I’m a value investor. So, I like to search for companies that are trading at good value. A list of stocks that are near a 52-week low is a good place to start my search for a good reason. These are the stocks that are either neglected or beaten down by investors. And, some of these stocks can be bargains in relation to their actual economic worth because market participants can at times react too negatively to certain companies that have sound long-term prospects but have experienced some short-term stumbles. As such, I will screen for stocks that are trading…
I’m a value investor. So, I like to search for companies that are trading at good value. A list of stocks that are near a 52-week low is a good place to start my search for a good reason.
These are the stocks that are either neglected or beaten down by investors. And, some of these stocks can be bargains in relation to their actual economic worth because market participants can at times react too negatively to certain companies that have sound long-term prospects but have experienced some short-term stumbles.
As such, I will screen for stocks that are trading near a 52-week low nearly once every week. There are many stocks that pop up on my screen each time I run it. In here, let’s look at three such stocks: Mandarin Oriental International Limited (SGX: M04), Singapore Post Limited (SGX: S08), and Kingsmen Creatives Ltd (SGX: 5MZ).
Source: SGX Stock Facts; Yahoo Finance (data as of 7 March 2017)
Mandarin Oriental is an international hotel investment and management company. It currently runs 29 hotels and eight residences in 19 countries and territories. Its main shareholder, with a stake of nearly three-quarters, would be another Singapore-listed company, Jardine Strategic Holdings Limited (SGX: J37).
Over the past five years, Mandarin Oriental has seen its stock price fall by 18%. The company’s latest earnings, for the year ended 31 December 2016, was released just week. 2016 wasn’t a good year for Mandarin Oriental – revenue and underlying earnings fell by 1.6% and 37%, respectively. Softer demand from Hong Kong, London, and Paris had pressured its business.
Looking ahead, Mandarin Oriental thinks that challenging market conditions will continue to have a negative impact. Moreover, the company also said that its earnings will be “disrupted by the renovation of the London hotel.” But, the hotelier is still confident about its long-term prospects given its “strong brand position, healthy balance sheet and continued portfolio development.”
The next company on the list, Singapore Post, probably needs little introduction – it is Singapore’s main postal services company. But, the company has embarked on a journey over the past few years to focus more on being a logistics and e-Commerce services provider. This strategy has been executed mainly via acquisitions.
The company’s strategy has yet to bear fruits so far as it is still working on integrating the acquisitions made over the past few years. In addition, the company’s operating costs have risen at a faster pace than revenue for a while now, resulting in multiple quarters of declining profitability.
Singapore Post’s stock price has followed its weakened profitability – over the last three years and last 12 months, its stock is down by 31% and 14%, respectively. Any meaningful turnaround in Singapore Post’s stock price will likely depend on how well the company can execute on its strategy to transition away from its legacy postal business in a profitable manner.
The postal and logistics services provider announced its latest quarterly results, for the quarter ended 31 December 2016, a few weeks ago. Revenue had grown by 16.8% year-on-year, but profit had fallen by 28%.
Singapore Post also mentioned in its earnings release that it is facing a “risk of significant impairment” of the value of Trade Global, an end-to-end eCommerce services provider it acquired in October 2015 for US$169 million. Trade Global’s business performance has not been up to mark since the acquisition.
Kingsmen Creatives rounds up our list here. The company provides services such as exhibition setup, interior design for retailers and corporates, and more. It operates through four segments: Exhibitions and Thematic, Retail and Corporate Interiors, Research and Design, and Alternative Marketing.
Some of the projects that Kingsmen Creatives has worked on include Art Stage Singapore 2016, the 2015 BNP Paribas WTA Finals Singapore, and the 28th Southeast Asian Games. As for some of the retailers Kingsmen Creatives has worked with, they include Uniqlo, Ermenegildo Zegna, Robinsons, and Skechers.
The company recently announced its full year results for 2016. Revenue inched up by 0.6%, but net profit (after excluding a one-off gain in 2015), was down by 9.3%. The lower profitability is mainly due to an increase in employee and depreciation expenses.
Commenting on Kingsmen Creatives’ future, management said that “uncertainties and challenges will remain in 2017.” But, the company still sees opportunities for it to grow.
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 Mandarin Oriental, Singapore Post, and Kingsmen Creatives 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.