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.
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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), Jumbo Group Limited (SGX: 42R), and Old Chang Kee Ltd (SGX: 5ML).
Source: SGX Stock Facts (12 March 2018)
Jardine Cycle & Carriage is a bona-fide conglomerate. In 2017, 81% 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. The other two business segments are the director motor interests, and other strategic interests. The latter segment consists of a 25.5% stake in Thailand’s Siam City Cement, a 23.9% stake in Vietnam’s Refrigeration Electrical Engineering (REE) Corporation, and a 10% stake in Vietnam Dairy Products Joint Stock Company (Vinamilk).
For 2017, Jardine C&C’s revenue increased 12% year-on-year to US$ 17.7 billion while underlying earnings per share (EPS) was up by 16% year-on-year to US$1.99. The positive performance was driven mainly by its Indonesian conglomerate, which was held back a the weak performance in its direct motor interests segment.
Despite the positive financial result, its stock price has flown in the opposite direction over the last 12 months, falling by about 17% during the period.
At today’s price of S$35.20, it is trading at a P/E ratio of 17.7 times.
JUMBO Group Ltd (SGX: 42R), the next company on the list, is well-known for its eponymous seafood restaurants around Singapore that serve the famous chilli crab. Its other brand of restaurants includes JPot, Ng Ah Shio Bak Kut Teh, Chui Huay Lim Teochew Cuisine and J Cafe. JUMBO Group went public in November 2015.
In its first quarter for the financial year ending 30 September 2018 (FY2018), Jumbo Group sales was up 9.3% year-on-year to S$35.7 million. However, net profit attributable to owners fell by 19.8% year-on-year to S$2.1 million due to promotional activities, and higher operating costs. The higher cost came from new outlet opening cost and the expansion of its corporate office.
Jumbo Group share price has declined by about 15% in the last 12 months. At its current share price of $0.57, it’s trading at a P/E ratio of 25.9 times.
Old Chang Kee Ltd‘s (SGX: 5ML) shares are also trading around its 52-week low.
The company has been around since 1956, growing from a single stall outside Rex Cinema to 92 outlets, as at 31 December 2017. Old Chang Kee may be best known for its signature Curry’O puff, a popular Singapore snack.
In its third quarter earnings for the financial year ending 31 March 2018, revenue increased 9.6% year-on-year to S$22.2 million due to revenue contributions from its new outlets, and an increase in revenue from existing outlets. Despite recording higher sales, quarterly net profit declined declined 9.3% year-on-year to S$1.2 million, due to an increase in raw material costs and rental expense.
As for its share price, Old Chang Kee has experienced a similar fate as the two companies above, losing about 15% in its market capitalisation over the last 12 months.
At its current stock price of S$0.76, it’s trading at a P/E ratio of 166 times.
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.