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Three Shares For Halloween

Halloween

Not many may know that Halloween, also known as All Hallows’ Eve, is an annual celebration dedicated to remembering the dead. Some of us may know it as a day where kids go trick-or-treating in costumes for candy, while the adults dress themselves up in ghoulish outfits to attend parties or wander the streets.

As Fools, we love festivals and celebrations. We’ve given you Four Shares for Vesak Day, Three Shares for Hari Raya Puasa, and even congratulated our homeland Singapore for her 48th birthday.

So with Halloween today, we couldn’t pass up the opportunity to present you three scary shares!

The first kind of scary: A fear of heights

UPP Holdings Limited (SGX: U09) and AsiaPhos Limited (SGX: 5WV) are probably as diverse as can be in their businesses. The former operates paper mills and sells industrial-grade paper products in addition to owning a power-generation plant in Myanmar. The latter, on the other hand, mines for phosphate rocks in the Sichuan province of China.

But despite their differences, they do share a common thread – both carry scary valuations. UPP’s shares are being valued at 133 times trailing earnings at its current price of S$0.26. AsiaPhos, at its current price of S$0.183m is being traded at a price-earnings ratio of around 130 based on its historical full-year profits.

At such high valuations, the market’s generally expecting great things from both companies and any failure to deliver would likely not bode well for future returns.

As investors, our greatest fear would likely be investing in a company that’s going to make us lose our shirts. And, one of the easiest ways to paint our brokerage account red would be to invest in highly-valued shares whose eventual growth disappoints the market.

To be clear, that’s not to say that UPP and AsiaPhos are bad investments. It’s just that investors need to judge if the underlying fundamentals for both companies can justify the rich valuations.

The second kind of scary: A fear of death and change

Death, rightfully, should scare most people. But, there are companies that make a living by treating such tragic events with respect and provide invaluable bereavement services to the family of the deceased.

One such company used to be Asia-Pacific Strategic Investments Limited (SGX: 5RA). Prior to September, the company’s focus was on being a provider of integrated bereavement care services in Malaysia.

But despite the toll-like nature of its bereavement-services-business (after all, death is a certainty in life), AP Strategic has been making annual losses since June 2009.

To turn its fortunes around, it recently decided to enter into the metal-mining industry.

In September this year, AP Strategic announced that an investor had paid S$200m to purchase newly-issued shares, valuing the whole company at around S$667m. According to Reuters, AP Strategic’s market value was only S$10m prior to the announcement.

The company would be using the cash proceeds, as well as even more new shares to be issued in the future, to purchase a company that owns mining rights in Armenia for metals such as gold, silver, antimony and copper. No price has been set yet for the acquisition.

This is a drastic change in the company’s business focus and serious questions must be asked by investors on management’s ability to perform in an entirely different industry.

The bonus kind of scary: Horrifying theme parks

As a bonus, here’s another company that had links to something scary: Haw Par Corporation (SGX: H02).

Folks in Singapore might be familiar with Haw Par Villa, an oriental theme park currently under the jurisdiction of the Singapore Tourism Board. It contains figures and statues that depict a Taoist interpretation of hell, with the noble intention of trying to impart traditional Chinese cultural values.

But, as you might imagine, things can get pretty scary when it comes to hell and the displays found in Haw Par Villa can be said to be not for the faint-hearted.

The theme park was built in 1937 by the owners of Haw Par Corporation back then, the Aw brothers, Aw Boon Haw and Aw Boon Par.

Today, the company no longer has links to Haw Par Villa and its corporate focus is on properties, its leisure and healthcare businesses, and its strategic investments in other companies like United Overseas (SGX: U11), UOL Group Limited (SGX: U14), and United Industrial Corporation (SGX: U06).

Foolish Bottom Line

Some shares might appear scary for investors due to high valuations or an abrupt 180-degree-turn in business strategy. But, that does not automatically mean they are bad investments. As always, only a careful appraisal of their underlying fundamentals can let us know if such shares are indeed scary investments.

Happy Halloween, Fools!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.