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: Sheng Siong Group Ltd (SGX: OV8), VICOM Limited (SGX: V01), and QAF Limited (SGX: Q01).
|Company||Stock price||Current price vs. 52-week low|
Source: SGX Stock Facts; Yahoo Finance
Sheng Siong is one of the largest supermarket chains in Singapore. The company’s network of 42 stores are primarily located in the heartlands of the island. The company was established in 1985 and listed in 2011.
In late July, Sheng Siong reported its 2017 second quarter earnings. The company experienced a 6.8% year-on-year increase in revenue to S$201.5 million, while earnings per share stepped up by 5.9% to 1.07 cents. Sheng Siong attributed its revenue growth mainly to new store openings (a 5.2% contribution) and same store sales growth (a 0.9% contribution).
Looking ahead, Sheng Siong commented that “competition in the supermarket industry is expected to remain keen.” That’s not surprising, especially given the fact that US-based eCommerce giant Amazon.com launched its Prime delivery service in Singapore in late July.
That being said, Sheng Siong is still searching for “suitable retail spaces in areas where it does not have a presence.” The company also said in its earnings release that its supermarket in Kunming, China, is “expected to be operational in September in 2017.”
At Sheng Siong’s current stock price, it is trading at 21.5 times trailing earnings.
VICOM is a leading provider of technical testing and inspection services in Singapore. It is majority-owned by land-transport giant ComfortDelGro Corporation Ltd (SGX: C52).
VICOM released its 2017 second quarter earnings in early August. Revenue for the quarter was down 5.2% to S$24.1 million compared to a year ago. This pushed VICOM’s profit down by 8.3% to S$6.1 million. Free cash flow for the quarter was also down by 4.1% to S$5.2 million.
One positive development in the quarter is the increase in VICOM’s interim dividend from 8.0 cents per share in the second quarter of 2016 to 13.12 cents. The company had revised its dividend policy – it would now pay out 90% of its profit, instead of 50% previously.
Going forward, business conditions for VICOM are expected to remain challenging due to a high vehicle de-registration rate in Singapore, and a general slowdown in the industries that its non-vehicle testing business serves.
Vicom has a trailing price-to-earnings (PE) ratio of 18.5 right now.
The last company on our list is QAF, which released its 2017 second quarter results in early August. QAF is a food production company. Its business activities include bakery operations, pork production, food processing and distribution, feed milling, food trading and distribution, food manufacturing, wine distribution, and the ownership and leasing of warehouses.
The second quarter of 2017 was tough for QAF. The company reported a 1% year-on-year increase in revenue to S$209.8 million. But, its net profit had fallen sharply by 72% to S$8.06 million.
QAF’s big decline in profit can be traced partly to the appearance of a S$9.7 million one-off gain recorded in the second quarter of 2016. But even if the one-off gain was excluded, QAF’s net profit in the second quarter of 2017 would still have fallen by 58% year-on-year. In the reporting quarter, the company’s operating costs had grown by 5%, much faster than the rate of revenue growth.
QAF’s weak performance was driven by challenges in its different business segments. For the Bakery segment, higher operating costs resulted in lower profitability. Meanwhile, the Primary Production segment faced pricing pressure due to an oversupply of pork in the market.
Going forward, QAF is planning to list its Australia-based pork-production business in the Australian stock market. One of QAF’s reasons for the listing is to enhance shareholders’ value: The listing is expected to reduce any possible conglomerate discount. The company will be holding an extraordinary general meeting on 6 October 2017 for shareholders to vote on the matter. QAF expects to continue owning at least 51% of the Australian entity after it is listed.
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 Sheng Siong, Vicom, and QAF 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. The Motley Fool Singapore recommends shares of Amazon.com.