The Weekly Nibble: A 2018 Review
- Original Post from The Motley Fool Sg

Here are some of the most popular articles that have appeared on The Motley Fool Singapore’s website for the week.


2018’s Top 5 Performing Blue-Chips


The year is drawing to a close, and it’s time for a review of the stock market.


In this article, Chin Hui Leong and Esjay jointly looked at the top five performing Straits Times Index (SGX: ^STI) components. The best performing of all, Dairy Farm International Holdings Ltd (SGX: D01), delivered a return of 14.8% from the start of 2018 till the end of November. Do jump into the article to find out which are the other best performers of the index.


3 Companies Which Managed To Weather A Tough 2018


2018 was not an easy year for stock market investors. From its peak in May 2018, the Straits Times Index has fallen some 14% up till Thursday this week.


Even amid the turbulent times, some companies have managed to weather the storms. Chin and Royston Yang jointly investigate three such companies in their article.


2018’s Top 5 Worst Performing Blue-Chips


Earlier, we looked at the top five performing blue-chip shares. Here, we have some of the worst performing blue-chips. The worst performer of all, Golden Agri-Resources Ltd (SGX: E5H), saw its share price being cut by around 34%. You can check out the other worst performers from the article.


$STI(^STI.IN) $DairyFarm USD(D01.SI)

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Is SATS A Bargain Now?
- Original Post from The Motley Fool Sg

SATS Ltd (SGX: S58)is a Singapore-listed company with a market capitalisation of S$5.52 billion. As a quick background, SATS is the leading provider of gateway services and food solutions in the region.


It caters to the needs of the aviation sector and a host of other businesses in hospitality, food, healthcare, freight, and logistics industries besides governments. SATS can be seen almost everywhere at Singapore’s Changi Airport, where it manages most of the gateway services for airlines.


Between from 1 Jan to 31 Dec 2018, SAT’s total return, which includes reinvested dividends, underperformed the STI Index (SGX: ^STI), with the former registering a negative 7.2% return, compared to a negative 6.5% return for the latter.


Has the pullback in SATS’ shares made it a bargain at current prices?


To decide we will use four metrics, namely, the price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the dividend yield and the net-debt-to-equity ratio.


SATS has a trailing twelve months (TTM) earnings per share of S$0.23. At the current share price of S$4.91, the P/E ratio is 21.3, which is in line with its one-year historical PE ratio of 21.


Looking at the earnings per share between 2015 and 2018, (SAT’s fiscal year ends in March) gives a range of S$0.175 to S$0.232. This means that SAT’s TTM EPS is at the high end of its historical range.


At the end of the third quarter of 2018, SATS reported a Net Asset Value of S$1.44. At the current share price, this results in a P/B ratio of 3.41. Looking at its NAV over the past four years, we see a rising trend with NAV coming in at S$1.30 in FY2015 and S$1.46 in FY2018.


At the end of September 2018, SATS had a net debt of S$96.8 million and equity of S$1.6 billion, indicating a net-debt-to-equity-ratio of 0.06. This indicates that SATS is very conservative about taking on too much debt to fuel its growth. Looking at the debt to equity ratio for the past four years, it quickly becomes clear that SATS has consistently been conservative with a stable ratio of 0.07.


Lastly, SATS’ dividend has consistently increased over the last four years, moving up from S$0.14 in 2015 to S$0.18 in 2018. Assuming the company pays out a dividend at the same rate as 2018, this would imply a yield of 3.7% at current prices.


Looking at the four metrics, SATS seems to be attractively priced. Its EPS is at the top end of the range, NAV is rising, debt-to-equity is conservative, and the dividend payout has been increasing.


This suggests that SATS is worthy of further investigation.


$STI(^STI.IN) $SATS(S58.SI)

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Institutional Investors Have Been Buying These 3 Singapore Blue Chip Stocks
- Original Post from The Motley Fool Sg

There are many ways to find investment insights. Some useful ways 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 (among the top ten stocks) that have seen the highest net purchases in dollar value by institutional investors for the week ended 11 January 2019. They are DBS Group Holdings Ltd (SGX: D05), United Overseas Bank Ltd (SGX: U11) andOversea-Chinese Banking Corp Limited (SGX: O39).



Source: Singapore Exchange; SGX Stock Facts


From the above, we can see that institutional investors have been excited about the local banks, buying up all three companies’ stocks in the past week. There are many good reasons that might have driven the recent purchase. For one, the local banks have been delivering solid results in the last few quarters.


