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: Jardine Cycle & Carriage Ltd (SGX: C07), QAF Limited (SGX: Q01), and VICOM Limited (SGX: V01).
Source: SGX Stock Facts; Yahoo Finance
Jardine Cycle & Carriage is a bona-fide conglomerate. In 2016, 71% of its underlying profit came from the Indonesia-listed Astra. Astra operates in Indonesia and itself has seven different business segments: Automotive; Financial Services; Heavy Equipment & Mining; Agribusiness; Infrastructure & Logistics; Information Technology; and Property.
On 8 November, Jardine Cycle & Carriage released its 2017 third quarter results. It was a good quarter from the conglomerate. Revenue was up 13.1% year-on-year to US$4.44 billion, while profit attributable to shareholders grew 13.4% to US$211.1 million. Jardine Cycle & Carriage’s performance was driven by Astra, which saw strong across most of its business segments. The rest of the non-Astra business interests under Jardine Cycle & Carriage did not do well.
Jardine Cycle & Carriage’s management said that “the outlook for the rest of the year is expected to remain positive as Astra’s results will continue to benefit from increased commodity prices, although there are concerns over greater competition in the car market as well as increased provisioning in certain of its financing activities.”
At its current price of S$39.31, Jardine Cycle & Carriage has a trailing price-to-earnings (PE) ratio of 14.3.
Next up is QAF. As a quick introduction, 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.
Some of the more prominent consumer food brands the company has in its portfolio are Gardenia, Cowhead, and Farmland.
During the reporting quarter, the company’s revenue fell slightly by 0.4% to S$211.6 million. But, profit attributable to shareholders plunged 61.5% to S$7.45 million. QAF’s two main business segments, namely, Bakery, and Primary Production, both suffered from lower profitability. The former incurred higher operating costs, while the latter faced increased competition from an oversupply in its industry which led to lower revenue and hence, profit.
In its earnings release, QAF commented that it would continue facing intense competition and cost pressures in its business. The company also announced on 7 November that a proposed listing of its Australia-based Primary Production business on the Australian stock market has been put on hold “given current market conditions.”
At the current price of S$1.14, QAF’s shares have fallen by 17% year-to-date. The food production company has a price-to-earnings ratio of 7.5 currently.
Lastly, we have VICOM.
In the third quarter of 2017, VICOM experienced a 3.4% year-on-year decline in revenue to S$24.55 million, and a 5.9% dip in profit attributable to shareholders to S$6.39 million. It’s worth noting that VICOM’s latest quarterly revenue was higher than in the first and second quarters of 2017, in which revenue came in at S$24.1 million each. This may be a relief for some investors.
As a quick introduction, VICOM is a leading provider of technical testing and inspection services for vehicles in Singapore. The company also provides technical testing and inspection services for a wide range of industries, such as aerospace, construction, food, and more.
Looking ahead, VICOM expects its vehicle-testing business to remain stable, although the non-vehicle testing business is still expected to be weak. Yet, VICOM’s current outlook is a little brighter compared to the past few quarters, so that’s a good thing. The company’s balance sheet is also really strong right now, with S$99.43 million in cash and equivalents, and zero debt.
At its current stock price of S$5.78, VICOM has a PE ratio of 19.2.
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 Jardine Cycle & Carriage, QAF, and VICOM 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.