The Straits Times Index was trading at 3,227 a year ago. Today, it is trading at about 3,200.
This performance is not that bad for the STI with the index down less than -1%. However, more than half of the stocks (17 out of 30 STI index stocks) are down!
“Where there’s crisis, there’s opportunities” right?
We found the 5 Singapore blue chip stocks with the weakest performance so far. Now let’s find out if there are catalysts for them to turnaround, and whether you should be picking up some of these ‘cheap’ blue chip stocks!
5 SG Blue Chip Stocks with Weakest Performance
| Weakest Blue Chip Stocks | Ticker (SGX) | 1 Year Share performance (%) | Dividend Yield (%) | Price to earnings ratio (times) |
| Sats Ltd | S58 | -33.6 | N/A | Loss |
| Hongkong Land Holdings Limited | H78 | -28.9 | 6.4 | 9.3* |
| Venture Corporation Ltd | V03 | -24.6 | 5.8 | 11.2 |
| Mapletree Pan Asia Commercial Trust | N2IU | -21.0 | 5.9 | 17.0* |
| City Development Limited | C09 | -18.7 | 1.2 | 28 |
1. Sats Ltd (SGX: S58)
Sats has traded down since the announcement of its acquisition of WFS which was completed in April 2023. The timing for the acquisition amid a rising interest rate environment and the lack of dividends from Sats killed investors confidence. The acquisition which was funded by a mix of debt and equity caused Sats to move from a net cash position to a D/E ratio of 1.68 times.
In 1Q24, Sats reported an operating profit of S$10.2 million compared to an operating loss of S$24.3 million a year ago. This is notwithstanding the discontinuation of government reliefs in the current quarter and the inclusion of one-time restructuring and liability management costs totaling S$13.3 million related to the integration of WFS.
Overall, Sats posted a net PATMI loss of S$29.9 million after considering the one-off expenses. Excluding one-off expenses, underlying Core PATMI loss narrowed to S$17.4 million compared to a loss of S$19.5 million a year ago, which included government reliefs of S$9.4 million.
Riding on the increased scale of business globally, Sats posted a 1Q24 EBITDA margin of 15.0% (1QFY23: 3.7%)
With China’s reopening, there are market expectations that Sats could achieve sizable profits on its own. However, the debt incurred for the acquisition would likely result in no dividend until Sats is profitable.
Investors will be looking to Sats be able to deliver on its specific initiatives to obtain $100m in increased earnings so as to cover its debt burden and resume dividend distributions.
2. Hongkong Land Holdings Limited (SGX: H78)
Hongkong Land (HKL) is down because of the weakness in the Hong Kong and China office rental and residential development market.
HKL’s financial performance was stable in 1H23 with FY23 underlying profits expected to improve somewhat compared to FY22, driven by the timing of project completions. Modestly higher contributions from Investment Properties are also anticipated, as improved retail trading performance is expected to offset negative rental reversions in Hong Kong.
The negative rental reversions have a longer term impact as HKL faced another property valuation loss for 1H23 accounting for approximately 2.3% of its net asset value.
Unlike the past where HKL’s investment properties had limited to no vacancies, vacancy levels was 6.9% at the end of June 2023, an increase from 4.9% at the end of 2022, although this was significantly lower than the average vacancy in the Central market where a large proportion of HKL’s portfolio is situated. Negative rental reversions resulted in average office rents decreasing to HK$107 per sqft, compared to HK$112 per sqft and HK$111 per sqft in 1H22 and 2H22, respectively. In comparison, average office rents was close to HK$160 in 2018.
The extended weakness in the past few years has impacted operational performance and property valuations. However, with a stable 1H23 performance, many investors are hoping that a bottom is near and there will be a chance to bottom fish.
3. Venture Corporation Ltd (SGX: V03)
Venture is down because of broader weakness in the manufacturing industry as a result of the slowing consumer demand as well as customers reducing its inventory in line with demand and to better manage their working capital.
Venture recorded a weaker set of 1H 2023 results against a high base last year as revenue declined 11.9% YoY while net profit declined 19.7% YoY.
Many of Venture’s customers and partners are de-risking out of their current geographic presence and will be keen on diverting their production needs into Venture’s Southeast Asian manufacturing sites as well as Venture’s supplier base. This will provide Venture with the opportunity to capture more market share as Venture has noted that new customer acquisitions and new product introduction activities are gaining traction, providing the company with opportunities to scale the business.
