The pandemic has resulted in plummeting valuations for stocks across the board.
During such times, you should take a step back and assess the business before putting money in it.
COVID-19 is an unprecedented crisis that has altered human habits and behaviour, some irreversibly.
What used to be an attractive business model may not be so any longer.
In such a dynamic environment, you need to relook at your investment thesis and re-assess valuations to determine if they are justified, or if you could be looking at a potential bargain.
The same assumptions apply to blue-chip companies as well.
Although such companies may be large and have a strong track record, they are not immune to disruptions in their business models.
Neither are they unaffected by the sharp plunge in demand for goods and services across a wide range of industries.
We take a look at four blue-chips trading at cheap valuations.
To be sure, not everything that is cheap may be deemed worthy.
It is up to you to decide if these companies deserve a place within your portfolio.
Singapore Press Holdings Ltd (SGX: T39)
Singapore Press Holdings, or SPH, publishes newspapers, magazines and books in both print and digital formats.
The group also owns around 65% in SPH REIT (SGX: SK6U), a retail REIT that owns three properties in Singapore and majority stakes in two Australian shopping centres.
The share price of SPH has fallen 39% year to date, and the group is trading at a price-earnings ratio of just 10.5 times.
SPH reported a weak set of earnings for the first half of the fiscal year 2020.
Revenue dipped 1.3% year on year, while core operating profit declined by 15.3% year on year.
The media division saw segment profit plunging from S$42.4 million in the first half of the fiscal year 2019 to just S$11.4 million in the current fiscal half-year.
However, in a COVID-19 business update released last month, the media giant reported a 40% year on year rise in the rate of subscription for the Straits Times.
The group is also working on the integration of its UK purpose-built student accommodation (PBSA) portfolio to optimise synergies and lower costs.
Genting Singapore Ltd (SGX: G13)
Genting Singapore is a leisure and hospitality group, and also the owner and operator of the Resorts World Sentosa integrated resort (IR).
The IR has six hotels with 1,600 rooms, a casino, shopping malls and lifestyle and entertainment outlets.
COVID-19 has hit Genting hard as the flow of tourists has all but dried up.
In a quarterly business review released last month, the group announced that revenue fell by 36% year on year in the first quarter of 2020.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell by a sharper 55% year on year.
Genting’s shares have fallen 17% year to date and are trading at around 13.5 times last year’s earnings.
The group remains pessimistic on the outlook for the rest of 2020 but will continue to gun for the Japan IR opportunity in Yokohama City.
SIA Engineering Company Ltd (SGX: S59)
SIA Engineering Company, or SIAEC, specialises in aircraft maintenance, repair and overhaul (MRO) services for a variety of airlines.
The group also performs line maintenance services and provides fleet management services.
For the full fiscal year ended 31 March 2020, SIAEC’s revenue fell 2.6% year on year, but profit attributable to shareholders jumped 20.4% year on year.
The increase was mainly due to a writeback of tax provision for the engine and component division, as well as a higher share of profits from associates and joint venture companies.
The outlook is poor, though, with all segments expected to be impacted in future quarters.
The group has also cut its final dividend from S$0.08 to S$0.05 to conserve cash.
Shares of SIAEC are down 26% year to date and are trading at just 12 times earnings.
Wilmar International Limited (SGX: F34)
Wilmar is a leading agribusiness group whose activities include oil palm cultivation, oilseed crushing and sugar milling and refining.
The group has over 500 manufacturing plants and hires around 90,000 people.
In a business update released last month, Wilmar’s revenue increased by 4.6% year on year to US$10.9 billion, while core net profit jumped 22.5% year on year to US$306.5 million.
Demand for the group’s products grew as household consumption increased due to movement control measures and lockdowns.
Wilmar’s operations were also not adversely impacted by the pandemic as it is a producer of essential products.
Its shares have declined by just 6.2% year to date and the group is trading at around 14 times historical earnings.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
