There is an article that mentioned the worst performing STI stocks in 2015. Over here, we took a contrarian view on loser stocks. We like loser stocks as they are heavily discounted. So typically when we come across such news, we will take a quick look at the names mentioned. Of course, not all losers are good. Some are beaten for a reason. For example, most of the big STI losers are related to commodities, oil and gas industry and property sector. The question we should ask is, are they undervalued now given the general bearish view on them?
Take for example Noble, beaten badly because of drop in commodities prices and shorters’ accusation of fraudulent accounting versus Sembcorp Industries who is having a drop in price due to its holding of SembMarine which is largely depressed due to drop in oil prices. Are we comfortable to take a stake in any one of them? We will probably not touch Noble as it is highly leverage and is a potential risk for trouble and its fate is link closely to the commodities prices which is currently in a downward cycle. We dont know when price will stabilize and move upwards. But we know that it has tons of debts that need to be serviced. If banks are not interested to refinance their debt, they will either raise cash from shareholders or simply go kaput. We cannot stomach such kind of scenarios hence we prefer less leverage companies. Sembcorp’s debt level is acceptable and warrant us to further study its business to check if there is any current mismatch in value.
At least from the eyes of UOBkayhian, it is undervalued. At the worst case scenario where SembMarine is deem worthless, the utilities business of Sembcorp is still worth S$2.85 which is higher than the current price of S$2.76. We are quite sure Sembmarine won’t be worth nothing and the utilities business is in general stable (who don’t need electricity nowadays?). The current yield is around 6% assuming dividend is maintained. The yield won’t drop drastically since utility business cash flow is stable. At current yield plus potential price oil price rebound, upside is plenty for our typical retail investor who dare to take the plunge now and purchase a stake of the company for a fair return held over long term. We cannot be sure that the price will not drop further but at least we did not purchase at its all time high of near S$5 and suffer a near 50% loss, the probability of incurring another 50% loss from current price is lower. With a long term horizon, we are confident the typical investor will be able to reap meaningful returns.
What are your views?
The Valumetrics Team
Most counters booked double-digit losses.
Most of Singapore’s largest stocks experienced hefty losses in the past year. The benchmark Straits Times Index dropped 14.3% in 2015, dragged by the extremely poor performance of its constituents.
Data from Bloomberg show that the worst performer was commodity trader Noble Group, whose share price declined 64.91% in 2015 following a spate of short-seller attacks. The next worst-performers were Sembcorp Marine and Sembcorp Industries, which declined 46.32% and 31.46, respectively, on back of the sharp decline in commodity prices.
Meanwhile, resorts operator Genting Singapore dropped 28.7% on back of persistently weak gaming revenue. Lastly, Keppel Corporation dropped 26.4% last year on back of the bearish outlook on rigbuilding.
Other poor performers include Golden Agri-Resources, City Developments, Hutchison Port Holdings, United Overseas Bank, and DBS Group Holdings.
On the contrary, four stocks managed to book positive price returns in 2015. These include SATS, ComfortDelGro, Hongkong Land Holdings, and Capitaland.
Valumetrics.co 
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