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 (data as at 15 October 2018)
Singapore Exchange Limited (SGX: S68) is the first company that I will look at in this article. As a quick background, Singapore Exchange, or SGX for short, is the only stock exchange in Singapore. The company has three business segments, namely, Equities & Fixed Income, Derivatives, and Market Data & Connectivity.
For the financial year ended 30 June 2018, Singapore Exchange’s revenue grew by 5.5% to S$844.7 million. Furthermore, operating profit grew by 5.7% year-on-year to S$424.9 million. Meanwhile, net profit improved by 6.9% to S$363.2 million. As a result, Singapore Exchange’s diluted earnings per share rose to 33.8 Singapore cents from 31.6 Singapore cents.
A final dividend of S$0.15 per share was declared, a 15.4% increase from S$0.13 per share given out a year ago. Total dividend for FY2018 was S$0.30 per share, up 7.1% from S$0.28 per share one year back.
Loh Boon Chye, chief executive of Singapore Exchange, commented on the latest results:
“FY2018 was a record milestone in our financial performance as we achieved our highest revenue since listing in 2000 and the highest profit in five years. All three core businesses registered higher revenues. Our securities daily average traded value (SDAV) hit a five-year high, with the number of bond listings and derivatives trading volumes reaching record highs.”
Straco Corporation Ltd (SGX: S85) is a tourism asset operator with operations in China and Singapore. In China, the company owns the Shanghai Ocean Aquarium, Underwater World Xiamen, and Lintong Lixing Cable Car attractions. As for Singapore, Straco has a majority stake in the iconic Singapore Flyer – one of the largest observation wheels in the world.
In Straco’s latest results for the quarter ended 30 June 2018, revenue was down by 6.4% year-on-year to S$28.3 million. Similarly, operating profit declined by 7.7% year-on-year to S$ 15.6 million mainly due to the lower revenue. Net profit attributable to shareholders was lower by 5.1% year-on-year at S$10.8 million. As at 30 June 2018, Straco had cash and cash equivalents of S$181 million and total borrowings of S$43 million.
Straco’s Executive Chairman, Wu Hsioh Kwang, said the following about the latest results:
“We are happy that the Singapore Flyer had resumed its rides operation from 1st April, much to the delight of tourists. Our China operations remained fairly stable for the quarter under review. While SOA’s revenue had declined mainly on the value-added taxes on ticket revenue accounted and paid upfront starting this year, this has been partly mitigated by higher revenue generated by Lixing Cable Car and Underwater World Xiamen this quarter.”
Singapore Post Limited (SGX: S08), or Singpost, is another company that is trading close to its 52-week low price. As a quick introduction, SingPost is a mail and logistics company, organised into three major segments of Mail/Postal, Logistics, and Retail & eCommerce.
For the quarter ended 30 June 2018, Singpost reported that revenue climbed by 3.3% year-on-year to S$372.6 million. Yet, quarterly operating profit declined 22.3% year-on-year to S$33.3 million. As a result, net profit for the quarter dropped 40.4% year-on-year to S$18.7 million. Excluding exceptional items, underlying net profit was down 9.8% to S$24.7 million. The fall was mainly due to lower contributions from associates and higher tax.
As at 30 June 2018, Singpost’s borrowing stood at S$248.2 million while its cash and bank balances stood at S$377.6 million, giving the company a net cash position of S$129.4 million. In comparison, the net cash position was S$70.1 million, as at 31 March 2018.
The Foolish conclusion
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 already low.
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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. Motley Fool Singapore has recommendations for Straco Corporation Ltd and Singapore Exchange Limited.