In this part of the series, we continue with three more blue-chip stock picks that will thrive in a ‘Risk-On’ environment.
Investors Takeaway: 6 Blue-Chip Stocks To Own In A ‘Risk-On’ Environment
Keppel Corp is in a unique position where it is expected to ride on the recovery of multiple sectors, i.e. property and O&M sector. According to DBS, the Chinese market, which accounts for half of Keppel Corp’s property segment, is seeing improving sentiment with rising demand and average selling price on the back of loosening liquidity year-to-date, especially in the tier 2 cities. Land sales in the Tianjin Eco-City project should also pick up.
For O&M, Keppel Corp’s year-to-date orders of $1.8 billion has already surpassed the whole of last year. Thus, moving forward, DBS expects stronger orders for production and gas related solutions to drive a recovery in earnings for the O&M segment from current near breakeven levels.
Overall, Keppel Corp has demonstrated earnings resiliency during the industry downturn, on the back of its multi-business strategy which includes providing robust solutions for sustainable urbanisation.
As part of the technology supply chain, Venture has been dragged down by the US-China trade war which has escalated into a technology war. Margins of Venture have been hit and earnings visibility remains low as customers are less willing to commit to orders in view of the cloudy outlook. While Venture has a broad based exposure to generic technology domains (e.g. printing & imaging, computer peripherals, networking and communications), it has not been spared by the trade war. But with its diversification of plants outside China, Venture could benefit from new business opportunities on the back of the US-China trade diversions.
However, DBS believes that Venture’s exposure to the relatively more stable Life Science, Test, Measurement segment will help to mitigate the impact from the US-China trade war. DBS notes that Venture has a strong reputation in this area and could benefit from more value creation opportunities as this segment broadens out.
Yangzijiang is among the prime proxies for recovery in the shipping and shipbuilding sectors as one of the world’s best-managed and profitable shipyards. Despite a downturn in the sector, Yangzijiang has remained profitable throughout the cycles, delivering 22 percent average return-on-equity and three to four percent dividend yield over the past 10 years. Core shipbuilding revenue ahead is backed by its healthy order backlog of US$3.5 billion (about 2 times revenue coverage) as at end-March 2019.
In terms of strategy, Yangzijiang is exploring the option of moving up into the LNG/LPG vessel segment where it sees robust newbuild demand next few years. The management believes that expanding into the LNG/LPG vessel segment will strengthen the longer-term prospects of the company. According to DBS, Yangzijiang’s valuation remains undemanding at one time price-to-book value. This puts it at a 10 percent discount to global peers despite its more attractive 11 percent ROE, three percent yield and solid balance sheet with $0.99 net cash per share.