Frasers Logistics & Commercial Trust and two other SGX stocks are expected to trade below their intrinsic value

Recent regulatory actions, such as the heavy fines imposed on major banks such as Citi for poor corporate governance, underscore the importance of sound risk management and internal controls in financial institutions. In light of these market events, investors may invest in stocks that have sound corporate governance structures and may be trading below their intrinsic value in markets such as Singapore.

Top 5 undervalued stocks in Singapore based on cash flows

Click here to see the full list of 7 stocks from our Undervalued SGX Stocks Based on Cash Flows screener.

Let’s examine some outstanding options from the screener results.

Overview: Frasers Logistics & Commercial Trust (SGX:BUOU) is a Singapore-listed real estate investment trust specialising in industrial and commercial properties with a portfolio of 107 assets valued at approximately S$6.4 billion across Australia, Germany, Singapore, the UK and the Netherlands and a market capitalisation of approximately S$3.63 billion.

Operations: The Trust’s income is generated from its diversified portfolio of industrial and commercial properties in five developed markets.

Estimated discount to fair value: 42.1%

Frasers Logistics & Commercial Trust is trading at S$0.97, well below the estimated fair value of S$1.67, suggesting that the company is undervalued based on a discounted cash flow analysis. Despite a decline in net profit and dividends, analysts expect the price to rise by 31% and forecast earnings growth of almost 41% per year. However, the company’s debt is not well covered by operating cash flow and return on equity is expected to remain low at 6%.

Overview: Hongkong Land Holdings Limited is engaged in real estate investment, development and management in Hong Kong, Macau, Mainland China, Southeast Asia and other international locations and has a market capitalization of US$7.26 billion.

The story goes on

Operations: The company generates its revenue primarily from investment properties, which generated $1.08 billion, and development properties, which contributed $0.76 billion.

Estimated discount to fair value: 43.5%

Hongkong Land Holdings trades at S$3.29 and appears to be undervalued, with the price 43.5% below the calculated fair value of S$5.82. The company’s revenue growth is expected to outperform the Singapore market average, increasing at 4.6% annually compared to the market’s 3.6%. Despite this promising growth and an expected significant increase in earnings of 43.34% per year, the low forecast return on equity of 2.4% and an uncovered dividend yield of 6.69% point to potential financial vulnerabilities.

Overview: Singapore Technologies Engineering Ltd is a global technology, defense and engineering company with a market capitalization of approximately SGD 13.75 billion.

Operations: The company’s revenue is generated from three main segments: Commercial Aerospace (SGD 3.97 billion), Urban Solutions & Satcom (SGD 1.98 billion) and Defense & Public Safety (SGD 4.29 billion).

Estimated discount to fair value: 45.8%

Singapore Technologies Engineering is considered undervalued at S$4.41 on a discounted cash flow basis, as its market price is 45.8% below its estimated fair value of S$8.13. Despite high debt and an unstable dividend history, the company is expected to report revenue growth that exceeds the Singapore market average (6.9% versus 3.6% annually) and earnings to grow at 11.71% annually. Recent initiatives include a share buyback program and regular dividend payments, which have a positive impact on shareholder returns.

Next Steps

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This Simply Wall St article is of a general nature. We comment based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles are not intended as financial advice. They are not a recommendation to buy or sell stocks and do not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

Companies discussed in this article include SGX:BUOU, SGX:H78 and SGX:S63.

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