These 2 Companies May Be Massively Undervalued Stocks

The Straits Times Index (SGX: ^STI) is currently below 2,600 points after dropping close to 12% since the start of the year.

The index’s decline is a sign that many companies are experiencing falling prices as well. With lower prices come the possibility of finding bargains.

In here, I’d be looking at two companies that have seen their shares fall to less than 0.4 times their tangible book values. This means that in theory, investors can get hold of the tangible assets of the company, net of all liabilities, at a discount of over 60%.

The unloved real estate owner

When it comes to a list of unloved companies in Singapore’s stock market, the S$1.15 billion Wing Tai Holdings Limited (SGX: W05) would have to be considered for inclusion.

Valued at just 0.36 times its tangible book value of S$4.09 per share at its current price of S$1.49,  the company has property development businesses in China, Singapore, and Malaysia. On top of that, Wing Tai also has a smaller retail business which distributes a bevy of fashion retail brands in Malaysia and Singapore that include Adidas, G2000, Topshop, Uniqlo, and Dorothy Perkins.

When I took a closer look at Wing Tai’s balance sheet, it seems to me that the firm has stable assets. There’s nearly S$600 million in cash and S$1.6 billion in long-term investments which mainly consist of the firm’s investment properties portfolio.

Wing Tai also has a long-term track record as it has been established since 1955. When measured from the start of 1992, Wing Tai has generated a total return (including reinvested dividends) of over 230% for its shareholders.

Dirt-cheap oil

With oil prices tumbling to multi-year lows of around US$30 per barrel, I don’t think it’d be a surprise for anyone to find that some of the companies in Singapore’s stock market with the most depressed share prices now are those from the oil and gas sector. One such company is offshore support vessels owner PACC Offshore Services Holdings Ltd  (SGX: U6C), also known as POSH.

At its share price of S$0.28 at the moment, POSH trades at just 0.39 times its latest tangible book value of S$0.72 per share. That is the lowest valuation POSH has had since its initial public offering in late 2014.

The main bulk of POSH’s assets is in property, plant and equipment (PP&E), which comes out to US$1.3 billion. For perspective, POSH’s total assets have a value of US$1.88 billion. It’s worth noting that the market value of POSH’s PP&E might be much lower when compared to their accounting values given the current low price of oil. Moreover, as of 30 September 2015, the company had reported a net debt to equity ratio of 46%, which isn’t low.

These could be possible reasons why the market has priced POSH at just 0.39 times its tangible book value.

Foolish Summary

So, are Wing Tai and POSH massively undervalued stocks at the moment? To answer this, investors would need to think of another crucial question, and that is, what needs to happen to the two companies’ businesses for their valuations to be re-rated by the market? Do you have any thoughts on the matter? I’d love to read about them in the comments section below!

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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 writer Stanley Lim doesn’t own shares in any companies mentioned.