Venture is currently trading at a relatively cheap valuation. A potential industry recovery as well as new revenue streams will provide upside both from valuation expansion as well as increased operating profits and dividends.
4. Mapletree Pan Asia Commercial Trust (SGX: N2IU)
Mapletree Pan Asia Commercial Trust (MPACT) is down because of its prevailing macro issues impacting REITs such as the extended high interest rate environment as well as its exposure to the Chinese and Hong Kong property market. It is also affected by the depreciation of the RMB & JPY against SGD.
Due to its geographic exposure, MPACT’s journey to post-pandemic recovery will be uneven, particularly due to the fragile global economy and recent downturns in the tech and finance sectors. However, these are also opportunities should China’s economy and retail sentiment improves.
MPACT’s portfolio occupancy in its core Singapore assets remains steady with rental reversions of 7.1% in MBC, 12.3% in VivoCity while tenant sales rose 3.7%. In Hong Kong, although tenant sales saw a growth of 12.1%, rental reversion was -9.4% due to the broader market weakness.
MPACT has an overall committed occupancy of 95.4%. This is dragged down by its China properties which currently has an occupancy of 86.5%. To mitigate against the headwinds, MPACT is also proactive with its lease renewals and will seize opportunities to fill its vacancies in China.
We recently covered here why we think MPACT is an S-REIT worth buying. MPACT has a proactive management, managing its assets to higher yields and mitigating risks. Together with its portfolio of trophy assets, the REIT is one of the largest and most stable REIT in the STI. We also recently covered MPACT here as an undervalued stock.
5. City Development Limited (SGX: C09)
City Development Limited (CDL) is down because of the broader weakness amongst property developers. Many are affected by a myriad of factors such as slower property sales and higher interest rates affecting asset and capital recycling.
CDL actually had a strong 1H23 performance. Revenue from its property development segment nearly doubled as one of CDL’s condominium project obtained its temporary occupation permit and was able to recognise the entire revenue and profit. Sales for many of its Singapore projects have also fared as well as or better than its peers.
Its hotel operations segment also saw a 12.4% increase due to higher RevPAR. The RevPAR also exceeded pre-covid levels in many regions.
Its Singapore office portfolio also remains resilient with a committed occupancy of 95.3%, above the island-wide occupancy of 89.2%. Its trophy asset, Republic Plaza is 94.3% occupied, with a positive rental reversion of 7.9% recorded in 1H23.
Comparing underlying operational profit, CDL registered a 48% increase in tax profits in 1H23.
Unlike its peers, CDL was actually also able to recycle its assets in 2022 with the sale of Millennium Hilton Seoul and the gain on the deconsolidation of CDL Hospitality Trusts (CDLHT) from the Group following the distribution in specie of CDLHT Units in 1H 2022, as well as the completion of the collective sales of Tanglin Shopping Centre and Golden Mile Complex in 2H 2022 where the Group owns share values and strata areas.
Some of these funds were put towards the acquisition of St Katharine Docks in UK for S$636 million as well as Sofitel Brisbane for S$159 million.
CDL remains focused on its goals to advance its global presence in tandem with its land replenishment strategy in Singapore. In addition, CDL continues to review opportunities to extract value from its current assets while pursuing its fund management ambition.
Although there were some painful investment missteps in the recent past, this has been fully disposed off with no further liability.
CDL might seem cheap at 0.4x P/RNAV, but it is worth noting that other big property developers who are equally nimble and faring well in the current climate are also trading at current levels.
For investors looking to purchase one of the strong property developers listed in Singapore, CDL will be one of the top choices.
Should you buy these weakened Singapore Blue Chip Stocks now?
We’ve taken a deeper look at the 5 SG blue chip stocks with the worst performance year to date. I’ve listed the reasons for their poor performance.
However, there is a silver lining. All of these 5 SG Blue chips provide opportunities to the upside which are worth looking at.
Sats is coming out of an acquisition and would have to deliver on its initiatives. Venture has seen demand slowed and is taking the opportunity to benefit from the changing manufacturing landscape.
HKL, MPACT and CDL are large resilient companies who are exposed to the property segment in various ways and could be ripe for bottom finishing opportunities for investors.
If you’re hunting for opportunities in Singapore and are considering them, remember to do your own due diligence!