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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), several stocks are at or near their respective 52-week low prices.

Let’s look at three of them at random – Singapore Telecommunications Limited (SGX: Z74) (Singtel), CapitaLand Limited (SGX: C31) and Jardine Cycle & Carriage Ltd (SGX: C07) – starting with the stock that is closest to its 52-week low price.Source: Google Finance and SGX StockFacts (data as of 28 June 2018)

Singtel posted its revenue for its fiscal year ended 31 March 2018 last month. The telco’s top-line for the year grew 4.9% year-on-year to S$17.5 billion while net profit rose to a record S$5.5 billion, boosted by gains from the divestment of NetLink Trust to NetLink NBN Trust (SGX: CJLU) and a strong performance by its core business.

The firm’s board recommended a final dividend of 10.7 cents per share, bringing the total dividend for the year to 20.5 cents per share (including a special dividend of 3.0 cents per share). This marks an increase from 17.5 cents per share paid out one year prior.

Going forward, Singtel said that it expects to “maintain its ordinary dividends of 17.5 cents per share for the next two financial years and thereafter, will revert to the payout of between 60% and 75% of underlying net profit”.

As for CapitaLand, its earnings for its fiscal first quarter slumped 18.8% year-on-year to S$319.1 million, despite revenue surging 53.3% to S$1.4 billion. The fall in profit was largely due to an absence of S$160.9 million in gains from the sale of The Nassim in the 2017 first-quarter. The lower bottom-line was offset by “higher portfolio and revaluation gains mainly from the divestment of 20 malls in China and a property investment in Vietnam, as well as a writeback of provision for Victoria Park Villas and Bedok Residences in Singapore”.

Moving on, Jardine Cycle & Carriage’s revenue for the first quarter ended 31 March 2018 rose 12% to US$4.6 billion, but net profit tumbled 36% to US$135 million. The slump in earnings was due to the recognition of fair value losses following adoption of new accounting standards. Underlying net profit (which excludes fair value changes) rose 8% to US$219 million, though.

The group’s chairman, Ben Keswick, said:

“Astra is continuing to benefit from stable coal prices, although the car market is increasingly competitive. While the Group’s Direct Motor Interests are also likely to continue to face challenges, its Other Strategic Interests are expected to produce growth. Overall, the current outlook for the full year is for a satisfactory performance.”

Jardine Cycle & Carriage has a 50.1% stake in Astra, the largest independent automotive group in Southeast Asia.

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

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 28 June 2018, the SPDR STI ETF had a PE ratio of close to 10, a PB ratio of 1.1 and a dividend yield of around 3%. This could suggest that Singtel and CapitaLand are worth a second look at their current 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 NetLink NBN Trust.