These 2 Stocks Are Trading Near Their 52-Week Lows

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Some of the greatest investors around – John Neff and Walter Schloss are good examples – source their investing ideas from lists of stocks that have fallen hard.

That’s because they believe some beaten-down stocks will be bargains in relation to their actual economic worth. Market participants can at times react too negatively to certain companies that have sound long-term prospects but have experienced some short-term stumbles.

Nearly once every week, I run a screen to look for companies with stock prices that are near 52-week lows.

There are many companies that pop up on my screen each time I run them. This week, let’s look at two companies I’ve chosen at random from a list of those that appeared. They are Singapore Shipping Corporation Limited (SGX: S19) and Lian Beng Group Ltd (SGX: L03).

Source: SGX Stock Facts

Singapore Shipping, as its name suggests, is in the shipping industry. The company operates through two main business segments: Ship Owning, and Agency & Logistics. Under the former segment, Singapore Shipping owns and manages ships; under the latter, the company provides services such as shipping agency, terminal operations, warehousing and logistics.

The company’s latest results are for the six months ended 30 September 2016. In that period, it experienced a 1.3% year-on-year increase in revenue to US$22.4 million. But, the profit attributable to shareholders actually fell by 26% to US$3.86 million. The off-hire of a vessel for dry-docking during the reporting period had a part to play in the lower bottom-line.

In its earnings release, Singapore Shipping mentioned that its Agency & Logistics business “faces a challenging environment.” But, the company expects both of its segments to remain profitable for the current fiscal year (year ending 31 March 2017).

Lian Beng is next in line. The company is a home-grown construction, property development, and civil engineering outfit that also has other business lines including the provision of engineering services, supply of ready-mix concrete, and training of foreign construction labour, amongst others.

Lian Beng’s status with the Building and Construction Authority (BCA) as an A1 grade contractor in General Building enables it to tender for public sector building projects of unlimited contract value, while its A2 grade in Civil Engineering allows it to handle engineering projects of up to S$85 million in contract value.

The quarter ended 30 September 2016 was a poor one for Lian Beng. It saw its revenue sink by 48% year-on-year to S$70.8 million. The bottom-line picture did not look any prettier as the company’s profit attributable to shareholders fell by 61% to S$12.7 million.

The company commented in its latest earnings release that the “construction industry is expected to remain challenging due to high labour costs and keen competition.” But, Lian Beng is still “cautiously optimistic of the outlook for the construction industry in the next 12 months.”

It also said that it will “continue to explore business opportunities in the region through acquisition, joint venture and/or strategic alliances.” Lian Beng has been busy with acquisitions lately. In October, it bought some strata lots in an industrial building in Singapore before following up with the purchase of an office in Melbourne, Australia in November.

A Foolish conclusion

It’s worth noting that not every company with a stock price near a 52-week low is a legitimate bargain. A declining stock price can decline yet further if the underlying business performance continues to weaken.

Nothing we’ve seen here about Singapore Shipping and Lian Beng should be taken as the final word on their investing merits. The information presented in this piece should be viewed only as a useful starting point for further research.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.