Wind Farm 2

Wind Farm 2

When shares hit a 52-week high, it is natural to feel worried.

Typically, there’s a concern that valuations may be getting expensive.

However, there are usually justifiable reasons for shares to hit a year-high.

There could be corporate developments or the announcement of good news that propels the stock price upwards.

Blue-chip companies have been mostly battered in the last year as the pandemic upended the economy and crimped consumer spending.

However, there are three that have been scaling new 52-week highs in recent weeks.

Is there a great reason to own these companies? Or are valuations getting too frothy?

Singapore Exchange Limited (SGX: S68)

Singapore Exchange Limited, or SGX, is Singapore’s sole stock exchange operator.

Shares of the local bourse recently hit a 52-week high of S$11.80, up around 22% year to date.

The group has been busy growing its business in the last six months.

It also reported healthy growth for its fiscal 2021 half year ended 31 December 2020.

Revenue was up 9% year on year to S$521 million while net profit increased by 12% year on year to S$240 million.

SGX’s June trading statistics also highlighted daily record highs in the trading volume of several foreign exchange (forex) contracts.

Commodity derivatives traded volume also rose 12% year on year for the month.

In late June, the group also inked a deal with S&P Global Platts, a unit of S&P Global Inc (NYSE: SPGI), to provide commodities data and content.

And just last week, the exchange announced the acquisition of MaxxTrader, a provider of forex pricing and risk solutions for sell-side clients, for US$125 million.

This acquisition complements the acquisition of BidFX last year that provides forex solutions for buy-side clients.

SGX intends to set up an over-the-counter forex electronic communication network in Singapore eventually to facilitate trades among multiple market participants.

The group has detailed its growth plans during its recent Analyst Day, and investors can expect more business developments from the bourse operator.

Sembcorp Industries (SGX: U96)

Sembcorp Industries, or SCI, is a leading energy and urban solutions provider.

The group has an energy portfolio of over 12,800 megawatts (MW) comprising solar, wind and energy storage globally.

SCI’s shares are trading close to their one-year high of S$2.23, and are currently up around 21.5% year to date.

The utility giant recently announced its intention to go big on renewable energy as this represents the future of the energy market.

It has set an ambitious target to grow the profit contribution from renewables from the current 40% to 70%.

Since that Analyst Day announcement, SCI has taken steps towards that goal.

It recently announced a collaboration agreement with US innovation firm 8 Rivers Capital to develop the UK’s first net zero-emissions power plant.

The project is expected to produce around 300 MW of clean, efficient and low-cost electricity.

SCI also recently launched Singapore’s first solar-powered electric vehicle charging hub at its Tuas depot.

This charging hub will be available for public use by 2022 and is part of the group’s waste management’s division’s transition from its reliance on diesel-powered trucks to electric trucks.

CapitaLand Limited (SGX: C31)

CapitaLand is a diversified real estate group that owns and manages a global portfolio worth around S$137.7 billion as of 31 March 2021.

The group’s portfolio spans commercial, retail, industrial, lodging and urban developments, and has a presence in more than 240 cities in over 30 countries.

The real estate giant’s shares recently hit a 52-week high of S$4.05 and are up around 22% year to date.

The surge began when the group unveiled a major corporate restructuring back in March.

The proposal then was to spin off its development division and privatise it, while listing its investment arm on the stock exchange as a separate entity.

The new entity, aptly named “CapitaLand Investment Management” or CLIM, will be a real estate investment manager that can scale up its fee income.

Armed with an asset-light business model, CLIM can seek out growth opportunities in Asia and nurture the growth of its portfolio of listed and unlisted funds and REITs.

Investors still need to approve this transaction but should it go through, it will create a company that’s not overly reliant on heavy working capital requirements, thus allowing it to grow faster.

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Disclaimer: Royston Yang owns shares of Singapore Exchange Limited.

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