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

The Straits Times Index (SGX: ^STI) has been falling steeply of late, and this could have thrown up some bargains. In this article, let’s look at three companies that are part of the STI and are selling near their respective 52-week low prices.

The companies are Keppel Corporation Limited (SGX: BN4), Singapore Telecommunications Limited (SGX: Z74) and Sembcorp Industries Limited (SGX: U96). All data in the table below are as of 19 December 2018. Keppel Corporation and Sembcorp Industries have not been doing well ever since the oil price took a massive hit in 2015. Keppel, through its Offshore & Marine (O&M) division, and Sembcorp, through its 61%-ownership in Sembcorp Marine Ltd (SGX: S51), are heavily involved in the offshore rig and marine sectors.

In mid-2014, oil was trading at around the US$100 per barrel mark. It plunged to a low of below US$30 in February 2016 before slowly making its way up to US$76 per barrel in early October 2018, making almost a four-year high. Since then, oil was again whacked down to around US$47 right now.

For its nine months ended 30 September 2018, Keppel’s O&M division posted a net loss of S$38 million while a year back, it had a net profit of S$11 million. Sembcorp Marine suffered a similar fate – it saw losses of S$80 million whereas one year ago, it registered a net profit of S$143 million.

Moving on, Singapore Telecommunications Limited (Singtel), for its half year ended 30 September 2018, saw flat revenue at S$8.4 billion. The telco saw strong post-paid mobile customer growth and higher equipment sales across Singapore and Australia. Singtel’s net profit, however, plunged 60% to S$1.5 billion due to a lack of one-off gain clocked in last year.

Underlying net profit, which excludes items such as one-off gains, fell 21% to S$1.4 billion. The decline was mostly due to lower contributions from associates, and a stronger Singapore dollar against regional and Australian currencies.

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 19 December 2018, the SPDR STI ETF had a PE ratio of 11.0, a PB ratio of 1.1 and a dividend yield of 3.6%. All the companies look expensive based on PE ratio, but Keppel Corporation’s and Singtel’s dividend yield may appeal to income investors. However, before investing in these high-yielding shares, investors should research on the sustainability of their dividends.

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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.