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:
Source: SGX.COM (as at 21 September 2018)
QAF Limited (SGX: Q01) is the first company that I will look at in this article.
As a quick introduction, QAF is a food production company. It is involved in bakery operations, pork production, food processing and distribution, and feed milling, among others. Some of the more prominent brands the company has in its portfolio are Gardenia, Cowhead and Farmland.
In the latest quarter ended 30 June 2018, QAF’s revenue declined 2% year-on-year to S$199.3 million. Furthermore, operating profit plunged 93% year-on-year to S$0.8 million. Net profit dropped 86% year-on-year to S$1.1 million. The weak performance was driven by the poor performance of QAF’s primary production, and distribution and warehousing segments.
QAF proposed an interim dividend per share of 1 Singapore cent.
As for its outlook, QAF provided the following guidance:
“As compared to 1H 2018 and barring unforeseen circumstances, the Primary Production segment is expected to report a weaker financial performance in the second half, whilst the Bakery and the Distribution & Warehousing segments are expected to perform better in the second half.”
Singapore Telecommunications Limited (SGX: Z74) is a company that needs little introduction; it’s the biggest local telco player in Singapore.
In Singtel’s latest results for the quarter ended 30 June 2018, revenue was down 0.5% year-on-year to S$4.1 billion. EBITDA (earnings before interest tax depreciation and amortisation) for the quarter tumbled 2.7% year-on-year to S$ 1.2 billion.
Net profit came down by 6.6% year-on-year to S$832 million. Excluding exceptional items, underlying net profit declined 19.3% year-on-year to S$733 million.
Singapore Airlines Ltd (SGX: C6L), Singapore’s flag carrier, is the last company that is trading close to its 52-week low price.
In its latest quarterly earnings update for the three months ended 30 June 2018, SIA reported that revenue was flat at S$3.8 billion. Yet, operating profit fell by 52.3% year-on-year to S$193 million. The lower operating profit was mainly due to higher fuel cost. Similarly, profit attributable to shareholders decreased by 58.7% year-on-year to S$139.6 million. As of 30 June 2018, SIA had a net debt of S$1.67 billion, up from S$0.56 billion, as at 31 March 2018.
In term of its outlook, this is what the company has said:
“Passenger traffic is expected to grow in the coming months, although competition in key operating markets persists. Costs remain under pressure, especially from higher fuel prices. Cargo demand in the near term is steady despite concerns over global trade tensions, the escalation of which could potentially have a longer-term impact on air cargo demand.”
The Foolish conclusion
Though companies trading at 52-week low prices is an excellent place to search for investment ideas, the low price in 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 a company is trading at its 52-week 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.