Singapore Technologies Engineering Ltd’s Stock Is Near A 52-Week Low Now: Is It Actually Cheap?
Singapore Technologies Engineering Ltd (SGX: S63) is a large engineering conglomerate with four main business segments, namely, Aerospace, Electronics, Land Systems, and Marine.
At its current price of S$3.23, ST Engineering’s stock is just 2.2% higher than a 52-week low of S$3.16. This may raise a question among investors: Is ST Engineering actually cheap now?
Unfortunately, there is no easy answer. But, we can still get some insight by comparing ST Engineering’s current valuations with the market’s. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
ST Engineering currently has a PB ratio of 4.8, which is significantly higher than the SPDR STI ETF’s PB ratio of 1.30. It’s a similar story with the PE ratio, as ST Engineering has a higher earnings multiple than the SPDR STI ETF (19.6 vs 11.45).
But, ST Engineering has the higher dividend yield of 4.7%; the SPDR STI ETF’s yield is 2.96%. The higher a stock’s yield is, the lower is its valuation.
Putting it all together, we can argue that ST Engineering is trading at a premium to the market average despite the engineering conglomerate having a more attractive dividend yield; that’s because the company has higher PB and PE ratios.