These 2 Companies Are Near 52-Week Lows; Are They Bargains?

Stocks which are trading near their 52-week lows can make for potentially interesting investing opportunities. Here are two stocks which are at that price level.

A punished big bank

Singapore’s largest bank, DBS Group Holdings Ltd  (SGX: D05), with 280 branches across 18 markets, is trading at S$16.58 as of the time of writing (10:26 am), after suffering a 17% decline over the past three months. At S$16.58, DBS’s shares are just a whiskey away from a 52-week low of S$16.56.

According to S&P Capital IQ, DBS’s total income (essentially the bank’s revenue), has climbed steadily over the past few years from US$6.91 billion in 2011 to US$9.17 billion in 2014. Over the same period, the bank’s profits that are attributable to shareholders have also stepped up by a third from S$3.0 billion to S$4.0 billion.

In DBS’s latest earnings release, for the first-half of 2015, the bank’s top-line and bottom-line had achieved year-on-year growth of 14% and 8%, respectively.

DBS’s balance sheet remains strong as well. Based on regulatory requirements from the Monetary Authority of Singapore, banks in Singapore must have at least the following Capital Adequacy Ratios (CARs) from 1 January 2015 onward: Common Equity Tier 1 CAR at 6.5%, Tier 1 CAR at 8%, and Total CAR at 10%. DBS can be considered to be well capitalized as its CARs, as of 30 June 2015, are comfortably higher than MAS’ requirements:

  • DBS Common Equity Tier 1 CAR: 13.4%
  • DBS Tier 1 CAR: 13.4%
  • DBS Total CAR: 15.3%

Given DBS’s business performance and robust balance sheet, its steep share price decline over the past few months may be unwarranted. For investors who are confident about DBS’s fundamentals and future prospects, the bank may turn out to be a potentially interesting investing opportunity given its depressed share price now.

Based on its current share price, DBS is valued at 1.06 times its latest book value and offers a dividend yield of 3.5% thanks to its annual dividend of S$0.58 per share in 2014.

Mailing in the lows

Shares of mail and logistics outfit Singapore Post Limited  (SGX: S08) are currently exchanging hands at S$1.71 apiece. At that price, SingPost’s shares are a mere cent higher than a 52-week low of $1.70.

SingPost has a history that dates back to the days when Singapore was first discovered by Sir Stamford Raffles in the early 19th century. The company has evolved with the times and today has three main business segments: Mail; Logistics; and Retail & eCommerce.

As my colleague Chin Hui Leong had mentioned in a recent article of his, SingPost’s Logistics segment has grown tremendously these past few years. To that point, Logistics was just 28% of the company’s total revenue in FY2010/11 (fiscal year ended 31 March 2011); by FY2014/15, Logistics had accounted for 42.2% of total revenue.

Recent strategic investments that Chinese ecommerce juggernaut Alibaba Group had made in SingPost is also a noteworthy development. Both companies have “entered into a joint strategic business development framework to further improve efficiency and integration of ecommerce logistics solutions” and that may mean more future growth for SingPost’s Logistics business.

SingPost’s recent financial results look okay. According to S&P Capital IQ, total revenue has advanced by more than 50% from S$624 million in FY2011/12 to S$971 million in FY2014/15. Net income growth has fallen short with just a 10% increase from S$142 million to S$158 million over the same period, but at least there’s still growth.

As of 30 June 2015, SingPost boasts a very healthy balance sheet. With borrowings of S$237 million and cash & cash equivalents of S$566 million, the company’s in a net cash position of S$329 million.

At its current price, SingPost is valued at 25 times its trailing earnings and offers a solid dividend yield of 4.1% (based on its annual pay-out of S$0.07 per share in FY2014/15). In my opinion, SingPost’s strong balance sheet and partnership with Alibaba may give it the fuel to grow in the years ahead.

Foolish Summary

Falling or low stock prices may make shares look like bargains, but investors should not focus solely on prices. It is crucial that we perform due diligence and determine if a share’s underlying business fundamentals are still intact and if its valuation makes sense at current prices.

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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 James Yeo doesn’t own shares in any companies mentioned.