Tuesday, 2 January 2018

ST Engineering - My SRS purchase for 2018

Unexpectedly, 2017 had been a rather uneventful year for me on a personal level. Certain events that I thought will take place in 2017 just didn’t materialise. Nevertheless, I'm looking forward to 2018 to see what's in store for me.

I started the year similar to how I started last year. I rebalanced my bank accounts such that accounts that are labeled under emergency cash are all rounded off nicely to the nearest thousands. I’m just OCD this way. Next, through I-Banking, I transferred $15,300 over to my SRS account in preparation for market to open this morning. 

After extensive thoughts and through an elimination process, the counter of choice for my 2018 SRS account is ST Engineering. Queued at $3.26 before market opened and got my allocation of 4,500 shares.  

Rationale:
1. Temasek Backed Company
Information obtained from sgx.com
Temasek is the substantial shareholder with 50.2% market share of the company.
I didn’t value this point much until the Olam Saga happened and that really opened up my eyes on the power a strong backer wield in times of crisis. 

2. No history of rights issues
As I only have little funds balance in my SRS account and I've contributed maximum amount, I won't be able to subscribe for rights issue should there be any, hence risk diluting my holdings. Therefore, this point is important for a long term consideration. 

3. Dividends track records 
Information obtained from sgx.com

Information obtained from sgx.com

Information obtained from sgx.com
ST Engineering has consistently been giving Dividends from 1998 till 2017 and I do not envision any possible circumstances that might result in them stopping of Dividends payout. At $3.26 and with dividends at $0.15, estimated Dividend Yield will be 4.6%, better than my first SRS Purchase

4. Shares Buyback
The last share buy back was reported on 15 Nov 2017, executed at a price of $3.30.
If the company felt that the company was undervalued at $3.30, it gives me confidence in purchasing shares at a slight discount to it.

5. Lastly, it is one of a few blue chips that is near its 52 weeks low which gives it room to appreciate should market conditions improve. Certain segments are performing well whereas certain segments are dragged down by weaker market sentiments.

Price on 5/1/15: $3.39
Price on 4/1/16: $2.97
Price on 3/1/17: $3.29
Price on 2/1/18: $3.27

One interesting point to note for ST Engineering is that it behaves somewhat similar to a cyclical stock. For the past 3 years, it had a rally from the start of the year until April to May before tapering off. Over the past couple of years, it rallied again come August before tapering off until end of the year. Let's see if the same trend persists for 2018. This could form the basis for my strategy in ST Engineering for the year ahead.



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