I have been contemplating this counter since last week and was weighing the probability whether oil prices will "crash" further with Citi predicting it will fall to the $30 region.
I bought 2,500 shares at $4.28 eventually and will spare you the details of how the price ran away from my various price queues ^_^
The key reasons for buying:
- reasonable valuation of less than 10x PE Mulitple
- stable utilities business giving a decent yield of ~3.6%
- bet that oil prices have stabilized
Given its significant exposure to Sembcorp Marine, any further crash in oil prices will be disastrous. The picture below shows the various multiples at the point of acquisition (for my future reference)
With many STI Components stocks trading at high PE multiples, oil-related counters seemed like having a "fire sale" right now.
As in all my investments, the cut loss for Sembcorp Industries is around $4 and that is likely to happen if oil prices crash below $50. My "target" for this investment is around $5.
With the above purchase, I have "maxed" out my wife's SRS account for now.
I bought 50,000 shares at $0.52 today. This is my second time investing in this counter but it is a much bigger position than when I first bought it.
This is more of a yield play that hopefully can give me a stable and recurring income for years to come. I am more than happy if share price stays stagnant but delivers the dividend every quarter.
Reasons for buying:
- Company is debt free and generates high cash flow
- Usually pays 1c dividend from Q1-Q3 and a higher dividend in Q4
- Business seems to be recovering, especially in the semiconductor area
Again the PE is not overly expensive at below 10x PE. I haven't thought of a cut loss point yet but will be very concerned if it drop below $0.48.
So long for now.