Sembcorp Industries and Keppel Corp have been among the best performing blue-chip stocks in recent weeks. Apart from the generally firm market tone, the two conglomerates with big exposure to the offshore and marine (O&M) sector have been getting a lift from firmer oil prices. We think this is an opportune moment to beat a tactical retreat, and hunt for other opportunities. If their share prices retrace significantly, we may look to get back in.
Both Sembcorp and Keppel climbed strongly over the past week, ahead of the April 17 meeting of major oil producers in Doha, where a deal to restrict supply could be hatched. However, there are concerns Iran may refuse to participate in this plan. In fact, it has said that it intends to ramp up its output to pre-sanction levels. And, even if a deal is sealed, it is unclear how much higher that would push oil prices. Or, how much that would boost capital expenditure across the energy sector.
To be clear, we still think that Sembcorp and Keppel could generate decent earnings over the long-term even if oil prices don’t rise much from current levels. Both companies are global leaders in the offshore and marine sector, and they have a slew of other promising businesses that are growing. But the strong rally in their share prices seems to rest on oil prices and capital expenditure in the energy sector staging a strong and immediate recovery — which seems unlikely.
At last week’s close, we have made a gain of 26.45% on our holding of Keppel. We have lost 13.6% on our holding of Sembcorp. With the sale of these two positions, we have raised some $21,697 in cash.
Sembcorp and Keppel were both holdings in our blue-chip portfolio. The other stocks in the portfolio are Singapore Telecommunications (Singtel), DBS Group Holdings, ST Engineering, Singapore Airlines (SIA), Dairy Farm International Holdings, and City Developments (CDL). These eight stocks have collectively gained 0.36% since they were added to the portfolio. The Straits Times Index (STI) has plunged 10.85% since this portfolio was started.
Sheng Siong buys property
Elsewhere, Sheng Siong Group on April 8 said that it has exercised an option to purchase a commercial property located at New Upper Changi Road for about $53 million. The property comprises the first and second storeys of a four-storey Housing and Development Board commercial building, and is situated within the recently upgraded Bedok Town Centre. With a gross floor area of around 2,844 square metres and a leasehold tenure of 86 years commencing from July 1, 1992, it is currently leased by Sheng Siong for the operations of its store.
Sheng Siong says that the proposed acquisition will ensure the store’s continued operations and contributions to the company. According to OCBC Investment Research, it will also eliminate the risk of higher rental reversions in future for this store as well as improve Sheng Siong’s control over its cost structure. The research house estimates that Sheng Siong has a net cash position of about $126 million as of FY2015 ended December. It has a ‘buy’ recommendation on the stock with a price target of 95 cents.
Sheng Siong is one of the holdings in our high-dividend portfolio. The other stocks in the portfolio are Singapore Exchange (SGX), Venture Corp, The Hour Glass, ComfortDelGro Corp, Cogent Holdings, and QAF. These seven stocks have collectively shed 0.10% since they were added. The STI has tumbled 12.79% since this portfolio was started.
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Both Sembcorp and Keppel climbed strongly over the past week, ahead of the April 17 meeting of major oil producers in Doha, where a deal to restrict supply could be hatched. However, there are concerns Iran may refuse to participate in this plan. In fact, it has said that it intends to ramp up its output to pre-sanction levels. And, even if a deal is sealed, it is unclear how much higher that would push oil prices. Or, how much that would boost capital expenditure across the energy sector.
To be clear, we still think that Sembcorp and Keppel could generate decent earnings over the long-term even if oil prices don’t rise much from current levels. Both companies are global leaders in the offshore and marine sector, and they have a slew of other promising businesses that are growing. But the strong rally in their share prices seems to rest on oil prices and capital expenditure in the energy sector staging a strong and immediate recovery — which seems unlikely.
At last week’s close, we have made a gain of 26.45% on our holding of Keppel. We have lost 13.6% on our holding of Sembcorp. With the sale of these two positions, we have raised some $21,697 in cash.
Sembcorp and Keppel were both holdings in our blue-chip portfolio. The other stocks in the portfolio are Singapore Telecommunications (Singtel), DBS Group Holdings, ST Engineering, Singapore Airlines (SIA), Dairy Farm International Holdings, and City Developments (CDL). These eight stocks have collectively gained 0.36% since they were added to the portfolio. The Straits Times Index (STI) has plunged 10.85% since this portfolio was started.
Sheng Siong buys property
Elsewhere, Sheng Siong Group on April 8 said that it has exercised an option to purchase a commercial property located at New Upper Changi Road for about $53 million. The property comprises the first and second storeys of a four-storey Housing and Development Board commercial building, and is situated within the recently upgraded Bedok Town Centre. With a gross floor area of around 2,844 square metres and a leasehold tenure of 86 years commencing from July 1, 1992, it is currently leased by Sheng Siong for the operations of its store.
Sheng Siong says that the proposed acquisition will ensure the store’s continued operations and contributions to the company. According to OCBC Investment Research, it will also eliminate the risk of higher rental reversions in future for this store as well as improve Sheng Siong’s control over its cost structure. The research house estimates that Sheng Siong has a net cash position of about $126 million as of FY2015 ended December. It has a ‘buy’ recommendation on the stock with a price target of 95 cents.
Sheng Siong is one of the holdings in our high-dividend portfolio. The other stocks in the portfolio are Singapore Exchange (SGX), Venture Corp, The Hour Glass, ComfortDelGro Corp, Cogent Holdings, and QAF. These seven stocks have collectively shed 0.10% since they were added. The STI has tumbled 12.79% since this portfolio was started.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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