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

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

In Singapore, even among the blue-chip companies of the Straits Times Index (SGX: ^STI), there are a number of stocks that are near their respective 52-week low prices.

Let’s look at three of them at random – Golden Agri-Resources Ltd (SGX: E5H), StarHub Ltd (SGX: CC3) and Thai Beverage Public Company Limited (SGX: Y92) – starting with the stock that is closest to its 52-week low price.Source: Google Finance

Golden Agri-Resources closed at S$0.345 on Friday, just a whisker away from its 52-week low price of S$0.34.

The palm oil plantation company saw its revenue rise 4.1% to US$7.5 billion for the full year ended 31 December 2017. However, net profit plunged 81.5% year-on-year to US$74.0 million, primarily due to the absence of deferred tax income on revaluation recorded in 2016, foreign exchange loss, and impairment loss on China assets recognised in the 2017 fourth quarter.

Underlying profit, which removes the changes in the fair value of biological assets and depreciation of bearer plants, exceptional items and other non-operating items, went up 36.3% to US$253.8 million. Total dividend per share improved from 0.635 Singapore cent to 0.809 Singapore cent, an increase of 27.4% year-on-year.

Moving on, StarHub had a miserable 2017. Its net profit for the year came down 27.1% year-on-year to S$249 million on the back of its total revenue improving slightly by 0.2% to S$2.4 billion. A final dividend of 4.0 Singapore cents per share was proposed, bringing the total dividend for 2017 to 16.0 cents per share, down from 20.0 cents per share a year back. StarHub intends to maintain a quarterly cash dividend of 4.0 cents per share in 2018.

The telco recently inked a deal with Sunseap, a Singapore-based sustainable energy firm, to offer clean energy to Jurong’s residents starting from this month.

Chief marketing officer of StarHub, Howie Lau, commented in a press release about the latest move:

“Working together with Sunseap, we are excited to offer households a compelling way to live a lower carbon footprint lifestyle using the Sun’s energy. Leveraging each other’s expertise, we will bundle essential services from mobile, pay TV, broadband and electricity in attractive packages for customers, who are becoming more environmentally-aware.”

Thai Beverage had a shaky start to its latest financial year. For the 2018 first quarter, revenue slipped 2.6% year-on-year to THB 45.6 billion while net profit tumbled 61% year-on-year to THB 3.0 billion. Excluding finance cost related to its Sabeco acquisition and non-recurring expense related to acquisitions, net profit would have dropped 29.3% year-on-year to THB 5.5 billion.

With the blue-chips selling near their respective 52-week lows, are they cheap?

To get a quick answer, we can compare the valuation of the SPDR STI ETF (SGX: ES3), an exchange-traded fund which tracks the fundamentals of the Straits Times Index, to the valuation of the respective companies.

As of 6 April 2018, the SPDR STI ETF had a PE ratio of close to 11 and a dividend yield of around 3%. This could suggest that the trio of blue-chips are not cheap, 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 doesn’t own shares in any companies mentioned.