These three Singapore stocks are going through strategic reviews that may drive a turnaround in their performance in 2024.
It’s hard to find themes to invest in within the Singapore stock market.
One area to look at is stocks that are going through strategic reviews.
After our recent write-up on Singtel’s new corporate strategy, we received questions on whether there are other Singapore companies going through business transformations too.
Some investors may have noticed that the Sembcorp Industries’ share price went up sharply after the company announced ambitious targets to grow its renewables capacity. This made Sembcorp Industries the top-performing blue-chip stock in Singapore last year.
Let us look at three Singapore stocks that are going through strategic reviews currently.
3 stocks going through strategic reviews to watch for in 2024
#1 – Seatrium Limited (SGX: S51)
Seatrium (SGX: S51) recently announced that it is expecting to make a significantly higher net financial net loss in FY2023 compared to the year before.
This is driven by a material non-cash write-down for its surplus non-core assets as well as excess and obsolete inventories, following a strategic review of its business focus.
As a recap, the oil and gas giant was previously known as “Sembcorp Marine” but changed its name on 27 April after its US$3.3 billion acquisition of Keppel Limited’s Offshore and Marine division.
Following the completion of this combination, Seatrium embarked on a comprehensive strategic business review when it announced its first quarter 2023 business update.
This holistic review will review Seatrium’s capital structure post-merger and how it can best position itself to take advantage of growth opportunities as more businesses go green.
Another consideration is whether a share consolidation may be needed as the combination gave rise to a very high base of outstanding shares (56.2 billion as of 30 June 2023).
Seatrium reported both a gross and net loss of S$150.4 million and S$264.4 million, respectively, for the first half of 2023.
For its third quarter 2023 business update, Seatrium reported that it clinched S$4.3 billion of contracts year to date, bringing its order book to S$17.7 billion as of 30 September 2023.
Around 40% of this order book comprised renewables and cleaner/green solutions.
In the meantime, Seatrium’s share price has fallen back to S$0.105, after reaching a 52-week high of S$0.148 in September last year.
This comes amidst a fall in oil prices, as well as concerns on the outlook of the green energy sector.
Just earlier this month, Seatrium’s S$250 million wind farm contract was canceled by Empire Offshore Wind, a joint venture between Norwegian state-owned energy company Equinor and oil giant BP, due to “significant macroeconomic conditions” impacting the project.
The outcome of its strategic review will be announced by the first half of 2024.
#2 – Singapore Post Limited (SGX: S08)
Singapore Post (SingPost) is Singapore’s only postal service provider and the group also provides eCommerce logistics in Asia Pacific.
In July 2023, SingPost announced that it would work with the Infocomm Media Development Authority (IMDA) to review its costs and operating model.
This led to an increase in the postage rate of 20 cents to 51 cents, which became effective from 9 October 2023. The rise in postage rate is expected to improve the performance of SingPost’s postal business in the second half of its fiscal year 2023.
In November 2023, SingPost also announced the acquisition of Australian courier and logistics services provider Border Express for not more than A$210 million (S$184 million).
SingPost believes that the acquisition of Border Express will widen its integrated logistics network and strengthen its market position in Australia.
SingPost reported an operating loss of S$10 million for its post and parcel division in its first half fiscal 2024 (1H FY2024).
This was also higher than the S$8.2 million operating loss in the same period last year.
On a group basis, SingPost saw revenue fall by 13.7% year on year to S$827.3 million for 1H FY2024.
Underlying net profit inched up 1.9% year on year to S$13.4 million, and an interim dividend of S$0.0018 was declared, similar to a year ago.
SingPost’s share price has fallen to a multi-year low of S$0.415 as of 30 January 2024, as the bounce after the announcement of the postal rate hike has proven to be short-lived.
This strategic review is being finalised and will be completed before SingPost’s fiscal year ends on 31 March 2024.
#3 - StarHub Ltd (SGX: CC3)
StarHub (SGX: CC3) has an ongoing transformation plan called DARE+ that the telco provided updates on during its recent Investor Day 2023.
First announced in November of 2021, DARE+ aims to deliver S$500 million in target ourcomes.
This will include cost savings of S$280 million plus S$220 million in gross profit growth from 2022 to 2026.
Starhub has given regular updates on its DARE+ initiatives and whether it is on track to meet its objectives.
For this year, the group intends to create an all-in-one app to offer targeted and personalised offers.
Customers will migrate from the legacy system next year and this is expected to be completed by 2025.
StarHub will also drive its Infinity Play while cross-selling and up-selling its services to customers underpinned by its new Cloud and Data Lake capabilities.
Cloud Infinity will be the world’s first autonomous metropolitan cloud network that will make use of application programming interfaces (APIs) to drive network monetisation.
A data lake is a consolidated cloud-based platform enabling new customer engagement models to arrive at data-driven strategic business decisions.
These are ambitious goals, but StarHub has already kick-started the process with the sale of D’ Crypt to Singapore Technologies Engineering for at least $67.5 million subject to earn-out considerations.
D’ Crypt focuses primarily on hardware development for the defence industry and is not integral to StarHub’s three “C” pillars of growth – Cloud, Cybersecurity, and Connectivity.
In addition, Starhub has achieved about S$51 million in outcomes in FY2023. This was slightly below the company’s original target of S$80 million, due to below-target margin growth due to upfront investments required for new business initiatives.
However, the company has exceeded its original savings target due to ongoing cost rationalisation efforts.
This has led to a slight bounce in its share price to S$1.05 as of 30 January 2024, from its 52-week low of $0.995 in June last year.
To learn more about Starhub's DARE+ transformation, read our earlier interview with CEO Nikhil Eapen.
What would Beansprout do?
It is encouraging to see more Singapore companies going through strategic reviews with the objective of boosting shareholder returns.
Seatrium, SingPost and Starhub have gone through varying challenges to their businesses in the past, and we will be tracking developments from their strategic reviews closely.
However, we would keep in mind that any changes may take time to implement and require a gestation period. Hence, we may not see an immediate financial improvement or earnings boost.
Amongst the 3 stocks, Starhub and SingPost appear to be in a better financial position than Seatrium, which remains loss-making in 2023.
Starhub is also expected to offer a decent dividend yield of 4.8%.
We will keep these stocks on our watchlist in 2024, and look out for signs that they may be on the cusp of a turnaround.
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