3 Blue-Chip Stocks Near their 52-Week Lows: Are They a Bargain?

Dubbed a Superinvestor by Warren Buffett, Walter Schloss was known to be a deep value investor. Schloss was very keen on stocks that were selling at 52-week low prices.

In Singapore, even among the well-known companies in the Straits Times Index (SGX: ^STI), there are a few stocks that are flirting with their respective 52-week low prices.

Let’s take a look at three of them today, starting with the stock that is closest to its 52-week low price.

Company Share Price on 14 Sept 2017 52-Week Low Price Approximate Trailing Price-to-Earnings (P/E) Ratio Approximate Dividend Yield
StarHub Ltd (SGX: CC3) S$2.58 S$2.54 15 7%
Singapore Telecommunications Limited (SGX: Z74) S$3.67 S$3.59 16 5%
Comfortdelgro Corporation Ltd  (SGX:C52) S$2.18 S$2.13 15 5%

Telecommunications outfit, StarHub Ltd, saw its share price languish even more after announcing a poor second quarter result.

For the three months ended 30 June 2017, revenue declined 1% year-on-year to $579 million, due to weaker mobile, pay TV and broadband sales. Meanwhile, net profit tumbled 21% year-on-year to S$85.7 million. Consequently, its diluted earnings per share fell 19% to 5.0 cents.

StarHub’s rival, Singtel, also recorded a dismal quarter.

For the first quarter of the financial year ending 31 March 2018, net profit slid 5.6% year-on-year to S$891.6 million, even though revenue grew 8.3% to S$4.2 billion. Alternative voice call apps, among others, have threatened Singtel’s Singapore consumer business.

Today newspaper reported this morning that “[o]ver 2,000 ComfortDelGro cabbies express interest in joining Grab”. The news follows Grab’s offer of huge rental discounts to court ComfortDelGro’s taxi drivers. The move by Grab comes hot on the heels of Uber’s potential tie-up with the listed land transport giant.

Keen competition is hurting ComfortDelGro’s business.

For the second quarter ended 30 June 2017, revenue came down 3.4% year-on-year to S$987.2 million while net profit tumbled 6.8% to S$79.4 million. All its business segments brought in lower sales except the Public Transport Services division and the Driving Centre division.

The company ended off its second quarter results announcement by saying that its “operating environment remains challenging and costs will continue to be managed prudently”.

With the blue-chip companies selling near their respective 52-week lows, are they undervalued?

To get a quick answer, we can compare the PE ratio of the STI ETF (SGX: ^STI), an exchange-traded fund which tracks the fundamentals of the Straits Times Index, with the PE ratio of the respective companies.

As of 14 September 2017, the STI ETF had a PE ratio of 11.4. This suggests that StarHub, Singtel and ComfortDelGro are not cheap at the moment, despite their languishing stock prices.

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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 Sudhan P owns units in STI ETF.