Singpost and the STI components

Have one ever wondered why Singpost is not in the list of the STI index components while the renowned SingTel, Starhub, Keppel , SGX , SIA , SATS and the 3 financial blue chips are among the constituents. The thought may have come across but a little more research shall clear this mist. Singpost is actually one of them in the reserve list of STI index. Do take a look here to understand why. (No guarantees on its accuracy)

Going by the 7 rules/criteria of a defensive investor (Benjamin Graham’s theory), I have given my ratings below but not in detailed calculation. 1 point is given whenever the share meets the criteria while none is given when it fails to meet the criteria.  0.5 points are given for those which partially met the criteria. For example, under the criteria of “having 20 years dividend payment” is not entirely applicable to Singpost because it is only listed in 2003. However, it has never stopped paying dividends ever since. Thus, 0.5 is given for fairer comparison.
Rightfully, all 7 criteria must be met. Since this is our own analysis, feel free to give your own leeway.

Below findings as of 22nd December 2016:

1. SINGPOST: 5.5/7
2. SINGTEL: 5/7
3. DBS: 7/7
4. CITYDEV: 6.5/7
5. KEPPEL CORP: 6.5/7

The 3 criteria for which all 5 shares have met are:
-Adequate size
-No earnings deficit in the past 5 to 10 years 
-P/E ratrio of less than 15 for the past 3 years 

Obviously, the findings showed that the theory alone (like many others) cannot be independently relied on. Even with high ratings, the industry which the shares are from may be in a current negative outlook. DBS may have scored full marks but are still exposed to expected higher non-performing loans if market continues to slow down, leading to more unpaid debts.

Keppel Corp may look good at 6.5 but the oil rigs are still oversupplied. Cutting oil production will only help in reducing global oil supply but it is unlikely to help in the oversupply of oil rigs. Nevertheless, Keppel Corp has other forms of business other than oil. Lastly, Singpost fared fairly at 5.5 but its stock price is highly overvalued. Adding on, you probably will think twice if you read the link I gave earlier by fool.sg

On a side note, Yangzijiang Shipbuilding (BS6) is currently trailing cheap and I have added it in my watch list with skeptic. Though most of its operations are based in the almighty China, the container ship business does not look desirable as we can see from the Hanjin crisis and ocean carrier business. We should ask will more vessels be required when there are excess vessels already being idle due to majority of the sea freight business being taken up by Maersk and MSC.