The Straits Times Index (SGX: ^STI) started 2017 at 2,881 points and ended the year 18.1% higher at 3,403. Yet, this healthy return does not imply that all 30 companies within the Straits Times Index had similar returns. In fact, there were some big losers, some flat stocks, and some huge winners within the group of the 30 blue chip stocks. This article is the first in a series that will look at the outperformers and laggards among the Straits Times Index’s constituents. In here, I will focus on three companies that beat the index in 2017. [Editor’s note: The…
The Straits Times Index (SGX: ^STI) started 2017 at 2,881 points and ended the year 18.1% higher at 3,403.
Yet, this healthy return does not imply that all 30 companies within the Straits Times Index had similar returns. In fact, there were some big losers, some flat stocks, and some huge winners within the group of the 30 blue chip stocks.
This article is the first in a series that will look at the outperformers and laggards among the Straits Times Index’s constituents. In here, I will focus on three companies that beat the index in 2017. [Editor’s note: The second, third, and fourth articles in this series have been published. They are on two blue chips that lost to the index, on another three blue chips that beat the index, and on another three blue chips that underperformed the index. They can be found here, here, and here.]
One of the big winners is Keppel Corporation Limited (SGX: BN4), a conglomerate with a few major business segments, namely, Offshore & Marine, Property, Infrastructure, and Investments.
The decline in oil prices that started in the second half of 2014 caused significant problems for companies related to the oil-and-gas industry, Keppel Corp included. The company’s Offshore & Marine segment is one of the largest oil rig builders in the world. In 2016, Keppel Corp suffered a 48.6% decline in profit, largely due to the difficult conditions its Offshore & Marine segment had to deal with.
Yet, the recovery in oil prices in 2017 (from a low of around US$30 per barrel in early 2016 to US$60 per barrel or so at the end of 2017) had caused sentiment toward some oil and gas companies to improve. Keppel Corp was one of the beneficiaries, and its stock price increased by 26.9% in total in 2017.
In the first nine months of 2017, Keppel Corp’s net profit grew by 11% year-on-year, buoyed by growth in its Property, Infrastructure, and Investments segments. Its Offshore & Marine segment saw its profit turn from a positive S$192.0 million into a negative S$11.4 million.
At today’s price of S$7.80 per share, Keppel Corp is trading at a price-to-earnings (PE) ratio of 16.6, and has a price-to-book (PB) ratio of 1.2.
Another big winner is Genting Singapore PLC (SGX: G13), the owner and operator of the integrated resort, Resorts World Sentosa. The resort is one of Singapore’s tourism landmarks, and it has many attractions within, such as one of Singapore’s two casinos, and the Universal Studios Singapore theme park.
Back in 2010, Genting Singapore’s shares were trading at a price north of S$2 apiece. That was the highest Genting Singapore’s shares have been. Subsequently, Genting Singapore lost more than half of its market value when its stock price fell below S$1 for most of 2015 and 2016. The main concern then was the bribery crackdown in China that impacted Genting Singapore’s gaming business in Resorts World Sentosa.
2017 has so far appeared to be a turnaround year for the company in terms of its business. In the third quarter of 2017, Genting Singapore reported quarterly revenue and net profit of S$629.9 million and S$168.7 million, respectively. These were up 8% and 24% year-on-year. For the first nine months of 2017, Genting Singapore experienced a 9% year-on-year increase in revenue to S$1.81 billion, and a huge jump in net profit from S$195.6 million a year ago to S$551.6 million.
As for its share price performance, Genting Singapore enjoyed a gain of 44.8% in 2017. Genting Singapore’s shares closed at S$1.34 apiece today, giving the company a PE ratio of 25.7, and a PB ratio of 2.1.
Singapore’s largest bank by assets, DBS Group Holdings Ltd (SGX: D05), was also one of the local market’s largest winners in 2017. During the year, the bank’s stock price climbed by 43.3% in total.
The banking industry was one of the most hated industries in the Singapore stock market through mid-2015 to 2016. Back then, investors were worried about a global economic slowdown and also the impact of declining oil prices on the loan portfolios of the local banks. Many oil and gas companies in Singapore fell into financial difficulties because of the collapse in oil prices that started in mid-2014; Singapore’s banks were lenders to these companies.
The global economic slowdown did not materialise in 2017. In fact, 2017 saw synchronised growth across the world. Interest rates in the US also started to rise in 2017, which is a good thing for the banking business in Singapore.
At DBS’s current stock price of S$26.50, it has a PE ratio of 16.7, and a PB ratio of 1.5.
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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 Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has a recommendation on DBS Group Holdings.