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 frequently. There are many stocks that pop up on my screen each time I run it.
Source: Google Finance; SGX Stock Facts
First Resources is an integrated palm oil producer. It manages over 210,000 hectares of oil palm plantations across the Riau, East Kalimantan and West Kalimantan provinces of Indonesia.
In its latest earnings update (for the fourth quarter of 2017), First Resources delivered a 3.2% year-on-year increase in revenue to US$180.8 million, mainly due to higher sales revenue in its Refinery and Processing business segment. Yet, its net profit fell by 41.1% to US$34 million because of weaker pricing in its upstream business.
First Resources said in its earnings update that it “anticipates its production volume growth to extend into 2018 from continued yield recovery and contribution from newly mature plantations.” It added that “improving crude oil prices and potential domestic demand growth in Indonesia from its biodiesel mandate policy may lend some support to prices,” despite pressure from higher industry production volumes and competition from other edible oils.
Next up, we have QAF, a multi-faceted food producer. The company’s different businesses range from bakery operations to pork production, food processing and distribution to feed milling, and food trading, distribution, and manufacturing to wine distribution. On top of these, QAF also owns warehouses which it leases out. Some of the familiar consumer food brands that the company has in its portfolio are Gardenia, Cowhead, and Farmland
The company’s latest earnings update was for the fourth quarter of 2017. During the quarter, the food producer saw its revenue decline by 1.6% year-on-year to S$214.4 million. But, a 1.8% increase in total costs and expenses to S$215.0 million resulted in the company’s profit attributable to shareholders sinking by 96.2% to S$2.11 million. QAF attributed its poor results to a challenging operating environment in its Primary Production business in Australia.
But, QAF still declared a final dividend of 4.0 cents per share, which was unchanged from a year ago.
In its earnings update, QAF painted a picture of difficult times ahead for its businesses. For instance, here’s what it said about its Primary Production segment:
“In the Primary Production segment, the oversupply market condition is expected to continue to exert significant pressure on selling prices. This cyclical factor is expected to subsist in 2018. As a result of the market conditions, Rivalea faces the risk of reduced demand from its principal distribution channel, the supermarket chains. Operating expenses are also expected to increase, in particular feed and energy costs, and possibly higher environmental compliance cost.”
But, QAF is also trying to overcome the difficulties. Time will tell if it can succeed.
Lastly, there is another palm oil producer Bumitama Agri. Its primary business activities are the cultivation of oil palm trees, the harvesting of fresh palm fruit bunches, the processing of the bunches into crude palm oil and palm kernel oil, and the sale of the oils to refineries.The company has over 180,000 hectares of plantation land located in three provinces in Indonesia, namely, Central Kalimantan, West Kalimantan, and Riau.
In its recently reported earnings update, Bumitama Agri posted a 9% year-on-year decline in revenue to IDR 2,066 billion. Profit attributable to shareholders fared worse with a 19.2% decline to IDR 455 billion.
Here’s a useful statement from Bumitama Agri on its outlook:
“The price of CPO is affected by global vegetable oil supply and demand, climatic conditions and fluctuating foreign currency exchange rate. The CPO price is expected to remain at the current level for the first half of 2018, in the absence of fresh positive news which can lift palm prices from its current level. Nonetheless the long term fundamental of the palm oil industry remains positive, supported by increasing demand particularly from the growing domestic and emerging markets.
The Group will continue to strengthen its business strategy and management, focusing on the upstream of this industry after a decision was made to close its biodiesel production plant.”
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 First Resources, QAF, and Bumitama Agri 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.