The Motley Fool

2 Beaten-Down Singapore Shares That You Can Consider Buying in 2019

In 2018, investors witnessed extreme market volatility due to higher interest rates, trade tensions between China and the United States, and geopolitical uncertainties such as Brexit. But savvy investors know that it is at such times that the stock market can present opportunities to buy stocks at discounted prices.

If you’re looking for bargains, here are two stocks ideas for you.

The HR experts

First on the list is HRnetGroup Ltd (SGX: CHZ). The recruitment company has demonstrated steady growth in its short history as a listed company. Its revenue increased by 2.5% and 7.4% in 2016 and 2017, respectively. Profits increased at an even faster pace, at 6.3% and 15.4%. Growth has even accelerated in 2018, as shown below.

Source: HRnetGroup Ltd 2018 Q3 Earnings Presentation

The pace of growth is made more impressive when you consider the fact that the company had to pay its initial public offering fees in 2017.

Besides growing in its core market in Singapore, HRnetGroup has also planted the seeds to expand its business regionally. In 2018, the group made acquisitions to kick-start its business in Jakarta and Suzhou.

HRnetGroup has also initiated a co-ownership program last year to improve the efficiency of its sales staff. This has worked wonders for the company, with gross profit per sales employee increasing progressively each quarter since its implementation.

At the helm is Founder and Chairman Peter Sim, who started the company as a small, four-person team back in 1992. Through the years, Sim has shown that he has the capability to take the company forward. Sim and his family have a 74.35% stake in the company, so investors can rest assured that Sim’s interests are aligned with those of shareholders.

In terms of valuation, the company’s shares have dipped around 12% from their peak to their current price of S$0.78 per share. At this price, HRnetGroup sports a reasonably low valuation of 13.5 times its trailing earnings, and it has a juicy yield of 2.9%.

Nurturing our future

The market has not been kind to Mindchamps Preschool Ltd (SGX: CNE). Over the past year, its share price has fallen more than 30% from its peak. However, this could be the perfect time to buy shares to hold for the long term.

The company has plenty of room to run with a strong pipeline of franchise schools. The group has so far sold a total of 180 franchise licenses, but only 54 are operational. As such, there are another 126 centres yet to be established.

Source: Mindchamps Preschool Ltd 2018 Q3 Analysts Presentation

Mindchamps collects a one-time fee from licenses sold and then earns recurring income from school fees, royalty fees, and sales of merchandise at these franchised schools.

Besides the opening of new franchised establishments, the company has also driven growth through acquisitions of new company-owned-and-operated (COCO) centres in Australia. In the first nine months of 2018, Mindchamps acquired seven preschools in Australia, taking its total COCO centres to 17. The buying spree looks likely to continue since the company is sitting on a net cash position of S$11.8 million.

Following the share price tumble, Mindchamps shares change hands at S$0.51 per share, giving the company a price-to-earnings ratio of 23. While this is still a little pricey, Mindchamps’ long runway for growth, its strong balance sheet, and a strong brand make it worth paying up for.

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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 writer Jeremy Chia own shares in HRnetGroup Ltd. The Motley Fool Singapore recommends HRnetGroup Ltd.