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 their respective 52-week lows 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 52-week lows 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: Japfa Ltd (SGX: UD2), Kingsmen Creatives Ltd (SGX: 5MZ), and Alibaba Pictures Group Ltd (SGX: S91).
|Company||Stock price||Current price vs. 52 week low||Price-to-book ratio|
Source: SGX StockFacts; Yahoo Finance
Japfa is an agrifood company that was listed in 2014. The company has a few segments, namely, Animal Protein Indonesia, Animal Protein Other, Dairy, Consumer Food, and Others. The company employs over 32,000 people across an integrated network of modern farming, processing, and distribution facilities in Singapore, Indonesia, Vietnam, Myanmar, India, and China.
In late April, Japfa reported its 2017 first quarter earnings. It was a mixed report for the company – despite a 3% increase in revenue, profit attributable to shareholders actually declined by 91%.
A large culprit for Japfa’s sharp fall in profit was significantly lower selling prices for swine in Vietnam. The decline in swine prices started in the fourth quarter of 2016 due to import restrictions from China. In addition, Indonesia witnessed weaker broiler (a type of chicken) selling prices in the first quarter of 2017 due to lower-than-expected poultry demand.
At its current stock price of $0.56, Japfa has a low price-to-earnings (P/E) ratio of 7.3.
Next up we have Kingsmen Creatives, a corporate marketing services provider. The company operates through four main business segments: Exhibitions & Thematic; Retail & Corporate Interiors; Research & Design; and Alternative Marketing.
Kingsmen Creatives’ latest results are for 2016. During the year, the company’s revenue was flat, but its net profit declined by 9.3% after excluding a one-off gain in 2015. The company is expected to release its 2017 first quarter results on 12 May, which is tomorrow. Investors may want to look at the results to have a feel for what 2017 will be like for Kingsmen Creatives.
At the company’s current stock price of S$0.62, it has a P/E ratio of 10.3.
Lastly we have Alibaba Pictures, a film entertainment company that’s linked to Chinese eCommerce giant Alibaba Group.
The company operates through four business segments, namely Internet-based Promotion and Distribution, Content Production, Integrated Development, and Other Operations.
The first two segments collectively accounted for 98.9% of Alibaba Pictures’ total revenue in 2016. The Internet-based Promotion and Distribution segment is engaged in the operation of an integrated offline-to-online (O2O) platform for the promotion and distribution of entertainment content, and the provision of online movie ticketing services. Meanwhile, the Content Production segment – as its name suggests – produces movies and drama series.
In 2016, Alibaba Pictures reported a loss of RMB 976 million due to marketing expenses incurred by its Tao Piao Piao service. The expenses mainly consisted of ticket subsidies to movie-goers. Alibaba Pictures had given subsidies to increase Tao Piao Piao’s market share.
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 Japfa, Kingsmen Creatives, and Alibaba Pictures 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.