In a recent report released by the Singapore Exchange (SGX: S68), the five best-performing retail stocks averaged a year-to-date total return of 21.5%. The shares are part of SGX’s cluster of 23 retail stocks (excluding distributors).
Of the 23 shares, there are some which are selling at low price-to-earnings (PE) valuations. Let’s take a look at three of the cheapest stocks (data as of 7 September 2018).
Company #1: Metro Holdings Limited (SGX: M01)
The cheapest stock among the 23 shares is Metro. The company has two main business segments, namely, property investment and development, and retail. Many would be familiar with the retail arm which runs three Metro department stores in Singapore. Metro also has another 10 department stores located in Indonesia.
For Metro’s first quarter ended 30 June 2018, revenue fell some 7% year-on-year to S$30.2 million. The poor showing was mainly due to the retail business performing poorly amid challenging trading conditions here. Revenue for that segment tumbled 7.6% to S$28.5 million. Meanwhile, overall net profit declined by 19.1% to S$20.2 million.
Year-to-date, Metro’s total return was 2.7%. At a stock price of S$1.10 on 7 September, it had a PE ratio of six times and a dividend yield 1.8%.
Company #2: Cortina Holdings Limited (SGX: C41)
Next on the list is Cortina. The company is a luxury watch retailer that began operations in 1972. It now has a presence in Singapore, Malaysia, Thailand, Indonesia, Hong Kong, and Taiwan.
Unlike Metro, Cortina’s revenue and net profit for its fiscal first quarter improved. Top line increased by 12% year-on-year to S$104.5 million while net profit surged 77% to S$5.3 million. The company did not reveal the reasons for the better performance.
It did, however, comment on its outlook, saying:
“Market condition is expected to be positive for the rest of the financial year. However, there will still be competition in the market that we operate in and the state of the global economy may have impact on the Group if it deteriorate.”
Cortina’s total return year-to-date stood at 21%, coming in as the third-best performer out of the 23 retail stocks. At a stock price of S$0.905, it sported a PE ratio of 6.3 times and a dividend yield of 2.2%.
Company #3: Noel Gifts International Ltd (SGX: 543)
Noel Gifts, which is involved in marketing and distributing flowers and gifts in our country, slots into the third spot. In 2015, Noel Gifts was the official vendor for the SG50 Baby Jubilee Gift project, an initiative spearheaded by the Singapore government.
For the full year ended 30 June 2018, Noel Gifts’ revenue grew 12.5% year-on-year to S$27.2 million due to a significant contract for the design and supply of gift sets. Meanwhile, net profit more than doubled to S$3.1 million, from S$1.4 million a year ago. The surge in earnings was due to a fair value gain of S$1.5 million from investment properties.
Looking ahead, Noel Gifts said:
“The economic outlook is uncertain, and the Group expects the operating enviroment [sic] to be challenging.”
Year-to-date, Noel Gifts’ total return came in at -11.1%. At a stock price of S$0.20, it had a PE ratio of 6.4 times and a dividend yield of 1.5%.
The Foolish takeaway
The three companies highlighted above could be cheap for a reason as all of them seem to be facing some form of headwinds. Investors interested in investing in those stocks should be familiar with the businesses and not merely invest in them due to their low valuation.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Singapore Exchange. Motley Fool Singapore writer Sudhan P owns shares in Singapore Exchange.