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2 Companies Trading Close To Their 52-Week Lows

Photo credit: Rafael Matsunaga. Licence: http://creativecommons.org/licenses/by/2.0/

Regular readers will be familiar that one of my favorite ways to look for stocks is to use the 52 week low list. This screen, which is usually done on a weekly basis, will give me the list of companies that are trading at 12 months low.

Why do I like this screen?

Because as a value investor, I like to look for companies that are trading at good value. The 52 weeks low is a good place to start, since they are usually hated or neglected by the market for various reasons. Some could deserve to be.

Occasionally, however, the market participants may have overreacted to certain companies that may have good long term prospects, despite some short term headwinds. Our job, then, is to try to separate the wheat from the chaff.

In this article we will look at 2 companies that are close to their 52-week low.

Company Name Mkt. Cap.in Price vs. 52 Price to book
  S$ million weeks low (%) ratio
Raffles Medical Group Ltd (SGX: BSL) 2,372 1.5% 3.4
Del Monte Pacific Limited (SGX: D03) 632 3.2% 1.2
 

The first is Raffles Medical Group.

Raffles Medical runs hospital and healthcare services in Singapore. It also has a network of clinics in five countries and thirteen cities. Also, it has two hospitals under development in China that are expected to be completed by 2018.

Raffles Medical has been one of the favourites of investors who are banking on continued demand for healthcare. As such, this company’s share price has significantly outperformed the overall market in the last 5 years.

Yet, the last 12 months have not been great for the company, as it has shed about 12% of its market value. Though there are no clear reason for this decline, it might have been be driven by its somewhat lofty valuation. Even after the decline over the last year, Raffles Medical is still trading at a P/E ratio of 33.6 times.

Moreover, in its first quarter result announcement for 2017, the company reported a decline in revenue on a year-on-year basis. Nevertheless, the revenue decline was marginal at 1.7%. Profit after tax actually rose by 0.1%.

Still, investors looking for growth might be excited by the second project secured in China to develop a 700 bed international hospital in Chongqing. The project is expected to be complete by 2018. 

The next company on the list is Del Monte Pacific.

Del Monte is a food and beverage company with a dual listing in Singapore and the Philippines. It operates mainly under four separate brands, namely, Del Monte, S&W, Contadina and College Inn.

The Group sells packaged fruits, vegetable and tomato sauces, condiments, pasta, broth and juices, under various brands and also sells fresh pineapples under the S&Wbrand.

In its FY2017 full year result, Del Monte reported that revenue was down 0.9% year-on-year, while net profit was down by 57.2% to US$ 24.4 million. The lower profit was driven by a one-off expense of US$ 17.9 million in FY2017 as compare to one-off gain of US$ 33.1million in FY2016.

As for its FY2018 outlook, the group expects its US business to improve through procurement synergies and transformation, footprint rationalisation and optimisation of General & Administration costs through the multiyear restructuring initiative that started in FY2016.

At current share price of S0.325, Del Monte is trading at P/E ratio of 15.4 times.

Conclusion:

Though companies trading at 52 weeks low can be a good place to look for investment ideas, the low price itself should not be the sole reason to invest in such companies.

As we all know, there is no guarantee that share price will not fall further just because it is trading at a 52 weeks low.

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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. Motley Fool Singapore has a buy recommendation for Raffles Medical.