There are many ways to find investment ideas. Some useful methods are to screen for stocks or to look at a list of stocks near their 52-week lows to sieve out potential bargains. Studying what institutional investors have been buying or selling is another avenue.
Institutional investors are typically large investment organisations, such as hedge funds, mutual funds, unit trust companies, sovereign wealth funds, insurance companies and so on. These investors tend to possess vastly greater resources than individual investors like you and me when researching stocks. Hence, it may be useful to keep a close eye on what they are doing, as a way to generate ideas.
In this article, I will look at three Singapore stocks that were among the top 10 shares that saw the highest net disposal in dollar value by institutional investors in the week ended 26 October 2018. They are: Keppel Corporation Limited (SGX: BN4), DBS Group Holdings Ltd (SGX: D05) and Genting Singapore Ltd (SGX: G13). The trio are all blue chip stocks too, given that they are in the list of 30 stocks that make up Singapore’s stock market barometer, the Straits Times Index (SGX: ^STI).
Source: Singapore Exchange; SGX Stock Facts
As a quick introduction, Keppel Corp is a conglomerate with major business segments that include Offshore & Marine, Property, Infrastructure, and Investments.
For the third quarter of 2018, Keppel Corp reported that its revenue fell by 19.9% year-on-year to S$1.30 billion. Similarly, operating profit declined by 8.9% year-on-year to S$270.4 million. As a result, Keppel Corp’s net profit attributable to shareholders slid 14.9% to S$225.67 million.
Keppel Corp’s revenue declined mainly because of a lower revenue from the Property segment; lower property trading activities took place in Singapore, China, and Vietnam. Meanwhile, a fall in contributions from the Investments and Property segments were big culprits for Keppel Corp’s lower profit in the third quarter of 2018. Stronger performances in the Infrastructure and Offshore & Marine divisions provided some offset. Despite lower profitability, Keppel Corp managed to improve its balance sheet on a year-on-year basis: The conglomerate’s net debt declined from S$6.25 billion a year ago to S$4.84 billion.
Investors may want to note that Keppel Corp has joined forces with Singapore Press Holdings Limited (SGX: T39) to take majority control of Singapore’s smallest telco M1 Ltd (SGX: B2F). The intention is to help transform M1’s business, thus allowing it to compete more effectively. Meanwhile, Keppel Corp is also in the process of privatising its listed subsidiary Keppel Telecommunications & Transportation Ltd (SGX: K11).
Here are useful comments from Keppel Corp on its outlook that were given in its latest earnings update:
“The Offshore & Marine Division’s net order book, excluding the Sete rigs, stands at $4.4 billion. The Division will continue to focus on delivering its projects well, exploring new markets and opportunities, investing in R&D and building new capabilities to position itself for the upturn. The Division is also actively capturing opportunities in production assets, specialised vessels, gas solutions, floating infrastructure and offshore renewables, as well as exploring ways to re-purpose its technology in the offshore industry for other uses.
The Property Division sold about 3,180 homes in the first nine months of 2018, comprising about 150 in Singapore, 1,830 in China, 200 in Vietnam, 230 in Indonesia and 740 in India. Keppel REIT’s (SGX: K71U) office buildings in Singapore and Australia maintained a high portfolio committed occupancy rate of 98% as at 30 September 2018. The Division will remain focused on strengthening its presence in its core and growth markets, while seeking opportunities to unlock value and recycle capital.
In the Infrastructure Division, Keppel Infrastructure will continue to build on its core competencies in energy and environment-related infrastructure as well as infrastructure services businesses to pursue promising growth areas. Keppel Telecommunications & Transportation will continue to develop its data centre business locally and overseas. Besides building complementary capabilities in the growing e commerce business, it plans to transform the logistics business from an asset-heavy business to a high performing asset-light service provider in urban logistics.
In the Investments Division, Keppel Capital will continue to allow the Group to more effectively recycle capital and expand its capital base with co-investments, giving the Group greater capacity to seize opportunities for growth. Keppel Capital will also create value for investors and grow the Group’s asset management business.
The newly established Keppel Urban Solutions will harness opportunities as an integrated master developer of smart, sustainable precincts, starting with Saigon Sports City in Ho Chi Minh City, while the Sino-Singapore Tianjin Eco-City Investment and Development Company Ltd will continue the development of the Eco-City, including selling further land parcels.”
Next up is DBS. Singapore’s largest bank just reported its 2018 third quarter results earlier this morning. During the quarter, DBS saw its total income (the bank’s revenue) grow by 10.3% to S$3.38 billion. Net interest income (income from lending activities) surged 15.1% to S$2.27 billion, driven by loan volume growth and an improvement in the net interest margin. All told, DBS’s net profit jumped by 71.9% to S$1.41 billion.
In DBS’s latest earnings update, CEO Piyush Gupta shared the following comments on the bank’s performance in the third quarter of 2018 and the bank’s outlook:
“Third-quarter business momentum was sustained amidst heightened geopolitical and economic headwinds. Year-to-date earnings per share is the highest in our history while return on equity is the best in more than a decade. As we celebrate our fiftieth anniversary, we are pleased to be named Best Bank in the World by Global Finance and World’s Best Digital Bank by Euromoney. We are well positioned to continue capitalising on Asia’s long-term prospects while navigating short-term uncertainties.”
The last company on my list is Genting Singapore. As a quick introduction, Genting Singapore is the operator of the integrated resort, Resorts World Sentosa in Singapore. Among the resort’s many attractions are one of Singapore’s two casinos and the Universal Studios Singapore theme park.
In its latest earnings update – for the second quarter of 2018 – Genting Singapore announced that its revenue fell by 6% year-on-year to S$560.3 million. The Gaming segment’s revenue was down by 8% to S$406.1 million, while the non-gaming segment experienced a 1% increase in revenue to S$153.5 million. Despite the lower overall revenue, there was a 1% increase in operating profit (to S$228.4 million), and a 3% increase in net profit (to S$177.6 million) for Genting Singapore. The improvement in the company’s profit was due to currency gains on its investments.
One of Genting Singapore’s important future growth drivers is the potential to open an integrated resort in Japan. Here’s what the company shared about its plans on the matter in its latest earnings update:
“In Japan, the anticipated Integrated Resorts (“IR”) Implementation Bill was enacted by the Japanese Diet on 20 July. The Group has been gearing up for this expansion opportunity and has been hiring a new team of Japanese nationals in different disciplines to prepare for the bid.”
Genting Singapore will be releasing its 2018 third quarter earnings update on 8 November 2018.
Looking at what institutional investors are doing could be a useful tool in your toolkit when sourcing for investment ideas. But do note that the information presented here is by no means a recommendation to take any action on the stocks mentioned. Instead, it should be viewed only as a useful starting point for further research.
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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 for DBS Group Holdings Ltd.