Let’s start with DBS Group. For the quarter ended 30 September 2018, DBS Group reported that income grew by 10% from a year ago to S$3.4 billion. Net interest income (income from loans) improved by 15% year-on-year to S$2.3 billion, driven by improvement in net interest margin and loan volume growth. As a result, net profit jumped 72% to S$1.4 billion due to higher income and lower allowances.


Similarly, UOB reported that total income grew by 8% from a year ago to S$2.3 billion. Net interest income (income from loans) grew 14% year-on-year to S$1.6 billion, driven by improvement in net interest margin and loan volume growth. Higher total income, as well as lower allowances, resulted in a higher net profit of 17% year-on-year to S$1.0 billion.


Now let’s move on to OCBC. Similar to its peers above, OCBC reported that total income grew by 5% from a year ago to S$2.5 billion. Net interest income (income from loans) grew 9% year-on-year to S$1.5 billion, driven by improvement in net interest margin and loan volume growth. Moreover, higher total income resulted in net profit up by 12% year-on-year to a record S$1.25 billion!


The banks are expected to report the last quarter result for 2018 in the coming next few weeks. Despite all negative macro news, such as trade war and Brexit, there’s no clear indication that the banks are going to report weaker performance anytime soon.


Another compelling reason that suggests the current purchase of the local banks’ stocks is their valuation. For example, OCBC’s share price of S$11.66, is trading at 1.2 price-to-book (PB) ratio, price-to-earnings (PE) ratio of 10.5 and a dividend yield of 3.4%. The DBS share price of S$ 25.03, on the other hand, is trading at price-to-book (PB) ratio of 1.3, price-to-earnings (PE) ratio of 11.9 and a dividend yield of 4.9%.


Comparatively, the market average’s PB ratio, PE ratio and dividend yield is at 1.1 times, 11.5 times and 3.5% respectively. If we useSPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).”


Overall, we can see that the banks trading at a valuation that is comparable to the market average.


Conclusion:


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.


$STI(^STI.IN) $DBS(D05.SI) $STI ETF(ES3.SI) $OCBC Bank(O39.SI) $UOB(U11.SI)

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Are Singapore Shares Cheap or Expensive Right Now?
- Original Post from The Motley Fool Sg

Since the start of January 2019, the Straits Times Index (SGX: ^STI) has increased by 4.7%. With the recent stock market rally, investors might be wondering if Singapore shares are still as attractively priced as before.


There are two methods to determine if Singapore shares are cheap or expensive right now.


The first method is to compare the market’s current price-to-earnings (PE) ratio to the market’s long-term average PE ratio. The second approach involves looking at the number of net-net stocks in the stock market.


PE valuation method


Since it is difficult to get the past daily PE ratios of the Straits Times Index, the PE ratios of SPDR STI ETF (SGX: ES3) can be used as a proxy. The SPDR STI ETF is an exchange-traded fund (ETF) that tracks the fundamentals of the Straits Times Index.


As of 15 January 2019, the SPDR STI ETF had a PE ratio of 11.6. Here are some of the other important PE ratios that we need:


1) The long-term average PE ratio: The STI’s average PE ratio from 1973 to 2010 was 16.9;


2) An instance of a high PE ratio for the STI: Back in 1973, the index’s PE ratio hit 35; and


3) An example of a low PE ratio for the STI: At the start of 2009, the index was valued at 6 times trailing earnings.


Based on the data above, we can see that Singapore stocks are cheaper than average currently.


Net-net stocks method


In this method, we will look at the number of net-net stocks available in the local stock market. To know what a net-net stock is, you can head to the explanation here. If there is a large number of net-net stocks than usual in the stock market, it could mean that stocks are cheap at that moment.


The following is a chart that shows the net-net stock count in Singapore since 2005:



Source: S&P Global Market Intelligence


When the Straits Times Index is at a peak (such as in the second half of 2007), the net-net stock count is low. The reverse is also true: When the Straits Times Index is at a low (like in the first half of 2009), the net-net stock count is high. In the second half of 2007, the net-net stock count was below 50 while in the first half of 2009, the figure was at the peak of almost 200.


As of 15 January 2019, there were 112 net-net stocks. This is comfortably between the net-net stock count’s peak-and-trough from 2005 till today.


The Foolish takeaway


Based on the two different valuation methods, we can safely say that stocks in Singapore are not that expensive, but they not in extreme bargain territory either.


$STI(^STI.IN) $STI ETF(ES3.SI)

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Is Jardine Cycle & Carriage Ltd A Bargain Now?
- Original Post from The Motley Fool Sg

Jardine Cycle & Carriage Ltd (SGX: C07), which is part of the Jardine Group of companies, has a diverse business portfolio. They include a strategic interest in Indonesia’s Astra International (IDX: ASII), a strong automotive presence through its Direct Motor Interests and other interests in the refrigeration, cement and milk business.


