Invested in ST Engineering for >20 years! BUY more now?

For readers who prefer reading to watching videos, this is the transcript of a recent YouTube video I produced on ST Engineering.

In the video, I reminded myself of my history with ST Engineering as well as how I would decide on whether Mr. Market was offering a fairly good price?

Don't worry as it isn't rocket science.

Just some quick and dirty number crunching, oppa AK style!
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I found a newspaper article I cut out in the year 2003.

It was about ST Engineering, a company which I have been a shareholder of for more than 20 years by now.

ST Engineering's stock trades at $3.70 a share and it has been paying out dividends annually without fail since I first became a shareholder.

I cannot remember how much exactly from year to year but, off the top of my head, an average of 15c annually in dividend per share cannot be too wrong.

In case you are wondering, yes, I am still holding on to those shares I bought at $1.55 a piece more than 20 years ago.



What would have happened if I had decided to spend that money all those years ago on a luxury watch to show that I had arrived instead of investing in ST Engineering?

If I did that, I think I would still not have arrived.

Isn't there something to be said about delaying gratifications and investing for income?

Once people are determined to make an improvement to their personal finances, once they try out some of the ideas I have blogged about, they will see for themselves that the magic that AK has, they have it in them too.

Suddenly, it isn't so mystical after all.



A reader told me this in 2017.

I remember you mentioned ST Engineering in Evening with AK and friends a couple of years back in 2015.

At that point, you mentioned you would look at adding if it went below $2.90 per share. 

It was hovering around $3.20.

It was my first time attending your talk.

I just managed to scoop some at $2.70!

AK told the reader.

$2.70 a share is a very good price.

I would hold on to it.

ST Engineering is a good income generating asset.

At the time, I also said the following.

I reminded myself how I would determine a fair entry price for ST Engineering.

ST Engineering PE ratio has always been pretty high, but I would not let that deter me.

Instead, I use the ratio to guide me.



Even during the Global Financial Crisis, ST Engineering's PE ratio was 15 times.

That could be considered as crisis valuation for ST Engineering, and I have used that as a yardstick for the stock for a long time.

Today, ST Engineering trades at a PE ratio of some 23 times.

In one of my past blogs, I said if I were to invest in ST Engineering not during a crisis, I would only do so if its PE ratio is 20 times or lower.

What about dividend yield?

Of course, that is something I would look at too as an investor for income.

Today, it is about 4.6% which is higher than the 4.2% ComfortDelGro offers.



However, we have to remember that ST Engineering is no longer the same as it was 20 plus years ago.

When I first invested in ST Engineering, it was sitting on a billion dollars in cash which it didn't know what to do with.

So, it paid out 100% of its earnings yearly to its shareholders.

Getting 15 cents dividend per share for a stock I paid $1.55 a share for was so sweet that it could have given me diabetes.

Today, ST Engineering is in a net debt position to the tune of almost six billion dollars.

That translates to a gearing level of almost 250%!

So, don't just take that 4.6% dividend yield at face value.

That dividend yield is achieved on the back of some amazing leverage.



In comparison, ComfortDelGro is in a net cash position and its 4.2% dividend yield is not achieved with leverage.

I would not be adding to my investment in ST Engineering although I am quite happy to hold on to my existing investment.

My investment in ST Engineering is free of cost and has been so for some time.

Getting free money regularly makes me happy.

However, to add to my investment in ST Engineering, I would have to see its gearing level reduce substantially.

Of course, if we had a crystal ball which was able to tell us that would certainly happen and soon, if ST Engineering should trade at a PE ratio of 20 times or lower, it would be a BUY for me.

If AK can talk to himself, so can you!

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