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 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; SGX StockFacts
Singapore Telecommunications Limited (SGX: Z74) is a company that needs little introduction as it’s a major telco in Singapore.
In the 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 declined by 2.7% year-on-year to S$1.2 billion. Similarly, net profit tumbled 6.6% year-on-year to S$832 million. When we exclude exceptional items, underlying net profit declined 19.3% year-on-year to S$733 million. Underlying net profit fell due to weaker results from Airtel and Telkomsel, a reduced economic interest in NetLink NBN Trust (SGX: CJLU), an increase in withholding taxes from higher dividends and adverse currency movements.
The next company on the list is Keppel Corporation Limited (SGX: BN4), a conglomerate with major business segments which include Offshore and Marine, Property, Infrastructure, and Investment.
For the third quarter ended 30 September 2018, Keppel reported that revenue was down 20% year-on-year to S$1.3 billion. Similarly, operating profit declined 9% year-on-year to S$271 million. As a result, net profit declined by 15% year-on-year to S$226 million. Earnings per share (EPS) also fell 15% to 12.4 cents. The lower net profit was due to lower contributions from the Investments and Property divisions, offset by stronger performance in the Infrastructure and Offshore and Marine divisions.
Despite lower profitability, Keppel has improved its balance sheet with a net debt position of S$4.8 billion, as at 30 September 2018, down from S$ 5.5 billion, as at 31 December 2017. As a result, gearing declined to 0.41 times from 0.46 times.
Keppel recently also announced a pre-conditional voluntary general offer, together with Singapore Press Holdings Limited (SGX: T39), to take majority control of M1 Ltd (SGX: B2F) to transform M1’s business, allowing it to compete more effectively.
Venture Corporation Ltd (SGX: V03) is the next company that is trading close to its 52-week low price. As a quick introduction, Venture is an electronics manufacturing services provider with expertise in a wide range of activities.
In Venture’s last quarter earnings update, revenue fell 6.0% year-on-year to S$952.3 million. Yet, profit attributable to shareholders was up by 40.2% year-on-year to S$97.9 million. As a result, Venture’s diluted EPS rose by 37.7% year-on-year to 33.6 cents. As of 30 June 2018, the company had S$688.6 million in cash on the balance sheet and S$41.7 million loan. This gives it a net cash position of S$646.9 million, down from S$721.6 million, as at 31 December 2017.
The Foolish conclusion
Though companies trading at 52-week lows 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 prices will not fall further just because they are trading at 52-week lows.
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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.