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Singapore Blue Chips at 52-Week Lows: Are They Cheap?

The Straits Times Index (SGX: ^STI) is not having a great May; thus far, it has tumbled around 7%. That seems to have left some of the index’s components languishing at their 52-week low prices. Let’s look at three blue chips that are selling at the bottom.

The trio of beaten-down blue chips

The three blue-chip shares that are selling near their respective 52-week lows are Singapore Airlines Ltd (SGX: C6L), Singapore Press Holdings Limited (SGX: T39), and Sembcorp Industries Limited (SGX: U96).

Company Share Price 52-Week Intraday Low Price Price-to-Earnings (P/E) Ratio Price-to-Book (P/B) Ratio Dividend Yield
Singapore Airlines S$9.13 S$9.14 16 0.8 3.3%
Singapore Press Holdings S$2.32 S$2.31 14 1.1 3.7%
Sembcorp Industries S$2.46 S$2.43 12 0.6 1.6%

 Source: SGX StockFacts (data as of 23 May 2019)

Singapore Airlines (SIA) reported its financial results for the fiscal year ended 31 March 2019 in the middle of the month.

For the year, SIA posted its highest revenue on record. The top line rose 3.3% to S$16.3 billion, but operating profit tumbled 31.1% to S$1.07 billion. With that, net profit also fell 47.5% from S$1.3 billion to S$682.7 million. The dividend declined 25%, from S$0.40 last fiscal year to S$0.30 in the latest year. The following shows the breakdown of dividends in both years:

Source: Singapore Airlines earnings presentation

Singapore Press Holdings (SPH) reported that its operating revenue for the second quarter ended 28 February 2019 decreased by 4.4% year on year to S$223.3 million, while net profit tumbled 25.7% to S$29.7 million. An interim dividend of S$0.055 per share was declared for the latest quarter, down from S$0.06 paid out a year ago.

Sembcorp Industries’ net profit for the first quarter surged 21% year on year to S$93 million due to improved performance from its energy business, which also grew 21% year on year. The improvement came even though revenue did not hold up, falling 10% to S$2.48 billion. The lower turnover was mostly due to a 31% decline in the marine business’s revenue.

Looking ahead, Sembcorp said:

“The Energy and Urban businesses continue to underpin the Group’s performance. However, the market environment continues to be challenging in 2019, especially for the offshore and marine sector. Global economic growth is projected to ease as markets face escalating risks including rising trade tensions and tightening financial conditions.

The Group remains focused on executing strategy, improving performance as well as strengthening its balance sheet, and is on track to deliver on its divestment programme.”

Cheap blue chips?

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

To get a quick answer, we can compare their valuations against that of the SPDR STI ETF (SGX: ES3), an exchange-traded fund that tracks the fundamentals of the Straits Times Index.

As of 23 May 2019, the SPDR STI ETF had a P/E ratio of 12.0, a P/B ratio of 1.1, and a dividend yield of 3.6%. Based on the P/E ratio alone, SIA and SPH look overvalued. Dividend investors, however, may be keen to take a second look at SPH as its dividend yield is slightly higher than that of the market.

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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.