7 stocks that piqued our interest this quarter
As autumn gives way to winter, or Singapore’s case, the hot season gives way to our dreaded monsoon, and we prepare to usher in the last quarter of the year, it is time for us to look at stocks that warrant a place on the year-end watch list.
1. OCBC Bank [Oversea-China Banking Corporation] – a dividend horse!
OCBC Bank is a household name in Singapore. It’s a blue-chip stock with a consistent market-beating yield. Like other major Singapore banks, OCBC Bank is feeling the crunch due to huge exposure to the oil and gas sectors currently facing a slump. The bank’s second-quarter net profit fell 15% to S$885mil.
However, OCBC remains a favourite amongst investors due to its enviable track history in declaring dividends every year without fail. It has been consistent in declaring dividend as well as maintained a growth trajectory in dividend pay-outs. The bank’s pay out of S$0.36 per share in 2015 has doubled in the past decade.
OCBC has maintained its pay-out ratio at healthy levels of between 29.2% and 51.3% over the last decade with a decent margin of safety to protect its dividends should its business falter over the short-term. This year OCBC Bank has declared an interim dividend of S$0.18 per share for the first half of 2016.
2. United Overseas Bank: under NPA siege but trudging on!
United Overseas Bank Ltd., Southeast Asia’s third-largest lender reported reduction in its year on year profit for the third-quarter by 7.8%, as the bank increased its provisions for bad loans to the struggling oil and gas industry. Nonperforming loans ratio rose to 1.6% from 1.3%.
A report by Moody’s showed that the banks’ assets’ quality and profitability by assets are both under pressure as is evident in their Q3 results. However, the report also concluded that UOB had “robust loss absorption buffers” in place.
Surprisingly, the bank witnessed an increase in net profit for the second quarter by 5.1% to S$801mil. UOB Bank has declared an interim dividend of S$0.35 per share for its investors.
3. SGX (Singapore Exchange Limited) – a fresh lease of life!
The acquisition of Baltic Stock Exchange in September this year has brought relief to both market watchers and SGX which had been beleaguered by a spate of delistings in the recent past. By acquiring Baltic Stock Exchange, SGX benefits from a shared Intellectual Property and Institutional Knowledge in the dry bulk and freight derivatives market.
For SGX, acquisition of the world’s only authoritative source of maritime market data and information, builds on its strengths in seaborne commodities and shipping derivatives. The acquisition also increases business opportunities for companies in the UK, Europe and Asia and creates a new shipping financial hub in Singapore.
SGX was named as named “Newsmaker of the Year” at the Lloyd’s List Asia awards. The market operator's net profit for the fiscal fourth quarter however fell 20.1% to S$76.8mil. Earnings per share stood at S$0.072, lower than S$0.09 a year ago. SGX is proposing a final dividend of S$0.13 per share for its investors.
4. EC World REIT: IPO, baby!
Units of the China-based logistics real estate investment trust EC World began trading on the mainboard of Singapore Exchange in July this year. The initial public offering, priced at S$0.81 per share saw its public offering over-subscribed by 1.5 times.
EC World REIT is China’s first logistics and e-commerce based REIT to be listed on SGX. The current market for EC World is People’s Republic of China but the group has aggressive plans to expand its reach in countries beyond PRC, mainly in the South East Asia region over the next few years. The trust invests in a diversified portfolio of income yielding properties used for supply chain management, logistics and e-commerce.
This listing takes the number of property related REIT’s and trusts on SGX to 42 with a combined market capitalisation of about S$70bil.
5. Keppel D C REIT (Keppel Corp): the star performer!
REITs have been star performers in the Singapore market. Keppel DC REIT is one trust that has done remarkably well.
As per its official announcement, its actual distributable income for the third quarter ended Sept 30, 2016, was up 13.7% at S$16.78mil from the IPO (initial public offering) forecast figure of S$14.76mil. The actual distribution per unit (DPU) was S$0.019, up 13.8% from the forecasted S$0.0167.
In another big announcement, Perpetual (Asia), a trustee of Keppel DC REIT, has entered into a conditional share purchase agreement with Keppel Data Centres Holding for the proposed acquisition of a 90% interest in Keppel DC Singapore 3, of approximately S$202.5mil. The proposed transaction will be funded from a fully underwritten preferential offering of 242 million new units on the basis of 274 new units for every 1,000 existing units in Keppel DC REIT.
6. Comfort Delgro Corp Ltd – beating all odds!
In the last 5 years, Comfortdelgro’s shares have nearly doubled in price from S$1.38 to S$2.74. Comfortdelgro’s strong returns have come from both capital appreciation and dividends. In the same period, Comfortdelgro’s revenue and earnings per share have both increased by over 20%. Earnings per share were S$0.1407, up from S$0.1329 a year earlier. A final dividend of S$0.05 per share was proposed at the end of 2015.
Operational costs increased, partly due to more headcount to support the Downtown Line 2, (DTL 2) and higher certificate of entitlement premiums to replace ageing taxis. Though Comfort DelGro is facing competition from Uber, Grab and other competitors, ComfortDelGro has said its posted gains come mainly from advertising and rental income as also overseas businesses that account for a chunk of the group's total operating profit.
7. Singapore Airlines (SIA) – still flying high!
SIA remains one of the most talked about stock in the circles. SIA reported a 70% fall in Q2 earnings to S$64.9mil owing to an excess capacity and aggressive pricing by competitors. SIA’s operating profit fell 20% to S$79mil while SilkAir’s operating profit fell 20% to S$17mil. However, Scoot and Tiger Airways registered operating profits of S$5mil and S$3mil respectively, in contrast to losses every year.
The Airlines performance is affected adversely by political uncertainty, volatile fuel prices, over capacity in cargo business. However, the group remains positive “about the improved operating capability and efficiency of the growing Airbus 350 fleet that is enabling the launch of previously unserved new routes.” It is also upbeat about the deep integration between Scoot and Tiger Airways that continues to provide cost efficiencies.
SIA has declared an interim dividend of S$0.09 per share, S$0.01 down from a year ago.