Undervalued Stocks in Singapore: 7 Best Blue Chip Stocks To Consider
Since the beginning of the year, Singapore’s Straits Times Index (STI) is up 9% to 3,089 points currently.
However, despite the slight optimism surrounding the index, a couple of blue chips are still selling below their net asset or book values.
And they could prove to be worthy investments over the long run.
Potentially Undervalued Companies
The late Benjamin Graham, who is often touted to be the father of value investing, liked to purchase a stock for less than its intrinsic value.
For example, when we purchase $1 worth of an asset for 50 cents, we have a margin of safety of 50%, and this “safe distance” can help minimise the downside risks of the investment.
Here, let’s take a look at all the blue-chip stocks that have a price-to-book (P/B) ratio of below 1 currently, which could mean they are undervalued.
Company Ticker Share Price P/B Ratio (times) Dividend Yield
Hongkong Land SGX: H78 US$4.29 0.29 5.13%
UOL SGX: U14 S$7.09 0.60 2.47%
City Developments SGX: C09 S$6.89 0.78 1.16%
Jardine Cycle & Carriage SGX: C07 S$19.39 0.82 2.96%
Keppel Corporation SGX: BN4 S$5.24 0.86 1.91%
CapitaLand SGX: C31 S$4.08 0.92 2.20%
Yangzijiang SGX: BS6 S$1.66 0.93 2.71%
Source: Shareinvestor (as of time of writing on 3 Sept 2021)
Cheap Doesn’t Make It an Automatic Buy
Some of the companies could make good investments.
For example, Hongkong Land, which owns prime office and luxury retail properties in Hong Kong and Singapore, has a solid long-term financial track record and has been giving out stable dividends over the years.
On the other hand, there are also companies on the list that have not been doing well in the past.
For instance, Keppel Corporation has seen its revenue, net profit and dividends falling over the past five years, and it could face more headwinds going forward.
The contrasting examples show that just because a company has a P/B ratio of below 1, it doesn’t mean it’s a “buy”. Cheap could be cheap for a reason.
As investors, we have to go beyond the headline numbers to ensure the companies we invest in have strong business fundamentals to begin with.
Investors can use the list above as a starting point to dig deeper into the companies they fancy and determine if they are worth investing in for the long term.
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer doesn’t own shares in any companies mentioned.