I’m a value investor.
As such, I like to search for companies that are trading at low valuations. 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 unloved or beaten down by the market. However, some of these stocks could turn out to be bargains compared to their actual economic worth. That’s 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.
I often screen for stocks that are trading near their 52-week lows around once every week. There are many different stocks that pop up on my screen each time I run it.
With that in mind, here are three companies that have turned up on my personal list:
Source: SGX.COM, Stockfacts
Hongkong Land Holdings Limited (SGX: H78) is one of the companies that is part of the Jardine network of companies which comprises of Jardine Strategic Holdings Limited (SGX: J37), Jardine Cycle & Carriage Ltd (SGX: C07) , Dairy Farm International Holdings Ltd (SGX: D01), Mandarin Oriental Limited (SGX: M04) and Jardine Matheson Holdings Limited (SGX: J336).
Hongkong Land is involved in property development, investment and management businesses in a number of cities in Asia.
In Hongkong Land’s latest half-yearly earnings update, the property owner and developer announced that its underlying profit attributable to shareholders declined by 3% year-on-year to US$455 million. The lower underlying profit was due to the timing of its sales completion in China, which was partially offset by higher recurring rental income from its investment properties. The company’s average office rental rose to HK$111 per square foot for 2018’s first half, compared to HK$106 per square foot for the same period last year. The average retail rent also rose to HK$231 per square foot for the first half of 2018, compared to HK$224 per square foot for 2017’s first half. As of 30 June 2018, it had net debt of US$3.1 billion, up from a net debt position of US$2.5 billion at the end of 2017.
Ben Keswick, the Chairman of Hongkong Land commented on its outlook:
“The strong performance from the Group’s investment properties is expected to continue in the second half of the year, while the contribution from development properties will benefit from higher sales completions in mainland China.”
The next company is United Overseas Bank Ltd (SGX: U11). As a quick introduction, UOB is one of the three main local banks listed in Singapore, along with DBS Group Holdings Ltd (SGX: D05) and Oversea-Chinese Banking Corp Limited (SGX: O39).
For the quarter ended 30 September 2018, UOB reported that total income grew by 8% compared to a year ago to S$2.3 billion. The bank’s total income comprises of its net interest income together with its net fee and commission income. The former, which includes income from loans made, grew 14% year-on-year to S$1.6 billion, driven by improvement in the bank’s net interest margin and loan volume growth. Net fee income was up by 2% year-on-year to S$484 million. As a whole, UOB posted a higher net profit, growing 17% year-on-year to S$1.0 billion. No dividend was declared for the quarter.
Mr Wee Ee Cheong, UOB’s Deputy Chairman and Chief Executive Officer, commented:
“Amid headwinds posed by escalating trade tensions and cautious business sentiment, we sustained stable performance in the third quarter. Our overall balance sheet remained healthy with robust capital and liquidity positions. Our disciplined management of capital and diversified funding base enable us to navigate near-term uncertainties.
Backed by our confidence in the medium- to long-term prospects of Asia, combined with our considered risk-focused approach, we continue to invest in regional connectivity and digital capabilities to serve business and to turn ideas into distinctive experiences that matter to our customers. This includes collaborating with ecosystem partners to create financial solutions our customers need and to help enterprises grow.”
Singapore O&G Ltd (SGX: 41X) is the third company that we will look at in this article.
As a quick introduction, Singapore O&G is a healthcare company that was listed in June 2015. The company has three main segments, namely Obstetrics and Gynaecology, Cancer-related and Dermatology.
In its last earnings update for the period ended 30 June 2018, Singapore O&G’s revenue was up by 19.0% year-on-year to S$8.6 million. Similarly, profit from operations jumped 66.5% year-on-year to S$4.4 million, mainly driven by growth in revenue and a one-off settlement payment from a former lead independent director. As a result, net profit jumped 75.3% year-on-year to S$3.8 million. Singapore O&G had S$18.2 million in cash and cash equivalents and no debt, as of 30 June 2018.
Dr Beh Suan Tiong, Executive Chairman of Singapore O&G, commented:
“We are extremely delighted with the Group’s performance, and with the double-digit growth in revenue and net profit after tax, for the first half of 2018. This is a remarkable team effort from our twelve specialist medical practitioners, clinical and management staff.
In celebrating this achievement, the Board of Directors is pleased to declare an interim one-tier tax exempt dividend of 0.80 Singapore cents per share for FY 2018 to thank all shareholders for your continued support and confidence in us!”
Companies trading at their 52-week low is a good place to search for investment ideas but a low price itself should not be the sole reason to invest in such companies. As we all know, there is no guarantee that share price will not fall further just because it is trading at its 52-week low. As investors, we will have to do our due diligence before committing our hard-earned money to these companies.
Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.
The Motley Fool’s purpose is to help the world invest, better. Like us on Facebook to keep up-to-date with our latest news and articles.
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 Hongkong Land Holdings Limited, Dairy Farm International Holdings, United Overseas Bank Ltd, DBS Group Holdings Ltd and Oversea-Chinese Banking Corp Limited.