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: ComfortDelGro Corporation Ltd (SGX: C52), Vicom Limited (SGX: V01), and Duty Free International Ltd (SGX: 5SO).
Source: SGX Stock Facts; Yahoo Finance
ComfortDelGro is one of the world’s largest land transport companies with a fleet of around 45,000 vehicles. It has operations in seven countries, including Singapore, China, Australia, the United Kingdom, Ireland, Vietnam, and Malaysia.
In 2016, the Taxi business made up 33% of ComfortDelGro’s total revenue. As a taxi operator, ComfortDelGro is facing significant challenges from ride-hailing apps such as Grab and Uber. So far, there are signs pointing towards more competition going forward, but not toward a complete demise of the company’s taxi business.
But there is an even bigger threat to ComfortDelGro’s taxi business around the world in the next five to 10 years. The threat comes from autonomous vehicles. Although autonomous vehicles are not on the roads yet and are nowhere near commercial production levels, it is highly likely that the taxi industry will be first-hit when they do get introduced.
Given the high stakes involved, it is vital that ComfortDelGro’s management pays significant attention to this long-term threat, especially when considering that ride-hailing apps such as Grab and Uber could be in better positions to embrace autonomous vehicles given their strength and genesis in the technology plane.
Meanwhile, ComfortDelGro’s revenue had declined by 2.4% year-on-year to S$972 million in the first quarter of 2017. But, higher income from investments managed to push up the company’s bottom-line by 12.4% to S$82.5 million.
Looking ahead, the company expects most of its business segments to deliver lower revenue in 2017.
Next, we have Vicom, which is majority-owned by ComfortDelGro. Vicom is a leading provider of vehicle testing and inspection services in Singapore. It also provides other non-vehicle-related technical testing and inspection services to a wide variety of industries including aerospace, oil & gas and petrochemicals, construction, and more.
In its latest earnings (for the first quarter of 2017), Vicom reported a 4.9% year-on-year decline in revenue to $24.1 million. This drove its profit attributable to shareholders to fall by 6.4% to S$6.9 million.
Vicom provided the following comments on its outlook:
“Business conditions are expected to remain challenging for the Group. The vehicle testing business will continue to be faced with the high de-registration rate although this will be offset partially by the increase in the number of Certificate of Entitlement (COE) revalidations. The non-vehicle testing business will continue to weaken with the general slowdown in the industries that we serve.”
The last company on our list today is Duty Free International. It is the largest multi-channel duty free and duty paid retailing group in Malaysia. The company’s ZON brand of retail shops are found in all major entry and exit points in Malaysia, such as airports, seaports, border towns, and more. Duty Free International has over 40 outlets right now.
In late April 2017, the retailer reported its fourth quarter and full year earnings for its fiscal year ended 28 February 2017 (FY2017). In the reporting quarter, Duty Free International saw its revenue shrink by 7.4% year-on-year to RM 150.0 million. Profit attributable to shareholders also fell by 14.9% to RM 17.8 million.
Duty Free expects its business environment “to remain challenging and competitive,” given “the fluctuation in foreign currencies, especially the US Dollar against the Ringgit Malaysia, coupled with the rise of inflationary cost and weak consumers’ purchasing sentiment.”
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 ComfortDelGro, Vicom, and Duty Free International 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.