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: Wilmar International Limited (SGX: F34), Sheng Siong Group Ltd (SGX: OV8), and Old Chang Kee Ltd (SGX: 5ML).
Source: Yahoo Finance; SGX Stock Facts
Wilmar is a leading agricultural company in Asia. It has three main operational business segments: Tropical Oils; Oilseeds and Grains; and Sugar.
In its 2017 third quarter earnings update released in mid-November, Wilmar reported quarterly revenue of US$11.13 billion, which was flat compared to a year ago. Yet, the agribusiness giant’s net profit was down by 5.7% year-on-year to US$370 million, driven primarily by weaker numbers from the Tropical Oils and Sugar segments. The core net profit, which strips out exceptional items, also fell by 15.9% to US$323.7 million.
Regarding its future, Wilmar shared the following comments in its earnings release:
“We expect the good performance in the Oilseeds & Grains segment to continue into the fourth quarter, with crush margins and volume anticipated to remain positive. Performance of the other major business segments is expected to be satisfactory.
With good economic performance in key Asian countries, we remain optimistic about the future of Asia. We will continue with our expansion plans, especially in Oilseeds and Grains including Consumer Products.”
Wilmar raised its stake in real estate company Perennial Real Estate Holdings Limited (SGX: 40S) from 16.89% to 20% in late November 2017. With this move, Perennial is now an associate of Wilmar’s. Pua Seck Guan, who is the chief executive officer of Perennial, is also Wilmar’s chief operating officer.
Next up we have Sheng Siong, which is one of the largest supermarket chains in Singapore. The company has a network of over 40 stores that are primarily located in the heartlands of our island nation.
Sheng Siong reported its 2017 third quarter earnings in late October. The company experienced a 4.2% increase in revenue to S$210.9 million. Its profit climbed by 25.3% to S$19.6 million; if a one-off tax refund of S$2.2 million was excluded from the company’s results in the reporting quarter, its net profit would have increased by 11.5% year-on-year instead.
As for Sheng Siong’s future plans, Lim Hock Chee, the company’s chief executive officer, shared the following comments in the earnings release:
“We have successfully opened a new store of 4,000 sq feet in Fajar 446 this quarter, expanding the Group’s total retail square footage to 431,000 sq feet. Our store expansion plans are on track as we have successfully bid for three new HDB shops at Woodlands Street 12, Edgedale Plains Block 660A and Anchorvale Crescent Block 338.
Moving ahead, we will remain focused on our store expansion plans in Singapore, particularly in areas where our potential customers are residing. Concurrently, we will continue to drive growth of our new and existing stores. Besides this, we remain committed to improve cost efficiencies through lowering input costs and operating overheads.”
Lastly, we have food & beverage retailer Old Chang Kee. In mid-November the company released its second quarter results for its financial year ending 31 March 2018 (FY2018). The reporting quarter was for the three months ended 30 September 2017.
As a quick introduction, Old Chang Kee has been around since 1956, growing from a single stall outside Rex Cinema to 89 outlets in Singapore as of 31 March 2017. Old Chang Kee may be best known for its signature Curry’O puff, a popular Singapore snack.
In the reporting quarter, Old Chang Kee’s revenue improved by 5.9% year-on-year to S$21.4 million. The company enjoyed revenue contributions from new outlets, and higher sales from existing outlets. These offset lost revenue from stores that were closed.
But despite the higher revenue, Old Chang Kee’s quarterly net profit sank by 52.6% to S$0.75 million, mainly due to higher selling and distribution expenses, an increase in raw material costs, and one-time factory test-runs for the commissioning of new factory equipment.
In its earnings release, Old Chang Kee shared the following on its outlook:
“The Group’s first flagship outlet in London, United Kingdom is targeted to open in 2018, generating new revenue streams for the Group and uplifting Old Chang Kee’s brand positioning.
On the current operations, the Group expects operating lease expenses (rental), labour and raw material costs to remain high in the next reporting period and the next 12 months, and believes that the labour market will continue to remain tight.
Following completion of the new factory facilities and the commissioning of new factory equipment in 2Q2018, the Group will be focusing its efforts on improving its gross margins and revenue”
Investors might want to pay attention to how well Old Chang Kee can contain its costs going forward. Failure to do so will result in a further deterioration of its financial performance. On a positive note, Old Chang Kee’s first outlet in London is opening in 2018, and this might open up new revenue streams for the company.
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 Wilmar, Sheng Siong, and Old Chang Kee 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.