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: StarHub Ltd (SGX: CC3), Riverstone Holdings Limited (SGX: AP4), and Bumitama Agri Ltd (SGX: P8Z).
Source: SGX Stock Facts; Yahoo Finance
Singapore’s second largest operational telco, released its 2018 first quarter earnings in early May.
The telco’s revenue and profit attributable to shareholders both declined compared to a year ago. The former fell by 4.7% to S$561.0 million, while the latter came in 14.9% lower at S$61.5 million. The decline in the company’s revenue was mainly driven by weaker performances in its Mobile and Pay TV segments (revenue declines of 7.1% and 10.0%, respectively).
There were will still bright spots in StarHub’s latest earnings update. The Enterprise Fixed segment enjoyed a strong 18% year-on-year increase in revenue to S$117.5 million mainly due to higher revenue from data and internet services, and managed services. This was the third successive quarter of double-digit year-on-year revenue growth for the segment.
In its earnings update, StarHub gave the following succinct comment on its outlook:
“Based on the current outlook, we expect our guidance on our Group’s 2018 service revenue to be 1% to 3% lower YoY. Group’s service EBITDA margin is expected to be between 27% to 29% after the adoption of SFRS(I) 15. We chose service EBITDA margin as it excludes margin on equipment sales, which better reflects the margin of our core business.
In 2018, CAPEX payment, excluding spectrum payment of S$282.0 million and building payment of S$31.6 million, is expected to be 11% of total revenue. We intend to pay a quarterly cash dividend of 4 cents per ordinary share for FY2018.”
Next up is Riverstone Holdings, which is a Malaysia-based company that manufactures gloves that are used in the healthcare as well as cleanroom industries.
In early May, the company announced its 2018 first quarter earnings update. Revenue was up 2.0% year-on-year to RM 209.8 million, as mentioned earlier, mainly due to growth in its sales volume. But, the gross profit margin for the reporting quarter was 22.4%, down from 25.2% in the same period a year ago. This was mainly due to the strengthening of the Malaysian ringgit against the US dollar, and a 23% increase in gas input prices.
Regarding its future, Riverstone’s expansion plan is on track and is now in Phase 5. Under Phase 5, the company’s total annual gloves production capacity will increase from 7.6 billion pieces at end-2017 to 9 billion pieces by the end of 2018. Moreover, Riverstone also has Phase 6 of its expansion plan, which will expand its manufacturing capacity to 10.4 billion gloves by end-2019. In other words, investors should expect more growth coming from the company.
Lastly, we have Bumitama Agri, whichis another company that released its 2018 first quarter earnings update in early May.
As a quick introduction, Bumitama Agri is a palm oil producer. 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.
For the first quarter of 2018, Bumitama Agri reported a 9.1% year-on-year decline in revenue to IDR 1,908 billion. Similarly, its profit attributable to shareholders fell by 16.8% to IDR 231.8 billion. The company’s weaker business performance was due to lower average selling prices for its products, as the table below shows.
Source: Bumitama Agri earnings update
Operationally, Bumitama Agri had showed improvement. Its production volume for fresh fruit bunches (FFB) grew by 19.1% year-on-year to 967,061 tonnes, while its sales volume for crude palm oil (CPO) was up 3.2% year-on-year to 205,859 tonnes.
As for its outlook, this is what the company had to say in its earnings update:
“Palm oil and other competitive edible oil production volume, crude oil prices and global demand are key determinant of palm oil prices. The lower estimated soybean oil volume and stronger estimated demand of biodiesel in both Indonesia and Malaysia will balance higher palm oil production vis-à-vis FY2017 and therefore lend support to the palm oil prices.
The Group anticipates improvement in its production volume in 2018 due to continued yield recovery, implementation of best management practices and contribution from newly matured plantations. The Group will continue to strengthen its business strategies, especially in areas of debt and cash management amid rising financing costs in the current economic environment.”
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 StarHub, Riverstone, 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. The Motley Fool Singapore has a recommendation on Riverstone Holdings Limited.