Warren Buffett once said that as an investor, it is important to be “fearful when others are greedy and greedy when others are fearful.” The idea is simple. When everyone is buying shares in a company, it’s unlikely that the company’s shares will be a good bargain. On the other hand, when others are shying away from the shares of a company, we might be able to pick some up at a good price.
How can we tell if investors are staying away from a company’s shares? By seeing if it has fallen hard in recent times. In this article, we will look at three blue-chip shares with prices that have declined significantly from their respective highs over the past year: SATS Ltd (SGX: S58), Thai Beverage Public Company Limited (SGX: Y92) and Keppel Corporation Limited (SGX: BN4). They are blue-chips because they’re part of the 30 constituents of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
Source: SGX StockFacts
In our previous article here, I looked at SATS and Thai Beverage. In this article, I will look at the last company, Keppel Corporation. As a quick introduction, Keppel Corporation is a conglomerate with major business segments such as Offshore and Marine, Property, Infrastructure, and Investment.
The company has recently seen significant sell-off by institutional investors (one of the top 10 in November 2018). Many reasons might have caused the sell-off. For one, oil price has fallen below US$50 per barrel recently, which might have caused investors to stay away from companies like Keppel.
Also, the weaker recent earnings result did not help Keppel’s share price. For the quarter ended 30 September 2018, Keppel reported that revenue was down 20% year-on-year to S$1.3 billion. Similarly, operating profit declined 9% year-on-year to S$271 million. As a result, net profit fell by 15% year-on-year to S$226 million.
Keppel has also announced a pre-conditional voluntary general offer, together with Singapore Press Holdings Limited (SGX: T39), to take majority control of M1 Ltd (SGX: B2F). It also announced a scheme of arrangement to privatise Keppel Telecommunications & Transportation Ltd (SGX: K11).
Though there is no guarantee that the strategic move is going to add value to shareholders, it’s useful to know that the company is trying to grow its business from here. At a price-to-book (PB) ratio of 1.0, Keppel is trading at a discount to the market average’s PB ratio of 1.1 (I’m using SPDR STI ETF (SGX: ES3) as a proxy for the market).
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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. Motley Fool Singapore has a recommendation for SATS Ltd.