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.
Source: Yahoo Finance; SGX Stock Facts
Straco is a tourism asset operator with business interests in China and Singapore. In China, the company has the Shanghai Ocean Aquarium, Underwater World Xiamen, and Lintong Lixing Cable Car attractions under its umbrella. As for Singapore, Straco bought a majority stake in the iconic Singapore Flyer – one of the largest observation wheels in the world – in late 2014.
In its latest earnings update (for the fourth quarter of 2017) that was released on late February, Straco delivered a 5.8% year-on-year increase in revenue to S$24.59 million, but its profit attributable to shareholders dipped by 1.2% to S$6.01 million. A big culprit for the lower profit was the 19.7% year-on-year jump in taxes to S$2.88 million. Straco also ended 2017 with a solid balance sheet that had cash and equivalents of S$190.41 million, and total borrowings of just S$49.90 million.
Regarding its outlook, Straco said in its earnings update that the “China government will continue to deepen the structural reform of the supply side in 2018, and vigorously boost inbound tourism, stabilize the development of domestic tourism, and enhance the international influence and competitiveness of the Chinese tourism industry.” On Singapore, Straco commented that it expects the tourism sector to “remain healthy into 2018.”
It’s also worth noting that the Singapore Flyer was suspended from operations from 25 January 2018 to 31 March 2018. In its earnings update, Straco said that “it is unlikely that this temporary suspension will significantly impact the Group’s business operations as a whole.”
Next up we have coffee shop operator Kimly. The company has 68 food outlets and 129 food stalls located around Singapore.
On early February, Kimly reported its first quarter earnings update for its fiscal year ending 30 September 2018 (FY2018). The reporting period was from 1 October 2017 to 31 December 2017. In that quarter, Kimly’s revenue grew by 6.8% year-on-year to S$50.15 million. But, its costs grew even faster (for example, its cost of sales increased by 9.6%, and its administrative expenses jumped by 17.1%), resulting in its net profit falling by 13.9% to S$5.75 million. One positive aspect about Kimly’s business is that it has a really strong balance sheet; as of 31 December 2017, the company had S$91.43 million in cash and equivalents, and zero debt.
Looking ahead, Kimly “expects the operating environment in the local food and beverage scene to remain challenging with tight labour supply, keen competition and low entry barriers.” The company intends to focus on managing its costs and improving its productivity and operational efficiency. To achieve this, the company stepped up its investments in IT infrastructure and proprietary software.
Kimly also “won the tender to operate a new “productive” coffee shop in Bukit Batok, the tender exercise is jointly facilitated by SPRING Singapore and the Housing and Development Board in a new bidding process under the food services’ transformation map.”
Lastly, there is Singapore O&G, a healthcare company that was listed on June 2015. It has four main operating business segments at the moment, namely, Obstetrics and Gynaecology, Cancer-related, Dermatology, and Paediatrics.
In its latest earnings update (for the fourth quarter of 2017), Singapore O&G reported a 10.3% year-on-year jump in revenue to S$7.95 million for the quarter. Its profit increased substantially, from S$0.76 million a year ago to S$2.02 million. The growth in revenue was driven by improvements in the Obstetrics and Gynaecology, and the new Paediatrics segments (the Paediatrics segment was set up in July 2017). The
Singapore O&G is another company with a sturdy balance sheet. The company ended 2017 with S$16.43 million in cash and equivalents, and no debt.On its prospects, this is what Singapore O&G had to say in its latest earnings update:
“As at the date of this Announcement [14 February 2018], the Board of Directors is not aware of any significant change in trends and competitive conditions that will significantly affect the Group’s operations and businesses. The Singapore Government has not changed its policy on or actions in encouraging population growth nor has there been any macro health risks, such as Severe Acute Respiratory (“SAR”), Middle East Respiratory Syndrome (“MERS”) and Zika virus, which could severely affect private healthcare visitations.
On 1 July 2017, the Group extended its services through the offering of general paediatrics and adolescent medicine services. With the new Paediatrics segment, it allows the Group to continue to take care of our existing patients and their newborns. As this is a new segment and in a start-up phase, the Group expects the contribution from this segment to continue to be moderate for FY 2018.”
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 Straco, Kimly, and Singapore O&G 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. The Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommendations on Raffles Medical Group and Straco Corporation.