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 their 52-week low prices 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:
Source: SGX.COM; data as at 6 September 2018
M1 Ltd (SGX: B2F) is the first company on the list.
As a quick introduction, M1 is the smallest player within Singapore’s telecommunications industry, sitting behind Starhub Ltd (SGX: CC3) and leader Singapore Telecommunications Limited (SGX: Z74). Its business can be broken down into four segments, namely, Mobile services, Fixed services, International Call services, and Handset sales.
In its 2018 second quarter earnings update, M1 reported that sales revenue grew 1.7 % year-on-year to S$253.2 million. Service revenue was up 5.2% year-on-year to S$193.0 million. The growth in sales revenue was mainly driven by stronger performance in the Mobile Services and Fixed Services, offset by weaker performance of International Call Services and Handset Sales. Similarly, EBITDA (earnings before interest tax depreciation and amortisation) rose 1.4% year-on-year to S$78.4 million while net profit improved by 1.5% year-on-year to S$36.2 million.
Karen Kooi, Chief Executive Officer of M1, commented:
“M1 is committed to stay at the forefront of technology advancements and has embarked on early multi-vendor 5G trials, including Singapore’s first end-to-end 5G live trial in June 2018. This could provide insightful learning crucial to the successful development of relevant 5G services. With our foundation of dense cell grid and advanced narrow band Internet-of-Things network, we are well positioned to harness exciting new capabilities and support highly reliable and responsive applications on our network.
The Smart Nation initiatives will accelerate the digitalisation and transformation of businesses. By leveraging on our scaled up ICT and digital capabilities, we will be able to capture new opportunities from Smart Nation initiatives and support businesses to leverage digital technologies.”
Keppel Corporation Limited (SGX: BN4) is the next company that is trading close to its 52-week low price.
As a quick background, Keppel is a conglomerate with major business segments that include Offshore and Marine, Property, Infrastructure, and Investment.
For the second quarter ended 30 June 2018, Keppel reported that revenue was flat year-on-year at S$1.5 billion. Yet, net profit rose by 44% year-on-year to S$246.2 million. Earnings per share (EPS) also gained 45% to 13.5 cents. The higher profitability was driven by strong performance in its Property and Infrastructure divisions.
In addition to the higher profitability, Keppel has improved its balance sheet with a net debt of S$4.9 billion, as at 30 June 2018, down from S$5.5 billion as at 31 December 2017. As a result, gearing declined to 0.40 times from 0.46 times. Moreover, the Offshore and Marine segment’s net order book (excluding Sete Brasil) grew from S$3.9 billion, as at 31 December 2017, to S$4.6 billion.
Loh Chin Hua, CEO of Keppel Corporation, said:
“Keppel continued to deliver strong results in the first half of 2018. Our multi-business strategy and geographical diversification have enabled the Company to remain resilient, despite cyclical headwinds in some of our businesses.”
Oversea-Chinese Banking Corp Limited (SGX: O39), or OCBC, is the last company on the list.
For the second quarter ended 30 June 2018, total income grew 5% from a year ago to S$2.47 billion. Net interest income (income from loans) climbed 8% year-on-year to S$1.45 billion, driven by improvement in net interest margin and loan volume growth. Similarly, non-interest income increased by 2% to S$1.02 billion as a result of growth across the board. Net profit jumped 16% to a record S$1.21 billion.
For the quarter, OCBC declared an interim dividend per share of 20 cents, up two cents from a year ago.
CEO of OCBC, Samuel Tsien, summarised the bank’s latest quarter performance:
“Our record quarterly performance reflects the resilience and strong foundation for growth of our diversified banking, wealth management and insurance franchise. Yearly and quarterly revenue growth was driven by increases in both net interest and non-interest income. 2Q18 net interest income rose from a year ago, driven by robust loan growth and improved asset yields in both the Singapore and Malaysia markets. Non-interest income growth was broad-based, led by higher fees, trading income and insurance income. Operating expenses were well-managed and credit cost remained low.
The operating environment is increasingly challenging and we are watchful of the severe implications to the global economy and financial markets from the escalating trade and political tensions. With our strong and diversified franchise, capital and balance sheet, we are well-positioned and committed to supporting our customers and pursuing long-term sustainable and stable growth for our shareholders.”
The Foolish bottom line
Though companies trading at 52-week low prices is a good place to search for investment ideas, the low price itself should not be the sole reason to invest in such companies. As we all know, there is no guarantee that the share price will not fall further just because it is trading at an already-low price.
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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.