In Singapore, Jardine C&C is best known as the retailer of Mercedes Benz, Mitsubishi, Kia, Citroen, DS, and Maxus motor vehicles. The company has a market capitalisation of S$14.55 billion currently.


Between 1 Jan to 31 Dec 2018, Jardine C&C’s total return, which includes reinvested dividends, has trailed the Straits Times Index (SGX: ^STI). The former retreated 10%, while the latter dropped of 6.5%.


With the 10%share-price decline recorded by Jardine C&C in 2018, is the company a bargain at current prices?


The price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the dividend yield and net debt to equity ratio might provide some useful pointers.


The conglomerate has recorded a trailing twelve months (TTM) earnings per share of US$1.47, which converts to S$1.99 (US$1 = S$1.35). Withits current share price at S$36.81, this implies a P/E ratio of 18.5.


The one-year historical P/E for Jardine C&C, however, stands at 13.3. In other words, it means that Jardine C&C is more expensive now compared to the previous year. But Jardine C&C did record a write-down on its non-trading items in the second quarter of 2018that led to a sharp drop in profits during the quarter. Hence, the drop in TTM earnings.


At the end of the third quarter of 2018, Jardine C&C reported Net Asset Value per share of US$15.07 (S$20.39), which results in a P/B ratio of 1.81 at current prices.


As the automotive distributor is more of a services company, it is not unusual for the P/B to be greater than one. For services companies, it could be better to compare the prevailing P/B with its historical average or an industry average for some context.


At end September 2018, Jardine C&C had a net debt position of US$4.36 billion, while total equity stood at US$12.88 billion. This results in a net debt to equity ratio of 34%.


Over the last three years (2015-2017), Jardine C&C’s net debt to equity ratio has been between 24% to 31%. This means the automotive distributor’s balance sheets has weakened slightly over the past year.


Lastly,Jardine C&C’s dividend hasrisen over the last three years, moving from S$0.95 in 2015 to S$1.18 in 2017. Assuming the company pays out a dividend at the same rate as 2017, thenthis wouldimply a yield of 3.2% at current prices.


Looking at the four metrics, Jardine C&C’s poor performance might be due to its one-off losses and a weakening balance sheet. The rising dividend over the past three years, however, might suggest amore confident outlook by mangement.


It seemss thoughmore investigationwillbeneeded to determine if Jardine C&C is a bargain at current prices.


$STI(^STI.IN) $Jardine C&C(C07.SI)

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Is Singapore Airlines Ltd A Bargain Now?
- Original Post from The Motley Fool Sg

Singapore Airlines Ltd (SGX: C6L) is Singapore’s national carrier. It is famous around the world for its ‘Singapore Girl’ branding.


Other than the namesake carrier which the airline runs, it also has other subsidiaries such as SilkAir, Scoot, and Vistara that serve different groups of customers in the area of passenger transportation.


Between 1 Jan and 31 Dec 2018, Singapore Airline’s total return, which includes reinvested dividends has underperformed the Straits Times Index (SGX: ^STI). Its shares fell 8.2% compared to the STI’s drop of 6.5%.


Has Singapore Airline’s share disappointing share-price performance in 2018 made it a bargain now?


Four metrics, namely, the price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the dividend yield and net debt-to-equity ratio might provide the answer.


The airline recorded a trailing twelve months (TTM) earnings per share of S$ 0.39. With its current share price at S$9.71, the P/E ratio is 29. Over the past four years (FY2014-FY2017, Singapore Airlines fiscal year ends in March), its P/E ratio has ranged from 14.36 to 38.06, which means that its current P/E, is comfortably in the range.


At the end of the September quarter of 2018, Singapore Airline’s reported a Net Asset Value of S$11.87. This results in a P/B ratio of 0.82 at current prices. Its P/B ratio over the past four years has ranged from 1.12 to 0.9, indicating that on a P/B basis the company is attractively valued.


For the quarter ending September 2018, Singapore Airline had a net debt of S$2.3 billion, while total equity stood at S$14.4billion. Dividing the net debt figure by the total equity thus gives us a ratio of 0.16, implying that Singapore Airline’s debt is 16% of its total equity.


Lastly, the airline’s dividend has increase slightly over the last four years, moving from S$0.22 in FY2014 to S$0.40 in FY2017. Assuming the company pays out the same dividend as 2017, the yield would be 4.1% at current prices.


Looking at the four metrics, it appears that Singapore Airlines is attractively prices based on all four metrics. But the analysis presented above should only serve as a starting point for further investigation.


$STI(^STI.IN) $SIA(C6L.SI)

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