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: Jardine Matheson Holdings Limited (SGX: J37), Genting Singapore PLC (SGX: G13), and StarHub Ltd (SGX: CC3).
Source: SGX Stock Facts; Yahoo Finance
As a quick introduction, Jardine Matheson is a conglomerate with interests in many other Singapore-listed companies such as fellow conglomerate Jardine Strategic Holdings Limited (SGX: J37) , Indonesia-focused automobile distributor Jardine Cycle & Carriage Ltd (SGX: C07), property investor Hongkong Land Holdings Limited (SGX: H78), pan-Asia bricks-and-mortar retail outfit Dairy Farm International Holdings Ltd (SGX: D01), and international hotelier Mandarin Oriental Limited (SGX: M04).
In its 2018 first-half earnings update, Jardine Matheson reported that revenue increased by 13.5% year-on-year to US$21.33 billion. Underlying operating profit (which excludes non-trading items) improved by 22.1% to US$1.90 billion. Similarly, underlying net profit attributable to shareholders stepped up by 6.5% to US$792 million. The conglomerate also announced an interim dividend of US$0.42 per share, up from US$0.40 a year ago.
Jardine Cycle & Carriage, and its Indonesian subsidiary Astra, were singled out by Jardine Matheson’s management as a key growth-contributor.
In Jardine Matheson’s earnings update, its chairman, Sir Henry Keswick, shared the following comments on the conglomerate’s outlook:
“After a good performance in the first half of 2018 driven primarily by Astra and Jardine Cycle & Carriage, we are optimistic for a stronger second half of the year, with these companies continuing to perform well and the contributions of other businesses expected to improve.”
Next up, we have Genting Singapore, the owner and operator of one of Singapore’s key tourism landmarks, the Resorts World Sentosa integrated resort. Among the resort’s many attractions are one of Singapore’s two casinos and the Universal Studios Singapore theme park.
In its latest earnings update, for the second quarter of 2018, Genting Singapore announced a 6.0% year-on-year decline in revenue to to S$560.3 million. But, the company still managed to eke out a 1.2% increase in operating profit to S$228.4 million, and produced a net profit attributable to shareholders of S$177.6 million, up 23.9% from a year ago.
Genting Singapore’s improvement in operating profit was due to foreign exchange gains. As for its net profit attributable to shareholders, there was a big jump in the reporting quarter due to a lack of attributable profit to holders of the company’s perpetual securities. In the second quarter of 2018, Genting Singapore’s Non-Gaming revenue inched up by 0.5% year-on-year to S$153.5 million. But that was not enough to offset an 8.2% fall in Gaming revenue to S$406.1 million.
In its latest earnings update, Genting Singapore also provided some useful comments on its plan to set up an integrated resort in Japan. Here’s what the company shared about the project:
“In Japan, the anticipated Integrated Resorts (“IR”) Implementation Bill was enacted by the Japanese Diet on 20 July. The Group has been gearing up for this expansion opportunity and has been hiring a new team of Japanese nationals in different disciplines to prepare for the bid.”
Last on the list is local telco StarHub Ltd (SGX: CC3). The second quarter of 2018 wasn’t kind to the company. Although revenue was up 5.4% year-on-year to S$597.3 million, EBITDA (earnings before interest, taxes, depreciation, and amortisation) declined by 10.4% to S$155.3 million and profit attributable to shareholders fell by 22.8% to S$61.7 million. Weak performances in StarHub’s Mobile and Pay TV segments contributed to the fall in its bottom-line.
Despite its lower profit, StarHub had declared an interim dividend of S$0.04 per share for the quarter, unchanged from a year ago. But, StarHub’s dividend may be at risk of being lowered in the future, as the telco has been paying a dividend that is higher than its profit and free cash flow in recent times.
Investors may also want to note that, as of today, StarHub has been replaced by Dairy Farm as one of the 30 constituents of the Straits Times Index.
Here’s the forward guidance that StarHub gave in its latest earnings update:
“Based on the current outlook, we maintain our guidance on our Group’s 2018 service revenue to be 1% to 3% lower YoY. Group’s service EBITDA margin is maintained at between 27% to 29% after the adoption of SFRS(I) 15. In 2018, CAPEX payment, excluding spectrum payment of S$282.0 million and building payment of S$31.6 million, remains at 11% of total revenue. We intend to pay a quarterly cash dividend of 4 cents per ordinary share for FY2018.”
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 Matheson, Genting Singapore, and StarHub 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 Dairy Farm International Holdings, Hongkong Land Holdings, and Mandarin Oriental.