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 that have experienced some short-term stumbles. As such, I will screen for stocks that…
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 that 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: Jardine Strategic Holdings Limited (SGX: J37), Raffles Medical Group Ltd (SGX: BSL) and Wilmar International Limited (SGX: F34).
Source: Yahoo Finance; SGX Stock Facts
First on the list is Jardine Strategic. As a quick introduction, Jardine Strategic is a conglomerate with stakes in many Singapore-listed companies, such as automotive distributor Jardine Cycle & Carriage Ltd (SGX: C07), property investor and developer Hongkong Land Holdings Limited (SGX: H78), hotelier Mandarin Oriental Limited (SGX: M04) and more.
Jardine Strategic’s latest earnings update is for the whole of 2017. It was a good year for the conglomerate. Revenue was up by 7% to US$31.6 billion, while profit attributable to shareholders surged 50% to US$4.12 billion. Even if one-off as well as revaluation gains were stripped away, Jardine Strategic’s underlying profit attributable to shareholders was still up by a respectable 11% for the year to US$1.60 billion. Stronger performances by Hongkong Land and Astra (which is under the umbrella of Jardine Cycle & Carriage) helped drive Jardine Strategic’s growth.
As a result of its higher bottom line, Jardine Strategic also hiked its full year dividend by 7% to US$0.32 per share from US$0.30 per share a year ago.
Jardine Strategic’s Chairman, Sir Henry Keswick, shared a short but useful comment on the conglomerate’s outlook in its latest earnings update:
“The Group’s key markets in Greater China and Southeast Asia look well placed for 2018 as the good levels of economic growth seen in 2017 appear set to continue. This, when coupled with the development initiatives that are being pursued across the Group’s businesses, provides the basis for future profit growth.”
The next company on the list is Raffles Medical, a private healthcare services operator that has one operational hospital in Singapore, two hospitals under development in China, and a network of clinics and medical centres across five countries in Asia (Singapore, China, Japan, Vietnam, and Cambodia).
For the first quarter of 2018, Raffles Medical reported that its revenue was up by 4.6% year-on-year to S$120.2 million. Profit attributable to shareholders inched up by 1.7% to S$15.8 million, while earnings per share (EPS) stepped up by 1.1% to 0.89 cents.
Raffles Medical’s higher revenue came on the back of revenue growth in both its Hospital Services as well as Healthcare Services divisions. The healthcare services provider ended 2018’s first quarter with a strong balance sheet that had S$94.0 million in cash and equivalents and just S$71.7 million in total debt.
Here’s a succinct comment given in Raffles Medical’s earnings update by Dr Loo Choon Yong, the company’s executive chairman, on the company’s outlook:
“We will continue to grow in Singapore with the opening of Raffles Specialist Centre. In the region, we look forward to greater growth with the opening of Raffles Hospital Chongqing later this year.”
Last on the list is agricultural company, Wilmar International. As a quick introduction, the company operates through four main segments: Tropical Oils; Oilseeds and Grains; Sugar; and Others.
In the first quarter of 2018, Wilmar’s revenue was up 5.7% year-on-year to US$11.2 billion. But both its net profit as well as core net profit were down hard; the former plunged by 40.6% to US$203.3 million, while the latter sank by 37.4% to S$183.5 million. The main culprits for the big fall in profit were the Tropical Oils and Sugar segments. In the first quarter of 2018, the Tropical Oils segment saw its pre-tax profit fall by 34% year-on-year to US$101.7 million; for the same period, the Sugar segment’s pre-tax loss widened from US$34.5 million to US$39.0 million.
Nonetheless, Wilmar’s chairman and CEO, Kuok Khoon Hong, painted a brighter picture regarding the company’s prospects in the latest earnings update:
“The prospect of China imposing import tariffs on US soybeans will result in soybean prices staying volatile for the coming quarters. Even though performance of our Oilseed Crushing business will not be affected in the short term, a prolonged standoff between China and the US would affect the utilization of our crushing plants.
Nevertheless, we foresee that any negative effect will be partially mitigated by better performances from both our flour and rice businesses. In addition, with the improvements in production yields and better margins from downstream operations, the Tropical Oils segment will likely perform better in the subsequent quarters.
Overall, we are cautiously optimistic that performance for the rest of the year will be satisfactory.”
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 Jardine Strategic, Raffles Medical, and Wilmar 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 recommendations for Raffles Medical Group, Hongkong Land Holdings, and Mandarin Oriental.