If you are looking for stability when investing, blue-chip stocks are the right pool to look at.
These stocks boast a strong business model and a long track record of operating through good times and bad.
The great news is that most blue-chip stocks also pay out a dividend which forms a useful source of passive income.
One effective method of looking for investment ideas is to look at how cheap a stock is based on a simple valuation metric such as the price-to-book (P/B) ratio.
The lower the P/B ratio, the more undervalued the company is based on the value of the assets on its balance sheet.
Here are three undervalued blue-chip stocks that could look interesting for your portfolio.
Hongkong Land Holdings (SGX: H78)
Hongkong Land, or HKL, is a property development, investment, and management group that owns and manages more than 850,000 square metres of prime office and luxury retail properties.
The group has a presence in cities such as Singapore, Hong Kong, Beijing, and Jakarta.
HKL released a mixed set of earnings for the first half of 2024 (1H 2024) that were impacted by weakness in its China development properties.
Revenue for 1H 2024 jumped 45% year on year to US$972.4 million.
However, changes in the fair value of the group’s investment properties of US$864.6 million led to an operating loss of US$650.5 million.
HKL’s net loss ended at US$833 million, more than double of the US$333 million net loss that was reported in 1H 2023.
The underlying net loss, however, was just US$7 million and was impacted by provisions made on the group’s China development properties.
Excluding these non-recurring provisions, underlying net profit would have been US$288 million.
HKL declared an interim dividend of US$0.06, unchanged from a year ago.
However, its net asset value (NAV) per share fell by 5% year on year to US$13.82.
Even at this lower NAV, shares of HKL are trading at around 0.28 times their book value.
A P/B ratio of 0.28 implies that shares of HKL are undervalued as the monetary value of its property portfolio is significantly higher than its share price.
The group is currently undergoing a comprehensive strategic review of its overall business strategy and commercial priorities.
A strategy update will be presented before the end of 2024 once the review is completed.
City Developments Limited (SGX: C09)
City Developments Limited, or CDL, is a global real estate company with a network spanning 163 locations in 29 countries.
The group has a global asset portfolio and has developed over 50,000 homes and owns around 23 million square feet of gross floor area for residential purposes.
The property giant also presented a mixed set of earnings for 1H 2024.
Revenue plunged 42% year on year to S$1.56 billion because of a S$1 billion recognition in the prior year from Piermont Grand condominium when this project obtained its temporary occupation permit.
CDL’s net profit, however, jumped 32% year on year to S$87.8 million.
There’s more good news, with CDL’s investment properties and hotel operations divisions posting a 21.3% and 10.8% year-on-year revenue increase for 1H 2024, respectively.
At CDL’s NAV of S$10.12 as of 30 June 2024, its shares are trading at a P/B ratio of just 0.52 times.
Management will continue with its GET strategy which stands for Growth, Enhancement, and Transformation.
The group made S$1.1 billion of acquisitions and investments in 1H 2024, of which the bulk (49%) went into property development.
CDL also boasts an impressive residential launch pipeline of around 2,500 units in condominiums such as Union Square Residences and Norwood Grand.
At the same time, there are ongoing asset enhancement initiatives (AEIs) for City Square Mall and Republic Plaza.
The target completion date for these two projects is 1H 2025.
UOL Group Limited (SGX: U14)
UOL Group is a property and hospitality group with total assets of around S$22 billion.
The group also owns three acclaimed hospitality brand names Pan Pacific, Parkroyal Collection, and Parkroyal.
UOL Group reported a slightly downbeat set of earnings for 1H 2024 as revenue fell by 7% year on year to S$1.3 billion.
Net profit dipped slightly, down by 3% year on year to S$130.4 million.
The property group’s NAV stood at S$13.19 as of 30 June 2024, giving its shares a P/B ratio of just 0.41 times.
Despite cautious sentiment in the office and retail sectors, UOL Group managed to record positive rental reversions of 8.5% and 15.7%, respectively.
Its new condominium, Meyer Blue, was launched in September 2024 and is a freehold condominium with 226 units.
UOL Group was awarded a mixed-use development site at Tampines Avenue 11 at S$1.2 billion.
This site is a 50:50 joint venture with CapitaLand Development and will be transformed into an integrated development with a retail mall, bus interchange, community club, and hawker centre.
Over at its property investment arm, the group has an AEI for Singapore Land Tower which is targeted to be completed by the end of this year.
The property giant recently acquired a 50% interest in 388 George Street in Sydney, Australia, at a consideration of A$460 million.
This is a freehold A-grade 30-storey commercial property with a five-storey retail and commercial podium.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
