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. So, what are the companies that have shown up on this week’s list? Here are three of them: M1 Ltd (SGX: B2F), SembCorp Industries Limited (SGX: U96), and CapitaLand Limited (SGX: C31)
Source: Yahoo Finance; SGX Stock Facts
The first company on the list is M1, which is the smallest operational telco in Singapore at the moment.
In its latest earnings update (for the first quarter of 2018), M1 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, I have Sembcorp Industries, a bona-fide conglomerate with four major business segments: Utilities; Marine; Urban Development; and Others. The Marine segment’s contribution comes from Sembcorp Industries’ 61% ownership stake in Sembcorp Marine Ltd (SGX: S51).
In early May, Sembcorp Industries reported its 2018 first quarter results. Revenue for the reporting quarter jumped by 30% year-on-year to S$2.76 billion. But, EBITDA (earnings before interest, taxes, depreciation, and amortization) for the quarter actually fell by 17% year-on-year to S$286 million. Profit from operations for the quarter declined harder, as it came in at S$213 million, 21% lower compared to a year ago. Ultimately, Sembcorp Industries’ net profit for the quarter sank by 34% year-on-year to S$77 million.
The good news is that Sembcorp Industries managed to strengthen its balance compared to a year ago; its net debt position had declined from S$7.73 billion in 2017’s first quarter, to S$7.29 billion.
This is what Sembcorp Industries had to say about its outlook in its latest earnings update:
“The market environment is expected to remain challenging in 2018. A broader-based global recovery is underway, aided by a rebound in investment and trade. As the Group repositions its businesses for the future, it is confident that it is well-placed to benefit from the market’s recovery.”
Lastly, I have CapitaLand. As a quick introduction, the company is a real estate developer and owner and is one of the largest companies in Singapore’s stock market. Its diversified global real estate portfolio includes integrated developments, shopping malls, serviced residences, offices and homes.
CapitaLand’s latest earnings update is also for 2018’s first quarter. The real estate giant reported a huge 53.5% year-on-year increase in revenue to S$478.0 million, on the back of higher contributions from development projects in Singapore and China, and rental revenue from newly acquired/opened properties. A consolidation of revenues from some of the company’s real estate investment trusts also played a role.
However, CapitaLand’s profit after tax and minority interest fell by 18.8% year-on-year to S$319.1 million, mainly due to the absence of a one-off gain that came from the sale of the Nassim in 2017’s first quarter.
In CapitaLand’s latest earnings update, its CEO Lim Ming Yan, shared some comments on the company’s recent business developments:
“CapitaLand is on track to achieve our annual S$3-billion capital recycling target while we explore investment opportunities across asset classes. In 1Q 2018, we continued to optimise our portfolio by divesting 20 retail assets in China. This was followed by the proposed acquisition of Pearl Bank Apartments in Singapore and a site for our first integrated development in Vietnam. We also successfully set up our second commercial fund in the country, the US$130-million CapitaLand Vietnam Commercial Value-Added Fund, as part of growing our fee-based business.”
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, Sembcorp Industries, and CapitaLand 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.