Earlier this week, Deputy Prime Minister and Finance Minister Heng Swee Keat presented the Singapore Budget 2021 to the nation. As the world is still in the midst of the COVID-19 pandemic, Budget 2021 was a vital one as it indicates the direction for which Singapore intends to embark as we prepare for economic growth in the post-COVID-19 world.
In this week’s edition of 4 Stocks This Week, we highlight some companies that might hope to capitalise on growth as our country enters a post-COVID-19 world.
For those interested in what our editorial team thinks about Singapore Budget 2021, you can watch our DollarsAndSense Tonight Post-Budget Discussion.
Singtel (SGX: Z74)
One notable difference in this year’s budget was the number of times the DPM referred to Singapore companies during his speech. One company cited was Singtel (SGX: Z74).
As one of the biggest non-bank companies in Singapore, it comes as no surprise that Singtel’s impact in Singapore goes beyond just delivering telecommunication services to Singaporeans and financial returns to her investors. Singtel employs about 24,000 people worldwide, with about 12,100 based in Singapore.
In his budget speech, DPM highlighted Singtel as an exemplary example of a company that plays an important role in kickstarting their employees’ volunteering journey. With about 12,000 employees based in Singapore, Singtel volunteers have been actively engaging the community they serve, from supporting children and youth with special needs, to enabling digital inclusion for the older generation.
While 2020 has not been a kind year for many telco companies, including Singtel, because of the reduction in revenue due to lower roaming usage and prepaid service, there are reasons to be optimistic based on Singtel’s latest financial results.
Based on its 3Q2020 result released on 10 February 2021, Singtel’s quarterly revenue for 3Q2020 is only 3.2% lower compared to the same period last year. However, the company’s profits for 2020 have also taken a significant hit as it sees its 9M2020 earnings before interest and tax (EBIT) at $923 million, down 42% compared to the same period in 2019.
With a share price of $2.35 (19 Feb 2021), Singtel share price has a taken a rough tumble of about 25% as compared to the $3.13 that it was trading at on 19 February 2021. It’s currently trading at a price-to-earnings (PE ratio) of about 23.
Olam (SGX: O32)
A company that is majority-owned by Temasek (52%), Olam provides a farmer services platform called Jiva, which was cited during the Budget 2021 speech. The platform enables farmers to grow more effectively and sustainably, buy farming inputs, borrow money to fund farm growth and help them sell their produce directly to end-buyers. Jiva also allows micro-entrepreneurs to participate in the supply chain business facilitating last-mile logistics.
As a group, Olam itself is a leading agri-business operating across the value chain in 70 countries, supplying various products across 18 platforms to over 16,200 customers worldwide.
Over the past year, Olam share price has declined by about 11%, from $1.80 (20 Feb 2020) to $1.59 (19 Feb 2021). It is currently trading at a PE of about 8.4 and with a price-to-book (PB) value of 0.762.
In a Business Times article on 24 December 2020, Olam said that it would report a loss for 2H2020, arising from an impairment on Olam Palm Gabon (OPG). However, the company expects its net profit for FY2020 to remain positive. This will be released on 26 February 2021.
Tesla (NASDAQ: TSLA)
Tesla (TSLA) is not new to investors, including those of us who are based in Singapore. Led by the vision of its CEO Elon Musk, Tesla share price is now at about $780, up about nine times since the start of 2020.
For those who live in Singapore and are not investors, Tesla is not a familiar brand (yet). However, this would likely change soon.
Earlier this month, Tesla launched its sales portal for customers in Singapore, giving potential buyers the option to directly order the Model 3 from Tesla. And right on cue this week, DPM announced that Singapore would be pushing ahead with its Singapore’s Green Plan 2020, with the government intending to roll out the deployment of 60,000 charging points at public car parks and private premises by 2030, an increase of its initial target of 28,000. This would likely increase the sales of Tesla’s Electric vehicle (EV) in Singapore.
While Singapore is going to represent just a small percentage of Tesla’s global sales, the fact that our government is aggressively encouraging people to adopt EV bodes well for Tesla. If other countries in Asia start to follow suit, this will put the US-based company in a prime position to capture huge market share globally as we move towards an EV world.
A little about Tesla for those who have not invested in it before. Tesla is a growth company. Over the past five years, Tesla’s revenue has increased five-fold, from USD 4.05 billion in 2015 to USD 24.58 in 2019.
When you look at its current market capitalisation of about USD 750 billion, this doesn’t make traditional financial sense. However, nothing about Tesla’s current financial ratios makes sense when you compare it to its peers. For example, Tesla does not have a PE ratio because up till 2020, the company has always been operating at a loss in each quarter. Even while it has generated a profit in 2020, its PE ratio is 1,220.
Put simply, you invest in Tesla for its long-term growth potential.
DBS (SGX: DO5)
With Tesla intending to penetrate the Singapore market in 2021, DBS (SGX: D05) has taken the first step to be the preferred partner for car owners in Singapore looking to finance their Tesla purchase.
Offering a green loan at an interest rate of 1.68%, the DBS Green Car Loan hopes to encourage car owners in Singapore to reduce their carbon footprint. This in line with the Singapore government’s announced initiatives in 2020 to support their target of replacing internal combustion engine vehicles by 2040.
DBS share prices have recovered well from the pandemic. After hitting a low of $16.88 on 23 March 2020, it’s now trading at $25.63 as of 19 February 2021.
For FY2020, DBS recorded a net profit of $4.7 billion, down about 26% compared to the year before. With a market capitalisation of about $66 billion, this puts its current PE ratio at around 14.
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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.