The Straits Times Index (SGX: ^STI) is down around 8% so far for the year, and it could be time to hunt for bargains.
I am keeping a close watch on three particular companies, namely, ComfortDelGro Corporation Ltd (SGX: C52), Singapore Press Holdings Limited (SGX: T39) and Thai Beverage Public Company Limited (SGX: Y92) — all three are part of the STI. Even though their stock prices have been hit over the last few years, these companies could be on the verge of turning around their businesses. Here are my reasons why.
ComfortDelGro is one of the largest land transport companies in the world with operations in seven countries, including the Lion City.
The company provides transport services for the daily commuter. In recent times, however, its taxi business was hit by the proliferation of ride-hailing apps such as Grab and Uber. The latter has since ceased operations in Singapore. With the exit of Uber, ComfortDelGro’s taxi business appears to have stabilised. In the 2018 second-quarter earnings release, the taxi company’s managing director, Yang Ban Seng, said:
“With a more rational competition landscape, the recruitment of taxi drivers has improved leading to a higher utilisation of the fleet. To meet this growing demand, we are also expanding the taxi fleet.”
As a signal of intent, ComfortDelGro placed orders for 1,000 hybrid taxis to be delivered by 2019.
Since the start of 2018, the land transport outfit has also invested S$269 million in various acquisitions, both in Singapore and overseas. Due to the “aggressive expansionary policy”, revenue increased by 5.4% for the second quarter of 2018.
“The new businesses that we acquired towards the end of last year and earlier this year in Australia, the United Kingdom (UK), China and Singapore have started making their maiden contributions to revenue and profits. They will continue to do so going forward. The deal pipe-line remains strong and we hope to conclude more deals in the coming months to grow the business.”
On top of monitoring the taxi business, I’ll be watching how much the new businesses contribute to ComfortDelGro’s growth in the months and years ahead.
2. Singapore Press Holdings
Singapore Press Holdings, or SPH for short, is Asia’s leading media organisation which publishes newspapers, magazines and books in both print and digital formats. It also has a property arm which owns 70% of retail-based real estate investment trust (REIT), SPH REIT (SGX: SK6U).
SPH’s business has been hit in recent times by popularity of digital news, and online advertisements. However, SPH is not giving up on its fight against these platforms.
For its third quarter ended 31 May 2018, SPH commented that its digital business is gaining traction, showing growing digital subscriptions and e-paper readership. SPH is also expanding its property and aged care portfolios to diversify its business. However, it’s early days, at the moment, for its digital and non-newspaper businesses.
If SPH is able to demonstrate strong earnings growth from its various initiatives, I may swayed into taking a second look at the company.
3. Thai Beverage
Thai Beverage is a prominent beverage company in Southeast Asia, and is the largest of its kind in Thailand.
I like the company for its top-notch beverage brands, its extensive distribution network, its international presence in more than 90 countries, and its growth potential for the future.
Thai Beverage has ambitions to become the largest and most profitable beverage company in Southeast Asia by 2020. However, in its latest third quarter, there were some short-term stumbles. While revenue rose 34% year-on-year, profit attributable to shareholders tumbled 61%. One of the factors that contributed to the fall in profit attributable to shareholders was the lower earnings recorded by its spirits and beer businesses. These two businesses are also the largest contributors to the company’s revenue and profit.
Another factor is Thai Beverage’s weak balance sheet. As of 30 June 2018, the company had THB 235.3 billion in total debt, and THB 13.0 billion in cash and cash equivalents, translating to a net debt position of THB 222.2 billion. The net-debt-to-equity ratio, thus, was 1.79, which looks high to me.
Today, I’m on the side-lines as I look for Thai Beverage’s balance sheet to strengthen. At the same time, I would like to see some signs that the company can grow its bottom line. When these happen, I might be keen to take a sip of the company.
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The article was written by Sudhan P, and was originally posted as three separate articles last week. We have combined all three to a single one for your perusal.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.