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…
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, which all happen to be in the healthcare industry: IHH Healthcare Bhd (SGX: Q0F)(KLSE:5225.KL), Raffles Medical Group Ltd (SGX: BSL), and Q & M Dental Group (Singapore) Limited (SGX: QC7).
|Company||Stock price||Current price vs. 52-week low|
|Q & M Dental||S$0.665||0.00%|
Source: SGX Stock Facts; Yahoo Finance
IHH Healthcare is an international provider of healthcare services in markets where it thinks the demand for quality healthcare is growing rapidly. Right now, the company is active in Asia (this includes Singapore and Malaysia), Central & Eastern Europe, the Middle East, and North Africa.
Asia remains the company’s largest market. Some of the company’s brands include Gleneagles, Mount Elizabeth, Pantai, ParkwayHealth and Acibadem.
IHH Healthcare released its 2017 first quarter earnings two weeks ago. Quarterly revenue was up 8% year-on-year, but net profit (excluding exceptional items) was down 15%.
The company’s top-line benefited from organic growth and contributions from new hospitals. But the pre-operating and start-up costs of the new hospitals ate into the bottom-line. In March, HH Healthcare opened two new hospitals, namely, the 500-bed Gleneagles Hong Kong Hospital, and the 350-bed Acibadem Altunizade Hospital in Turkey.
Looking at the rest of 2017, IHH Healthcare “expects to face cost pressures on several fronts.” These include “continued competition for talent, pre-operational and start-up costs from new operations, and higher purchasing costs with the stronger US Dollar.” The company’s mitigation measures include “prudent cost management, taking on higher revenue intensity procedures and ramping up new facilities to achieve optimum operational efficiencies.”
Investors appear to really like IHH Healthcare’s growth prospects, judging from its trailing price-to-earnings (PE) ratio of 57.6.
Next up we have Raffles Medical, which runs a hospital (its flagship Raffles Hospital) along with a chain of medical centres and clinics in Singapore. The company also has medical facilities in four other Asian countries (China, Japan, Vietnam, and Cambodia). In addition, it is currently developing two hospitals in the cities of Shanghai and Chongqing.
Raffles Medical’s 2017 first quarter results were released in late April. It wasn’t a good report card from the company as its revenue and operating profit were down by 1.7% and 3.4%, respectively, compared to a year ago. Profit attributable to shareholders, however, inched up by 0.1%.
The lower revenue was mainly driven by softer demand from foreign patients. Raffles Medical’s Healthcare and Hospital Services divisions recorded a year-on-year revenue decline of 2.0% and 1.9%, respectively during the reporting quarter.
Going forward, the company intends to grow its revenue through projects such as the expansion of Raffles Hospital (when completed by the end of 2017, the hospital’s area is expected to increase by over 70%) and the aforementioned development of the two hospitals in China.
Raffles Medical is valued at 34.4 times trailing earnings right now.
Lastly, we have Q & M Dental Group. As its name suggests, Q & M Dental’s bread and butter revolves around dental healthcare.
In the first quarter of 2017 (Q & M Dental released its results for the quarter just three weeks ago), the company experienced a 6.9% year-on-year drop in revenue. But, its profit attributable to shareholders climbed 3.6%.
Q & M Dental’s revenue decline was due solely to the spin-off of its dental supplies manufacturing business, Aidite, in December 2016. Aidite is currently listed in Beijing’s New Third Board and is now considered an associate of Q & M Dental.
In its earnings release, Q & M Dental reiterated its growth plan, which consists of four pillars. They are:
1. Expansion of its Singapore network of dental clinics, and the acquisition of specialist dental clinics here;
2. An expansion into Malaysia’s private dental healthcare market (the company currently has eight dental clinics and one dental centre in the country);
3. An expansion into China’s dental healthcare market. In April, Q & M Dental had successfully spun-off its Chinese dental healthcare business, Aoxin Q & M Dental Group Ltd (SGX: 1D4). It is currently listed on the Catalist board in Singapore’s stock market;
4. Growth through acquisitions, joint ventures, and/or strategic alliances.
At the current price, Q & M Dental has a trailing PE ratio of 18.7.
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 IHH Healthcare, Raffles Medical, and Q & M Dental 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. The Motley Fool Singapore has recommended shares of Raffles Medical. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.