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 two such stocks: M1 Ltd (SGX: B2F), Fraser and Neave Limited (SGX: F99), and Singapore Exchange Limited (SGX: S68).
Source: SGX Stock Facts
M1 should be an easily recognisable company in Singapore given that it’s the third largest operational telco in our Garden City.
Last week, M1 released its 2018 first quarter earnings update. It experienced a 0.5% year-on-year increase in revenue to S$254.1 million mainly due to growth in its fixed services and mobile telecommunications services businesses. Likewise, M1’s profit attributable to shareholders increased by 0.9% to S$34.1 million.
The telco’s free cash flow also managed to increase from a negative S$1.4 million a year ago (S$48.2 million in operating cash flow, and S$49.6 million in capex) to S$24.4 million (S$47.1 million in operating cash flow, and S$22.7 million in capex).
Looking ahead, M1 acknowledged in its latest earnings update that its “traditional telecommunication revenue remains under threat.” But, it thinks that “the digital economy also presents new opportunities.” Here’s more from M1:
“We are progressively scaling up our Info-Communication Technology (ICT) and digital capabilities. We are at the forefront of Internet-of-Things (IoT) solutions and are well placed to capture the growth in the Corporate and Government segment that is driven by digital transformation and Smart Nation initiatives.”
Next up is Fraser and Neave, or F&N for short. As a quick introduction, the company is a consumer group with expertise in the food and beverage, and publishing and printing sectors. F&N has three main business segments, which are Dairies, Beverages, and Printing and Publishing. The first two segments represent the food & beverage part of F&N’s business, and collectively accounts for over 80% of the company’s revenue.
F&N’s latest earnings update, released on early February, is for the quarter ended 31 December 2017. In the quarter, the company saw its revenue dip by 1.6% year-on-year to S$487.1 million. But, its profit attributable to shareholders (before exceptional items) actually increased by 16.3% to S$26.09 million.
The lower revenue experienced by F&N during the reporting quarter was mainly due to a 16% fall in sales at its Beverages segment. The segment’s business in Malaysia was affected by price competition and a shift in sales for Chinese New Year to the next quarter; in Singapore, certain soft drinks were “negatively affected by campaigns against diabetes, while sales in new markets were impacted by challenges faced in the route-to-market.”
Here’s what F&N said about its future in its latest earnings update:
“Contribution from our associated company, Vinamilk, is expected to increase as the Group will equity account the results of Vinamilk for the full 12 months in this new financial year. We will continue to invest in new markets and at the same time strive to maximise the benefits of capex projects and harmonised distribution network. Raw material prices are expected to be relatively stable compared to last year but we will continue to be vigilant of volatile price movement. The Group will continue to pursue new investment opportunities to further grow its beverages and dairies businesses.
As a result of restructuring activities undertaken by the Printing and Publishing business over the past year, the Group expects losses to continue to narrow in the new financial year. Publishing will continue to invest in its digital business and overseas markets by leveraging on its strength in the education content segment. The Group will continue to ensure that the cost structure remains sustainable, while at the same time explore opportunities to enter into new business segments.”
The last company on my list today is another familiar company to many, the stock exchange operator, Singapore Exchange.
The company’s latest earnings update, for the three months ended 31 March 2018, was released last Friday. It was a good quarter for Singapore Exchange: Revenue was up by 9.6% year-on-year to S$222.2 million; profit jumped by 21.0% to S$100.5 million; and free cash flow increased by 23.5% to S$110.2 million.
In its earnings update, Singapore Exchange gave the following positive comments on its outlook:
“With improved global growth, more central banks are seen adopting tightening measures, which will lead to investors rebalancing their portfolios. We expect market activity to improve as investors seek avenues to manage their portfolio risk. Looking forward, we will continue to build on our multi-asset offering and increase our servicing and marketing efforts across our domestic and international client base. We will also strengthen our global network through strategic partnerships and alliances.”
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 M1, Fraser and Neave, and Singapore Exchange 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.
How We Made an 88% Return in Just 19 Months!
Members of David Kuo’s personal investing club Stock Advisor Gold were recently rewarded with the biggest winner Motley Fool Singapore has seen to date In a special, 100% FREE report we’ve put together, we take you behind the scenes to show you exactly how we first uncovered this stock… every article and piece of research we released on it… and what ultimately led to our decision to SELL for an 88% gain. Click here to claim your copy now!
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. The Motley Fool Singapore has a recommendation on Singapore Exchange.