Some STI stocks near 52-week lows

Some STI stocks near 52-week lows

SINGAPORE - The Straits Times Index (STI) might have taken quite a dive lately, but it is still more than 380 points above its 52-week low, logged in June last year.

And most of the STI's 30 constituent stocks are still more than 10 per cent away from their nadirs over the past year.

But a handful of counters such as Singapore Airlines (SIA), City Developments (CityDev) and Noble Group are near their lowest levels for the period.

Bargain-hunters might be tempted, although analysts warn that the index could slide further, sending the stocks even lower.

Also, many of the firms whose stocks are trading around their lows have recently announced disappointing financial results, leading analysts to worry about their prospects and the risks they face.

SIA closed yesterday at $10.21, just 1.9 per cent above the 52-week intra-day low of $10.02 logged on Thursday. That is the closest any of the 30 STI stocks has come to reaching its trough.

SIA has tumbled about 11 per cent since May 16, when it posted a net profit of $68.3 million for the fourth quarter. Investors were disappointed, though it reversed the surprise loss of $38.2 million seen a year earlier.

The operating loss for the quarter widened to $44.2 million as revenue slid 1 per cent to $3.67 billion because of weaker passenger and cargo yields.

Full-year net earnings rose by 12.8 per cent to $378.9 million.

OCBC Investment Research said the fourth-quarter results were weak because sluggish demand had hurt passenger yields.

"With the lacklustre results, continuing challenges ahead and possible disappointment over the lack of a special dividend that some had hoped for, we expect selling pressure," said OCBC last month. It rated SIA as a "sell", with a fair value estimate of $10.

City Developments, at $9.98, is just 3.1 per cent from its 12-month intra-day low of $9.68, which it hit on Thursday.

The counter has been weak since the company announced on May 13 that first-quarter net profit fell 12.2 per cent to $137.6 million largely because of lower residential and hotel revenue.

DBS Vickers Research has a "hold" on CityDev and a $12.33 target price. It says the firm has a visible residential earnings stream but operating conditions will remain challenging for hotels.

CityDev has also been hit by remarks made on May 22 by United States Federal Reserve chairman Ben Bernanke that suggested the Fed might ease back on its massive stimulus programme.

Developers such as CityDev will be affected if interest rates go up as the cost of home loans will rise and property buyers will hold back.

The shares of commodities giant Noble Group closed yesterday at 98.5 cents, just 3.68 per cent above their year-low of 95 cents on Thursday.

It said last month that its first-quarter net profit had slumped 62 per cent to US$41.3 million (S$51.3 million).

"The first-quarter results were significantly below market expectations as problems in its agricultural segment persist," said Maybank Kim Eng Research, which downgraded Noble to a "hold" from a "buy" and lowered the target price to $1.17 from $1.53.

Still, the jury is out on whether it is a good time to bottom-fish.

The STI might fall further, which could drive the 52-week-low stocks even lower.

"We think it is still too early to bottom-pick, though individual stock valuations are starting to look attractive," said CIMB Research in a note this week.

"Our current 'underweight' rating for the STI will turn more positive for falls below the 3,000 level. We will be fully invested if the STI falls below 2,800."

CIMB used various methods to estimate "valuation floors" for the STI - levels that the index is unlikely to fall below. It arrived at two scenarios - 2,955 and 2,740 points.

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