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These 3 Shares Are Singapore’s Cheapest Blue Chips

Here’s a quick question for you: Name me three of Singapore’s cheapest shares at the moment within the Straits Times Index (SGX: ^STI).

If your answer, in descending order, was marine engineering and real estate conglomerate Keppel Corporation Limited (SGX: BN4), commodities trader Olam International Ltd (SGX: O32), and Oversea-Chinese Banking Corp. Limited (SGX: O39), you’d be spot on.

At their prices as of 5 December 2014, they are up to one-third cheaper than the SPDR STI ETF (SGX: ES3). The exchange-traded fund, a proxy for the fundamentals of the Straits Times Index, carries a trailing price/earnings (PE) ratio of 13.5 currently.

Share

Price: 5 Dec 2014

PE ratio

Keppel Corporation

S$8.27

8.1

Olam International

S$2.09

8.5

OCBC

S$10.33

9.5

Source: S&P Capital IQ

A deeper dive into the valuation figures brings up an interesting view: Keppel Corporation and Olam International are both carrying earnings multiples which are much lower than what they’ve been over the long-term.

Source: S&P Capital IQ

The chart above plots the historical PE ratios for both companies (it goes back to the start of 2004 for Keppel Corporation and tracks back to Olam International’s listing date on 11 February 2005).

With a long-term average PE ratio of 13.1 and 20.3 for Keppel Corporation and Olam International respectively, it’s easy to see how the valuations for both shares seem to be very depressed currently.

Of course, that alone is not a guarantee that both shares are sure-fire bargains. After all, what truly matters are their corporate futures. If their businesses crumble, even a low valuation now would not offer investors much protection from a falling share price over the long-term.

But, given their historically low PE ratios, they can at least be a good starting point for a closer look by investors who are interested in cheap shares.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.

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