Blue-chip companies evoke images of stability, strength and resilience during crises.
However, investors need to remember that some of these businesses are not immune to sharp downturns.
The COVID-19 pandemic has left a trail of destruction in the stock market, and some blue-chip companies have not been spared.
Here are three blue-chip companies that have seen their share prices hammered by 50% or more.
SATS Ltd (SGX: S58)
SATS is a market-leading ground handler and airline catering provider. The group counts major airlines as its customers and also owns central kitchens that provide food to a wider variety of restaurant chains.
As the pandemic swept across the world, air travel has almost ground to a near-halt.
Singapore Airlines Ltd (SGX: C6L) has grounded 96% of its fleet capacity till end-June 2020, with flights available to just 15 cities around the world.
Many countries are still trying in vain to contain the spread of the coronavirus. Travel curbs and border closures remain widespread and are unlikely to be lifted anytime soon.
SATS’ business will take a significant hit from this sharply reduced level of activity, as the group also announced pay cuts for its board of directors and executives ranging from 5% to 15%.
Shares in SATS have plunged from a high of S$5.40 in July 2019 to as low as S$2.70 in March, but have since rebounded slightly to close at S$2.99.
ComfortDelGro Corporation Ltd (SGX: C52)
ComfortDelGro Corporation Ltd, or CDG, is a diversified transport conglomerate with rail, bus and taxi operations spanning Singapore, Australia, London, China and Vietnam.
Lockdowns have been announced in numerous countries and governments have urged residents to stay at home as part of social distancing measures to contain the spread of the virus.
These measures have severely impacted CDG’s operations across its regions.
In Singapore, enhanced circuit breaker measures have left the city looking like a ghost town.
Taxi drivers have reported a sharp fall in earnings as fewer people move around the country.
CDG has had to grant a full rental waiver for all taxi drivers that will be extended to 1 June. This move will cost the division S$116 million and push it firmly into the red.
Train and bus ridership on CDG’s network has also plunged by more than 70%.
It’s becoming increasingly clear that 2020 will be a watershed year for the group, as this is the first time that its taxi division will be reporting a loss.
Shares in CDG traded as high as S$2.80 in July 2019, but have since crashed to around S$1.40.
Sembcorp Marine Ltd (SGX: S51)
Sembcorp Marine Ltd, or SMM, is an engineering solutions company that constructs rigs and floaters for the oil and gas industry. The group also constructs offshore platforms and specialised ships and has shipyards in Singapore, Indonesia, the United Kingdom and Brazil.
The group is a 61%-owned subsidiary of Sembcorp Industries Ltd (SGX: U96).
SMM’s share price has crashed from S$1.40 in July 2019 to S$0.70 currently.
SMM had already experienced tough business conditions due to the oil price crash back in 2014, as many oil majors had slashed capital expenditures for new oil projects.
Just last week, oil prices crashed once again to a 21-year low, with the May oil futures contract even going into negative territory due to an oil glut.
It is almost certain that this crash will further exacerbate SMM’s problems.
The group may have to rely on alternative sources of revenue to tide over this downturn or tap on its parent’s financial resources to stay afloat.
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Disclaimer: Royston Yang owns shares in SATS Ltd.
