Some investors may favour growth stocks that can multiply the value of their investment portfolio.
However, higher risks usually accompany fast growth.
Another group of investors may prefer the comfort of receiving a dividend and gravitate towards income investing instead.
Then there is a third group that focuses its effort on finding bargains by hunting for cheap stocks.
Better still if these stocks happen to be blue-chip businesses with sturdy operating track records.
The chances of losing money are greatly reduced when these factors are aligned.
Here are three Singapore blue-chip stocks that are trading at cheap valuations.
Keppel Corporation Limited (SGX: BN4)
Keppel Corporation is an offshore and marine conglomerate with four divisions – energy and environment, urban development, connectivity, and asset management.
The group is trading just above its book value as of 31 December 2021 but has many catalysts present that can take the business to the next level.
Keppel’s recent fiscal 2022 first quarter (1Q2022) business update saw all its divisions delivering higher year on year profits except for Urban Development.
The group is also pursuing growth in renewables and sustainable energy in line with its Vision 2030 strategic initiatives.
The offshore and marine (O&M) division’s outlook is also improving with rising oil prices and an order book of S$4.8 billion as of 31 March 2022.
The brighter outlook was evidenced by Keppel O&M clinching FPSO integration contracts worth S$250 million and jack-up rig utilisation contracts worth S$135 million just last month.
Both Keppel and Sembcorp Marine (SGX: S51) have also agreed to a S$9.4 billion merger that should see the creation of a stronger O&M entity with a combined order book of S$6.4 billion.
OCBC Ltd (SGX: O39)
OCBC needs no introduction, being one of Singapore’s three big banks.
The lender, like Keppel, is also trading at around its book value as of 1Q2022.
Of the three local banks, OCBC is the cheapest of the lot as DBS Group (SGX: D05) and United Overseas Bank (SGX: U11) are trading at 1.44 times and 1.16 times their book values, respectively.
OCBC reported a respectable set of earnings for 1Q2022, with net profit rising by 39% year on year to S$1.36 billion.
The bank is poised to see its net interest margins rise along with a rise in interest rates.
As net interest margins rise, OCBC should enjoy higher net interest income that will flow through to its net profit.
Group CEO Helen Wong expects the reopening of borders in Southeast Asia to drive a rise in economic activities which will benefit the bank.
Hongkong Land Holdings Ltd (SGX: H78)
Hongkong Land Holdings, or HKL, is a property investment, management and development group.
The group owns and manages more than 850,000 square metres of prime office and luxury retail properties in cities such as Singapore, Hong Kong, and Jakarta.
Shares of HKL changed hands at US$5.01 recently, representing a sharp 67% discount to its net asset value per share of US$15.05.
For its fiscal 2021 (FY2021), revenue rose 13.9% year on year to US$2.38 billion.
Underlying net profit stayed flat at US$966 million despite the challenges faced by the group due to COVID-19.
HKL also kept its FY2021 dividend constant at US$0.22 per share.
Its Hong Kong portfolio is holding up well, with physical vacancy at 4.9% on a committed basis.
For its Singapore properties, average office rents enjoyed positive rental reversion, rising from S$9.9 per square foot in FY2020 to S$10.30 per square foot in FY2021.
Vacancy remained low at just 2.9% on a committed basis, and the value of the Singapore property portfolio inched up 1% year on year.
A recovery in market sentiment along with the resumption in construction activity should benefit HKL’s development properties division.
The group has been replenishing its land bank in its various core markets.
It secured a 50% interest in a mixed-use site in Chongqing with the completion of a luxury retail mall expected in 2025.
In Singapore, HKL acquired a 49% interest in a residential site in Tanjong Katong that can yield up to 640 units.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
