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 fourth in a series that will look at the outperformers and laggards among the Straits Times Index’s constituents. The first article discussed three blue chips that outperformed the index…
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 fourth in a series that will look at the outperformers and laggards among the Straits Times Index’s constituents. The first article discussed three blue chips that outperformed the index in 2017, the second article looked at two blue chips with returns that lagged the market significantly, and the third article covered three more blue chips that beat the index. In here, I will focus on two more blue chips that did poorly in 2017 when compared to the Straits Times Index.
First in line is Singapore Telecommunications Limited (SGX: Z74), the largest of Singapore’s three operational telcos.
The company’s latest earnings update was for the first half of its fiscal year ending 31 March 2018 (FY2018). The reporting period was thus from 1 April 2017 to 30 September 2017. In that six month period, Singtel saw its revenue increase by 7.6% year-on-year to S$8.60 billion. Profit attributable to shareholders also nearly doubled from S$1.92 billion a year ago to S$3.78 billion, helped by a one-off gain from the spin-off of NetLink NBN Trust (SGX: CJLU) in an initial public offering (IPO) in July 2017.
Singtel’s share price started 2017 at S$3.65, and ended the year at S$3.57, delivering a return of a negative 2.2%. In a year when the Straits Times Index was up by over 18%, this is clearly a huge underperformance.
At its current stock price of $3.63, Singtel has a price-to-earnings (PE) ratio of 10.3, and a dividend yield of 4.9%.
Another of the losing stocks in 2017 would be ComfortDelGro Corporation Ltd (SGX: C52). In fact, 2017 has to be one of the most challenging years that the company has faced. Not only did it report declines in revenue and profit, its stock price fell by 19.8% during the year.
For those who are new to the company, ComfortDelGro is a land-transport company with operations in seven countries (Singapore, China, the United Kingdom, Ireland, Australia, Vietnam, and Malaysia). It is one of the largest land-transport companies in the world with its fleet size of around 44,000 buses, taxis, and rental vehicles.
The first nine months of 2017 saw ComfortDelGro’s revenue fall 2.7% year-on-year to S$2.95 billion. This led to a 1.6% slide in profit attributable to shareholders to S$242.0 million.
One of the main challenges that the company is currently facing is an onslaught on its taxi business from ride-hailing apps such as Grab and Uber. The rise of the duo in the past few years have hurt ComfortDelGro’s taxi business. As an example, the operating profit for ComfortDelGro’s Taxi segment fell by 17% in the first nine months of 2017. The company is not sitting idle though – it has formed alliances to counter the attack from Grab.
In early December, ComfortDelGro announced that it would be buying a 51% stake in Uber’s wholly-owned Singapore car rental subsidiary, Lion City Holdings Pte Ltd. The deal would also see ComfortDelGro and Uber collaborate closely in Singapore’s taxi market. But, it remains to be seen if the deal with Uber would work for ComfortDelGro in terms of revitalising its taxi business.
At its current stock price of S$2.04, ComfortDelGro has a PE ratio of 14, and a dividend yield of a market-beating 5.0%.
Lastly, we have Jardine Cycle & Carriage Ltd (SGX: C07), a bona-fide conglomerate.
In 2016, 71% of Jardine Cycle & Carriage’s underlying profit came from the Indonesia-listed Astra, which itself has seven different business segments: Automotive; Financial Services; Heavy Equipment & Mining; Agribusiness; Infrastructure & Logistics; Information Technology; and Property.
Jardine Cycle & Carriage was a big winner in 2016, with a stock price gain of 18.3%. But 2017 was not as fruitful for the conglomerate – its stock price declined by 1.4%. This reminds me of an oft-repeated phrase in investing: The past does not guarantee the future.
What’s also interesting is that Jardine Cycle & Carriage had a good year in 2017 in terms of its business performance. In the first nine months of the year, the conglomerate saw its revenue climb 11% year-on-year to US$12.96 billion. Moreover, its profit attributable to shareholders increased by 19% to US$610 million. Even if we strip away one-off items, Jardine Cycle & Carriage’s underlying profit attributable to shareholders still increased by 14% year-on-year to US$590 million.
At its current stock price of S$40.96, Jardine Cycle & Carriage has a PE ratio of 14.9 and a dividend yield of 2.4%.
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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.