SMRT Corporation (S53.SI) used to be a darling among dividend investors due to its resilient earnings, defensive nature and stable dividend payouts. Its last highest trading price was on 5 July 2010 when it hits a high of S$2.31. Since then, it went on a spiral downwards rollercoaster ride to a low of today’s closing price at S$1.515.
I’ve known many retail investors who are interested in this stock. Their main common reasons interestingly are:
1.) SMRT is on a 52-week low. I’m going to pick them up at S$1.60. If it goes down to S$1.50, I’ll average down and if it goes to S$1.40, I’ll average down again.
2.) The market looks expensive at the moment. The only stock that looks “cheap” to me is SMRT.
3.) SMRT is one company in Singapore which will not go bust anytime. Everyone needs them.
Based on the common reasoning among retail investors, it seems like many are bottom-picking the stock and regards the 52 week high and low as SMRT’s valuation.
What do I think of SMRT?
SMRT is currently trading at a PE of 21.48 (more than 1 SD above mean), which is a smug higher than its peers ComfortDelgro at 16.23. The management has recently issued a guidance that it will report its first Q4/FY13 results at a loss, citing higher operational costs and goodwill impairment as its main reasoning. Note that they have not even accounted for higher salary increment, bonus payout and higher CAPEX. Assuming a higher payout ratio of 80% than its usual payout, investors would most likely receive half of last year dividends of 3.5 cents/share, which amounts to ~3% yield. To me, that doesn’t sound appealing, not in terms of the dividends nor in terms of valuation.
SMRT at its 2010 high of S$2.31 has a PE of 21.5. At today’s closing price of S$1.515, it has a PE of 21.48. I hope investors who are buying into SMRT realise that they are not buying the stock at a cheaper valuation than what it was in 2010. The plunge in the stock price is caused by the drop in its earnings and NOT because the price is now some 80 cents lower.
I have no idea what is the bottom for SMRT. RSI is currently at an oversold position below 30. So we might get a rebound above the trendline at S$1.53, unless of course Mr. Kim or Mr. SARS decide to take action otherwise.
Are you one of those who are interested in SMRT stocks??
You’re most welcome to share your opinions…