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Is One Of Singapore’s Oldest Company Set For A Rebound?

STC straits trading companyStraits Trading Company (SGX: S20), one of the oldest company listed on the Singapore exchange, has been trading near its 52 week low in recent days. The company is majority owned by the Tecity Group, which is part of the late Tan Sri Tan Chin Tuan’s empire.

The company today can be considered a conglomerate. It has stakes in real estate, hospitality, resources and other strategic investments. Through its associates, ARA Asset Management (SGX: D1R) and Far East Hospitality, the company has interests in property fund management, and the investment and operating of hospitality assets.

Straits Trading is also in the resources business through its 54.8% ownership of Malaysia Smelting Corporation Berhad (SGX: NC9), the second largest tin metal supplier in the world.

Yet, the share price of the company continues to fall from its peak of S$4.42 per share to the current level of S$2.95 per share. It is trading around 0.9 times price to book ratio. This is partly due to the negative in the property segment. Price to book ratio of other property companies such as CapitaLand Group (SGX: C31) and City Development Ltd (SGX: C09) are around 0.8 and 1.25 times respectively.

Restructuring Process

Straits Trading has been transforming its business for the past year. Now with the transformation plan completed; the company has divested its hospitality assets into Far East Hospitality and acquire a large stake in ARA Asset Management, the company might be able to focus on growing its business.  Straits Trading is also forming a strategic alliance with ARA Asset to better leverage on the network and ability of each other.

Foolish Bottomline

The new association with ARA Asset is quite interesting. However, it is worth noting that the company still obtains most of its revenue from the resources sector and the future of this commodity business can still affect the future of Straits Trading significantly.

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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 contributor Stanley Lim doesn’t own shares in any companies mentioned.