3 Blue Chips Down 9% or More When STI is Up – Time to Buy Low?

The Straits Times Index (STI) recently reached a 17 year high, climbing to over 3,700 points, finally surpassing the highs made before the global financial crisis of 2007-2008. The biggest contributors were the three local banks, all of which hit new highs.

Despite the strong rally, out of the 30 STI stocks, 70% or 21 STI stocks have delivered negative returns so far this year.

Here we list all the STI stocks that have delivered negative returns this year and focus on 3 companies who have not done as well this year, but could be interesting to consider due to possible catalysts.

1) Genting Singapore (SGX: G13)

Genting Singapore is the 2^nd worst performer this year, as its 3Q24 results underperformed due to lower VIP volume and a weaker house win rate. There were early signs from Genting Singapore’s 2Q24 results as well as from the other Singapore Casino.

It was estimated that Genting Singapore’s total market share fell to 36% for the quarter, with VIP contributing 33% of gaming revenues for the quarter while the mass market revenues accounting for 67%. It was reported that Genting Singapore’s VIP market share was 47% with the other Singapore Casino having also reported a weaker premium gaming segment in 3Q24.

Genting Singapore said it had taken the opportunity to accelerate the transformation of many RWS attractions during the September quarter as a result of the slower recovery of international visitor arrivals to Singapore, increased regional competition and continued global economic uncertainty.

Barring any positive surprise on win rate which is dependent on luck, the current levels of earnings might persist for another two to three quarters until RWS 2.0 attractions (Minion Land, the Singapore Oceanarium, the Central Lifestyle Connector and an all-suite hotel in place of Hard Rock Hotel) start to open progressively from 1H25, and meaningfully contribute to earnings growth in 2H25/2026.

There is also a waterfront development that is slated to include two new luxury hotels featuring 700 keys, a four-storey podium housing entertainment offerings, plus various retail and dining outlets. This part of the expansion will commence construction in November 2024 and will be opened by 2030.

Genting has a net asset value of 68.8 cents per share as at 30 June 2024. Genting carries no debt and has 44% or 30.3 cents of its net asset value is cash.

With Genting trading at $0.78, this means that excluding cash, the rest of the business is valued at about $0.48.

The tricky part is valuing the business based on its earnings. It earned 2.95 cents per share in 1H24 but only recorded 0.66 cents per share in 3Q24. It is also unknown what the post RWS 2.0 earnings would look like.

If Genting can return to 1H24 level of earnings, i.e., 2.95 cents per share per half year or nearly 6 cents a year, that would mean the business is valued at a P/E ratio of only 8 times.

However, if the business is valued at 0.66 cents per share per quarter or 2.64 cents per share per year, the current P/E is 18 times which looks to be on the high side.

2) Seatrium (SGX:5E2)

Seatrium is the 4^th worst performer this year despite achieving a decade high net order book and improving underlying profitability metrics.

Seatrium recorded a revenue of $4.0 billion for 1H2024, a notable 39% growth from $2.9 billion for 1H2023, mainly due to progressive revenue recognition from newbuild projects and increased repairs & upgrades activities.

After winning $13.4 billion of orders in 1H24, Seatrium currently has a net order book of $24.4 billion with deliveries till 2031, a slight decrease from the $25.8 billion order book about half a year ago as it works through its order book. About 35% of the net order book is in renewables and cleaner/green solutions.

The bulk of its net order book is for delivery from 2028 onwards which means that it has good visibility at least till 2028 as Seatrium progressively bills its customers and recognises revenue based on project completion milestones.

Combining the strength of former Keppel Offshore & Marine and Sembcorp Marine, Seatrium is uniquely positioned as a leading globally competitive clean energy solutions provider, with distinctive competencies.

Seatrium is well positioned to take on projects in the growing renewables space while also benefiting from their existing order books. The floating production storage and offloading (FPSO) space continues to be robust, as well as offshore support vessel charters for oil and gas. Seatrium even has opportunities in areas like providing high-voltage direct current transmission systems.

As Seatrium has capabilities in both the renewables and traditional oil and gas space, market watchers believe that Seatrium is positioned to benefit either way and is a strong beneficiary to demand growth. This is especially important from a global political standpoint because world leaders change and so do their priorities/focus.

We have highlighted here and here that the one risk that investors should take note of for Seatrium is its long term nature of projects which subject investors to project execution risks and tail-end risks.

With Seatrium delivering earnings of 1.05 cent per share in 1H24, this should start to assuage investors of concerns over project execution risks. Should Seatrium be able to deliver strong levels of profitability with its order books, this could be another play with some upside to its share price from its current lows.

3) Venture Corporation (SGX:V03)

Venture is actually a middle of the pack performer as the 13^th poorest performer in the STI.

Revenue declined sequentially in 3Q24 largely due to soft demand in the Life Science, Lifestyle Consumer and Test & Measurement Instrumentation tech domains. This was partially offset by growth in Networking & Communications and Semiconductor related equipment tech domains.

Despite good opportunities from life science and AI data centres, Venture lowered its 2H24 revenue guidance stating that in spite of softer customer demand in 3Q 2024, revenue for 2H 2024 is likely to be relatively stable compared to 1H 2024. This means that if earnings for 2H24 are in line with 1H24, Venture’s earnings will contract to multi-year lows.

Moving ahead to 2025, Venture continues to see good opportunities on the horizon with new design wins and new product introductions for secular growth segments like Life Science and AI data centre related businesses.

Venture will benefit from technology supply chain diversification to ASEAN countries as many large companies seek to develop flexibility and reduce risk. In the forthcoming quarters, Venture will be onboarding new customers in selected technology domains. Venture is already seeing additional business from several customers seeking to mitigate geopolitical risk and is currently in different stages of implementation with the various customers.

Venture currently trades at very favourable valuations when compared to the last decade. Venture currently has about one-third of its market capitalisation or $4.1 per share in cash which which means the business is valued at about $2.4 billion. With revenues of about $1.4 billion 1H24 and earnings of $0.426 per share, this means that after excluding cash, P/S of the business is about 0.9 times while the P/E of the business is about 10.4 times.

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