolio in Central grow from US$3.78 per square feet per month to US$13.14.

As of the end-2014, the investment properties that Hongkong Land has a stake in have an estimated total value of US$28.2 billion, of which, 79% and 12.9% comes from the real estate located in Hong Kong and Singapore, respectively.

At its current share price, Hongkong Land is trading at merely 0.7 times its book value. That low valuation, together with a book value that has grown steadily through the years, may just make the share a bargain.

Foolish Takeaway

The trio of Thai Beverage, Jardine Cycle & Carriage, and Hongkong Land might be worth a deeper look by investors who are interested in looking for firms with good long-term potential.

But that being said, it does not mean that risks should be ignored.  Growth can slow and property prices can easily decline. So, investors should still carefully consider what can go wrong before any investing decision is made.

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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 writer Stanley Lim doesn't own shares in any companies mentioned.