SINGAPORE (April 8): The market has been lifted recently by a more dovish stance at the US Federal Reserve, and we are now looking for opportunities to realize some of our gains. Among the best performers in our blue-chip portfolio is Keppel Corp, which delivered a double-digit positive return since it was added only eight weeks ago. Apart from the generally firm market tone, Keppel has been getting a lift from firmer oil prices, which could be a harbinger of a better outlook for its offshore and marine (O&M) division.

Indeed, on April 6, Keppel said that its BrasFELS shipyard has clinched a floating production storage and offloading (FPSO) module fabrication and integration project from its existing customer MODEC Offshore Production Systems (Singapore). The value of this contract is worth over BRL 500 million ($190 million).

When we added Keppel to our blue-chip portfolio, the market was according practically no value to its O&M unit. Now, some value is being ascribed to it. But there is a wide variation in opinion on where we go from here.

OCBC Investment Research values Keppel’s O&M segment at book value, or around $1.37 billion. This translates to about 76 cents per share. Based on its sum-of-parts valuation, and further applying a 10% discount, OCBC Investment Research has a fair value estimate of $5.07. The research firm has a “hold” recommendation on the stock.

According to OCBC Investment Research, Keppel should be viewed increasingly as a property play, as the O&M segment could see a continued lack of earnings clarity with low oil prices. Also, the research firm notes that the property segment accounted for some 46% of the group’s earnings in FY2015 ended December, while the O&M and infrastructure segments contributed another 32% and 14% respectively.

Meanwhile, RHB Research Institute says that the market has underestimated the resilience of Keppel’s O&M segment, valuing it at 3.4 times its book value. This translates to some $4.66 billion, or $2.57 per share. Based on its sum-of-parts valuation, the research house derived a price target of $8.08. It has a “buy” call on the stock.

CIMB has a more bullish assessment. It values Keppel’s O&M segment at 4 times book value, or around $5.48 billion. This translates to around $3.02 per share. Based on revalued net asset value (RNAV), the research house has a price target of $5.53. It has a “hold” recommendation on the stock.

With shares in Keppel already trading above the most bullish By Benny Tan prognoses for its O&M segment in the market, we are looking for opportunities to sell. Apart from Keppel, the other stocks in the blue-chip portfolio are Singapore Telecommunications (Singtel), DBS Group Holdings, ST Engineering, Singapore Airlines (SIA), Sembcorp Industries, Dairy Farm International Holdings, and City Developments (CDL). These eight stocks have collectively slipped 4.26% since they were added to the portfolio. The Straits Times Index (STI) has plunged 14.38% since this portfolio was started.

SGX posts steady performance
Elsewhere, Singapore Exchange (SGX) has continued to deliver heartening numbers. In its March operating report released on April 6, the bourse operator said its total securities market turnover value grew 9% y-o-y to $27.3 billion, while its securities daily average value rose 9% to $1.2 billion. Total derivatives volume also increased 15% y-o-y to 17.1 million. The FTSE China A50 Index Futures remained the most active derivative contract, with volume up 7% y-o-y to 7.4 million. SGX is due to report its 3QFY2016 results ended March on April 20, when commentary in relation to its various business segments is likely to be scrutinized.

SGX is one of the holdings in our high-dividend portfolio. The other stocks in the portfolio are Venture Corporation, Sheng Siong Group, The Hour Glass, ComfortDelGro Corporation, Cogent Holdings, and QAF. These seven stocks have collectively shed 1.42% since they were added. The STI has tumbled 16.24% since this portfolio was started.

SATS embarks on new JV
In line with its overseas expansion plans, SATS said on March 31 that it has signed a joint venture (JV) agreement with Oman Air for cargo handling at Muscat International Airport. Under the agreement, Oman Air will transfer its cargo handling business and related assets to the JV company. SATS will pay around $22.5 million for a 33% stake in the JV company, called Oman SATS Cargo. The latter, expected to commence operations during the second quarter of this year, will become the single source provider of cargo handling services at the existing cargo facility and subsequently at the new state-of-the-art cargo terminal in Muscat International Airport.

SATS is one of the holdings in our high-growth portfolio. The other stocks in the portfolio are Raffles Medical Group, Del Monte Pacific, UG Healthcare Corporation, Best World International, China Aviation Oil (Singapore) Corporation (CAO), Sarine Technologies, and Jumbo Group. These eight stocks have collectively gained 7.45% since they were added. The STI has declined 4.01% since this portfolio was started.

Latest portfolio moves:
Our blue-chip portfolio, started on July 10, 2015 with $100,000, is holding 2,400 shares in Singtel purchased at $4.29 per share, 500 shares in DBS purchased at $20.64, 3,100 shares in ST Engineering purchased at $3.31, 900 shares in SIA purchased at $11.30, 2,900 shares in Sembcorp purchased at $3.53, 2,100 shares in Keppel purchased at $4.84, 1,300 shares in Dairy Farm purchased at US$5.94, and 1,300 shares in CDL purchased at $7.75. Our cash balance remains at $18,003.65 (excluding the receipt of dividends). Including the cash balance and dividends received, the overall portfolio has shed 2.52%.

Our high-dividend portfolio, started on July 24, 2015 with $100,000, is holding 1,200 shares in SGX purchased at $8.53 per share, 1,300 shares in Venture purchased at $8.04, 11,500
shares in Sheng Siong purchased at $0.885, 14,300 shares in The Hour Glass purchased at $0.70, 3,300 shares in ComfortDelGro purchased at $3.09, 20,900 shares in Cogent purchased at $0.48, and 10,000 shares in QAF purchased at $1.01. Our cash balance remains at $28,795.50 (excluding the receipt of dividends). Including the cash balance and dividends received, the overall portfolio has dipped 0.5%.

Our high-growth portfolio, started on November 13, 2015 with $100,000, is holding 2,400 shares in Raffles Medical purchased at $4.33 per share, 2,600 shares in SATS purchased at $3.90, 33,400 shares in Del Monte purchased at $0.30, 32,800 shares in UG Healthcare purchased at $0.305, 28,600 shares in Best World purchased at $0.35, 13,300 shares in CAO purchased at $0.755, 5,900 shares in Sarine purchased at $1.71, and 21,800 shares in Jumbo purchased at $0.46. Our cash balance remains at $18,533 (excluding the receipt of dividends). Including the cash balance and dividends received, the overall portfolio has gained 5.4%.