The Study On SG Blue Chips

It has been a long and interesting week working and getting market updates from the effect of the historical Trump win. Now, a good weekend to take a breath.

After the Trump presidential results, the much opposite have happened as compared to what was shared time and again by the media. Many did not expect his win. Even if he does, stocks should tumble and gold should rise but it was not the case. S&P have suffered a longest losing streak of 9 days and it was probably a rebound that further drives share prices even higher after the election.

During this month, some of the Singapore blue chips are still selling cheap. As we know, cheap does not mean well if value/quality is missing.

We shall go through 3 of the STI components (DBS, City Developments and Starhub). I have been holding DBS for a while and have done some averaging along the way. Whether to hold or sell will really depend on the Fed rate hike catalyst or any future fiscal policies to come. Let's take a look.

DBS (D05) 

Strengths / Potential

*The share is now hovering near its Net Book Value of $16.68.

*Its financial position remained healthy despite the Swiber hit. Most negativity should have already been priced in.

*Their actual profits are usually able to beat expectations or at least be in line with expectations.

*The group holds a long track of financial records and visibility.

*Average 4% dividend yield is able to sustain some drops of price if any.

*A Fed rate hike in December looks most favorable to DBS as compared to the other two banks. 

Weakness / Threats

*Non-performing loans (NPL) have increased slightly from 1.1% to 1.3%. (2Q to 3Q). With a slowing economy, NPL is likely to further increase. 

*DBS's exposure to Oil & Gas sector still remains.

City Developments (C09) 

Strengths / Potential
*Share price have been trading at an attractive level, below Net Book Value of $9.91 (Group).
*The group holds a long track of financial records and visibility.
*Recent positive results of a 60.1% rise in 3Q16 earnings as compared to 3Q15.
*The stock deserved better valuations in terms of its capitalization, diversification and sustainability.
* Debt to Equity ratio stands at only <1.

Weakness / Threats
*Its arm, CDL Hospitality Trusts, is a REIT related to hotel and retail properties. These industries are not currently performing well and in the near future. Hotels are overly supplied.
*The dividend yield of 1.4% might not be able to sustain further drops in price.

Starhub (CC3) 

Strengths / Potential
*The stock offers attractive dividend yield of more than 6%.
*Share prices have been trading at an attractive level, well below the 52 weeks low.
*The telecommunication sector is a defensive stock in times of possible crisis or recession.

Weakness / Threats
*Despite the recent plunge, shares are still considered overvalued above its NAV.
*The potential entrant of a fourth telecommunications next year has made shareholders nervous with expectations of higher competition and additional pressure on revenue.
*The share's gearing is high due to its current debt funding.
*Recent earning releases have not been positive, where 3Q earnings fell by 27.6% with lower mobile earnings as one of the causes.

We are not sure where the market will head from next Monday with the post-election. Singapore markets may not react the same way with Trump's victory as the US market. After all, their citizens had his support through their votes while Singapore investors may not share the same belief.

In my next post, I shall discuss on the topic of recession, inflation, deflation and the highly anticipated interest rate hike. Until then!