These 3 Blue-Chip Companies Have Plunged More Than 40%. Are They Bargains?
It’s been anything but business as usual in the past few months.
Even blue-chip companies have not been spared.
Supply chains have been disrupted, business models have had to evolve, and old habits have been replaced by new ones.
It’s no surprise to see large, reputable businesses suffering alongside smaller, weaker ones.
Many blue-chip companies have seen their share prices hitting multi-year lows.
The question on investors’ minds would be: could some of these beaten-down blue-chip companies be bargains?
Let’s have a look at three of them.
Singapore Press Holdings Limited (SGX: T39)
Singapore Press Holdings, or SPH, is a publisher of newspapers, magazines and books in print and digital formats.
The group also owns other digital products, online classifieds and outdoor media.
SPH also has a substantial real estate portfolio — it owns a 70% stake in SPH REIT (SGX: SK6U), a portfolio of purpose-built student accommodation (PBSA) assets in the UK, and Orange Valley, Singapore’s largest private nursing home operator.
The group’s share price has tumbled around 40% year to date to around S$1.32.
For the half-year ended 29 February 2020, SPH reported a 1.5% increase in total revenue, while core recurring operating profit improved by 5% year on year.
On the media front, SPH has seen a 40% rise in subscriptions for its flagship newspaper the Straits Times in April, while time spent on SPH’s apps has also increased by 30% to 40% year on year.
The group has also partnered with Google, under parent company Alphabet (NASDAQ: GOOGL) to grow its digital advertising revenue.
On the property front, SPH is integrating all its PBSA assets in the UK under a unified proprietary platform. This move will help to drive operational synergies and economies of scale.
At the last traded share price, SPH was valued at just 10 times earnings and offered a trailing dividend yield of around 5.3%.
Sembcorp Industries Limited (SGX: U96)
Sembcorp Industries Limited, or SCI, is a leading energy, marine and urban development group operating in multiple countries worldwide.
The group has total assets of over S$23 billion and more than 7,000 employees as of 31 March 2020.
SCI reported a downbeat set of earnings for the fiscal year 2019. Revenue was down 18% year on year while net profit tumbled 29% year on year. SCI shares are down nearly 40% year to date.
The troubles were centred around the Energy and Marine segments, which saw revenue declines on a year on year basis.
While Energy reported a small segment profit of S$195 million, Marine registered its second annual consecutive loss.
However, excluding exceptional items, the group posted a 17% year on year improvement in net profit.
SCI also increased its final dividend from S$0.02 to S$0.03, which was a positive sign after five consecutive years of dividend declines.
That said, in its latest first quarter 2020 business update, SCI disclosed that the underlying performance for Energy is expected to be materially lower for 2020.
The Marine division continues to see low levels of business activity, while COVID-19 has slowed down the inflow of new contracts and has led to delays in project execution.
In short, it does not seem like the pressure will ease on SCI anytime soon.
SATS Ltd (SGX: S58)
SATS is a leading provider of food solutions and gateway services for a range of airlines and food companies.
The group has a presence in 60 locations and 13 cities across Asia-Pacific and the Middle East.
The pandemic has severely impacted SATS’ operations due to the precipitous fall in air travel demand.
SATS shares have tumbled close to 48% year to date, and are trading at a five-year low.
At end-April, the group released a profit warning. It will register a material decline in profit for the fourth quarter of the fiscal year 2020 (ended 31 March 2020).
Aviation volumes have contracted sharply as countries impose travel restrictions and shut down borders.
SATS has also warned of a net loss between S$50 million to S$70 million for the first quarter of the fiscal year 2020 (ended 30 June 2020).
The board of directors and management have all taken voluntary pay cuts and instituting sharp cost-cutting measures.
While the shares are indeed cheap, there is no clear visibility on when the pandemic will subside.
Besides, air travel demand may also not return to pre-pandemic levels anytime soon.
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Disclaimer: Royston Yang owns shares in SATS Ltd.
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