SINGAPORE (Oct 8): With the Singapore market down 5.7% year to date, corporate activity seemed to have picked up pace recently, says OCBC Investment Research.
In July, Wheelock & Co made an offer for Wheelock Properties at $2.10 versus the last closing price before the announcement of $1.74.
In Sept, Keppel Corporation proposed a privatisation of Keppel T&T with a 40% premium to last traded price prior to the offer.
M1’s price also surged from $1.63 to $2.11, up 29%, following Keppel Corp’s and Singapore Press Holdings’ pre-conditional voluntary general offer for M1 at $2.06.
With these corporate activities, related companies in the telco and property sectors have also moved higher.
With Wheelock Properties’ offer, property stocks regained some ground in July. This included Wing Tai Holdings, Ho Bee Land, Bukit Sembawang Estates and Guocoland.
In the telco space, beleaguered Starhub also rose in Sept and helped to erase some of the YTD losses with current price of $1.97 versus year’s low of $1.58.
Singapre Telecommunications also posted gains, rising from the year’s low of $3.02 to $3.21 on Oct 5.
To be sure, the ongoing US-China trade war has taken a toll on the Singapore market.
“While a certain level of uncertainty seems to be the accepted norm now, a focus on quality and fundamentals is necessary in this environment,” OCBC advises investors who are poised to take advantage of the situation.
Companies with cash will shine, and defensive sectors are likely to be better positioned in this environment and will include the healthcare, insurance and consumer staples sectors, adds OCBC.
The recent correction in the Singapore market has thrown up good price levels for key shareholders to strengthen their stakes in the companies, OCBC says.
The Straits Times Index is trading at 12.0x FY18 earnings and 11.1x FY19 price/book.
Recent Singapore corporate activities and share buy-back volumes suggest that key owners and shareholders also see value emerging in the market currently.
After the 2Q18 results, share buyback activities have been rising. The buybacks are not just confined to the bigger market cap STI companies such as DBS, OCBC, CityDev, CapitaLand, SGX, SATS, but are also seen at the smaller-cap companies.
In addition, there are 87 share buyback transactions in Jan-Oct 2018 versus only 28 in the whole of 2017 and 40 in 2016, based on information from Bloomberg. The bulk of the share buybacks in 2018 took place from Jul-Sep 2018, or a total of 51 or 59%, coinciding with the same period when the market was at its lowest.
While there could be many reasons for share buybacks, the pickup in share buyback transactions is a key signal that insiders are seeing value in their stocks at current price levels.
At Oct 5 closing, the STI is down 5.7% for the year or down 11.9% from this year’s high.
“While corporate actions are likely to focus on the undervalued companies with lower trading liquidity, good longer term investment ideas include DBS, UOB, CapitaLand, UOL and SingTel," says OCBC,
As at 3.20pm, shares in DBS, UOB, Capitaland, UOL and Singtel are trading at $25.64, $26.13, $3.24, $6.62 and $3.20.
