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 would be a vital one as it indicates the direction that 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 firms that might hope to capitalise on growth as our country enters a post-COVID-19 world.
For those thinking about what our editorial team thinks about Singapore Budget 2021, you can watch our DollarsAndSense Tonight Post-Budget Discussion.
Singtel (SGX: Z74)
One notable improvement 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 real 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 being an exemplary example of a company that plays an important role in kickstarting their employees' volunteering journey. About 12,000 employees located 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 2021 has not been a kind year for many telco companies, including Singtel, because of the decrease 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 3Q2021 result released on 10 February 2021, Singtel's quarterly revenue for 3Q2021 is only 3.2% lower compared to the same period last year. However, the company's profits for 2021 have also taken a significant hit as it sees its 9M2021 earnings before interest and tax (EBIT) at $923 million, down 42% compared to the same period in 2021.
With a stock price of $2.35 (19 Feb 2021), Singtel stock price has a taken a rough tumble of approximately 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, that 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 an organization, Olam itself is a leading agri-business operating over the value chain in 70 countries, supplying various products across 18 platforms to over 16,200 customers worldwide.
Over yesteryear year, Olam share price has declined by about 11%, from $1.80 (20 Feb 2021) to $1.59 (19 Feb 2021). These days it is trading at a PE of about 8.4 and with a price-to-book (PB) worth of 0.762.
In a Business Times article on 24 December 2021, Olam asserted it would report a loss for 2H2021, arising from an impairment on Olam Palm Gabon (OPG). However, the company expects its net profit for FY2021 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 through the vision of its CEO Elon Musk, Tesla stock price is now at about $780, up about nine times because the start of 2021.
For those who live in Singapore and aren't investors, Tesla is not a familiar brand (yet). However, this could likely change soon.
Earlier this month, Tesla launched its sales portal for purchasers in Singapore, giving potential buyers the choice to directly order the Model 3 from Tesla. And right on cue this week, DPM announced that Singapore could be pushing ahead with its Singapore's Green Plan 2021, using the government intending to roll out the deployment of 60,000 charging points at public car parks and private premises by 2030, a rise of its initial target of 28,000. This could likely increase the sales of Tesla's Electric vehicle (EV) in Singapore.
While Singapore will represent just a small percentage of Tesla's global sales, the fact that our government is aggressively encouraging individuals to adopt EV bodes well for Tesla. If other countries in Asia start to follow suit, this will put the US-based company inside a prime position to capture huge share of the market globally as we move towards an EV world.
A little about Tesla for those who have not invested in it before. Tesla is really a growth company. Over the past 5 years, Tesla's revenue has increased five-fold, from USD 4.05 billion in 2021 to USD 24.58 in 2021.
When you look at its current market capitalisation of approximately USD 750 billion, this doesn't make traditional financial sense. However, nothing about Tesla's current financial ratios is sensible when you compare it to its peers. For instance, Tesla does not have a PE ratio because up till 2021, the company has always been operating at a loss in each quarter. Even while it has generated an income in 2021, its PE ratio is 1,220.
Put simply, you invest in Tesla for its long-term growth potential.
DBS (SGX: DO5)
With Tesla planning to penetrate the Singapore market in 2021, DBS (SGX: D05) has had the first step to be the preferred partner for car owners in Singapore looking to finance their Tesla purchase.
Offering an environmentally friendly loan at an interest rate of 1.68%, the DBS Green Car Loan hopes to encourage car owners in Singapore to lower their carbon footprint. This using the Singapore government's announced initiatives in 2021 to aid their target of replacing car engine vehicles by 2040.
DBS share prices have recovered well in the pandemic. After hitting a minimal of $16.88 on 23 March 2021, it's now trading at $25.63 as of 19 February 2021.
For FY2021, DBS recorded a net profit of $4.7 billion, down about 26% compared to the year before. With a market capitalisation of approximately $66 billion, this puts its current PE ratio around 14.