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

Stocks selling near their 52-week low prices might prove to be good bargains for investors. Even among the blue-chip companies of the Straits Times Index (SGX: ^STI), several stocks are trading near their respective 52-week low prices.

Let’s look at three of them which are trading close to their 52-week low prices. They are Hutchison Port Hldg Trust (SGX: NS8U), Wilmar International Limited (SGX: F34) and Sembcorp Industries Limited (SGX: U96). Source: Google Finance and SGX StockFacts (data as of 24 July 2018)

Hutchison Port announced its financial results for the second quarter ended 30 June 2018 on Monday this week.

For the latest period, revenue and other income dipped 3.6% year-on-year to HK$2.79 billion while net profit plunged 36.8% to HK$170 million. The bottom line was hit by lower container throughput at its ports in Hong Kong and Shenzhen.

Combined container throughput at its Kwai Tsing terminals declined by 7.2% year-on-year, mainly due to a decline in transhipment cargoes. The Shenzhen port’s container throughput fell by 4.1% largely on the back of a drop in empty cargoes, but this was partially offset by an increase in the US and transhipment cargoes.

Going forward, the trust provided the following cautionary statement:

“The level of uncertainty in political and economic relations as it pertains to trade has increased significantly over the course of the year to date and shows little sign of abating. The impact of measures which may arise out of the trade disputes, especially those between the United States and China, on the performance of HPH Trust for the remainder of the year cannot readily be quantified given the level of uncertainty that currently prevails as to both the specific nature; extent; and timing of such measures and the consequent precise impact they may have on local and global trade flows and, as such, HPH Trust’s business.”

Asia’s leading agribusiness group, Wilmar, will be announcing its 2018 second-quarter results on 13 August.

For the first quarter, revenue rose 5.7% to US$11.17 billion, but net profit tumbled 40.6% to US$203.3 million. The company said that the “lower profit reflected the difficult operating environment for Tropical Oils and seasonal Sugar losses during the quarter”.

Wilmar saw strong sales growth in Oilseeds & Grains due to higher crushed volume and the later Chinese Spring Festival in 2018. This, coupled with higher commodity prices, helped to prop up the top line.

Kuok Khoon Hong, chairman and chief executive of the group, commented on how the US-China trade war would affect his business in the near-term:

“The prospect of China imposing import tariffs on US soybeans will result in soybean prices staying volatile for the coming quarters. Even though performance of our Oilseed Crushing business will not be affected in the short term, a prolonged standoff between China and the US would affect the utilization of our crushing plants. Nevertheless, we foresee that any negative effect will be partially mitigated by better performances from both our flour and rice businesses. In addition, with the improvements in production yields and better margins from downstream operations, the Tropical Oils segment will likely perform better in the subsequent quarters.

Sembcorp Industries’ 61%-owned subsidiary, Sembcorp Marine Ltd (SGX: S51), went into a net loss of S$55.6 million for the 2018 second-quarter, reversing a net profit of S$5.1 million seen a year ago.

The loss came on the back of a revenue surge of 150.8% to S$1.63 billion. The massive increase in revenue was mostly due to higher revenue recognition for rigs and floaters upon the delivery of two jack-up rigs to Borr Drilling and the sale of a semi-submersible rig. Excluding these, revenue would have declined by 12% to S$572 million.

The loss of S$55.6 million for the quarter was largely due to “loss upon the sale of a semi-submersible, lower overall business volume, especially in rigs & floaters and offshore platforms, which impacted the absorption of overhead costs, offset by margin recognition upon delivery of rigs”.

Sembcorp Industries will release its second quarter financial results on 3 August 2018.

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 24 July 2018, the SPDR STI ETF had a PE ratio of close to 11, a PB ratio of 1.1 and a dividend yield of around 3%. This could suggest that Hutchison Port is worth a second look at its current price due to its better PB and dividend yield as compared to the market average. However, potential investors should also be aware of the risks associated with Hutchison Port. The trust could be selling at a low price for a reason.

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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 shares in Sembcorp Industries Limited.