As written in this post, I have bought and sold the conglomerate a number of times since 2003. In my latest purchase, I bought at $2.985 and sold at $3.29. After re-reading the post, I realized that I did not follow my original sell intention which is to sell only if price has appreciated to a point to return at least 3 years of dividend. And once again I have sold too early as the price continued to rise to a height of $3.8+ during June to August period.

Since August, the stock has been trending down and have retracted by about 17% from its height of $3.86. Flipping through 2016 annual report and the 2017 Q3 report, I do not know what causes the declined price. Having said that, I recalled I also did not understand why the price has shot up earlier on.

The following shows my past actions on ST Engineering.

2003 – Purchased a lot at $1.81 and sold at $1.96 within the year.
2009 – Purchased 5 lots at $2.38 and sold at $3.10 in 2010.
2011 – Purchased 10 lots at $2.81 and sold at $3.35 in 2012.
2015 – Purchased 5 lots at $2.98 and sold $3.29 in 2016
2017 – Purchased 4 lots at $3.21 and sold ???

Why buy?

In any case, I decided to re-entered it based on the following reasons.

  • Based on track record and its recent results (data from 2016 AR), it should be able to sustain its 15c dividend.
    Screen Shot 2017-12-23 at 8.47.03 AM
  • I also like the decision to give out Special Dividend only during special event, unlike previous year. To me, it is a signal that the management is committed to gives out the 15c of dividend as long as they are doing well.
    Screen Shot 2017-12-22 at 10.41.39 PM
  • It has provided a stable performance for this year so far. Its net profit has increased by about 9% for 9M mainly due to impairment charge incurred in the last financial year.
  • 2017 is the 50th Anniversary of the group. Is this consider a special event? I am hoping that it will hand out more than 15c for its dividend this year.
  • I like the direction that the new CEO Vincent Chong has set for the group. The interview with CEO found in the latest annual report provides a good read on his thinking. Of course, will that translate to action is something I will need to monitor.

Concern?

The land system and marine sector continues to do badly this year. The land system profit is higher this year because of impairment charges last year.

When sell?

This time round, I aim to hold this for  a longer period – maybe at least 3 years? Having said that, I think I will sell when

  • there is a huge reduction of dividend payout (20% drop) due to poor business,
    OR
  • the valuation is high which provides me at least 5 years of dividend, AND
  • there is no sign that the business is going anywhere, AND
  • I have better idea to re-deploy the fund

Conclusion

While my current purchase price might not be the lowest in the near future, I am satisfied with the yield of 4.6% if it continues to payout 15c dividend. I am also betting that the new CEO can grow the company in 3 to 5 years which will result in an increase in dividend.

I am also ready to add more if the price continues to trend down to below $3.

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