Investors who are looking for cheap stocks to invest in may wish to sift through a list of companies that have recently hit a 52-week low, as this usually offers a fertile ground for such investments. However, it is not as simple as just buying cheap companies without digging a little deeper into the underlying reasons.
The same situation can be applied to well-known companies as well. Despite being famous, such companies are also subject to the same economic forces and competitive threats as all other businesses. They have to grapple with economic headwinds and disruptive challenges to ensure that they stay relevant, and may even be forced to evolve and adapt to rapidly-changing conditions.
Investors need to do their due diligence before committing their capital to cheap investments, as such investments may eventually turn out to be a value trap. Here are three well-known companies that are trading at a year-low, but the investor needs to use his insight to determine if they are indeed bargains.
1. Singapore Post Limited
Singapore Post Limited (SGX: S08) is Singapore’s only postal provider. Aside from its main post and parcel division, the group also provides innovative mail and logistics solutions in Singapore and around the world. Singapore Post’s last traded share price was S$0.925, close to its one-year low of S$0.89.
The group’s post and parcel division saw declining margins, while its logistics and US e-commerce segments reported operating losses for its latest Q1 FY 2019/2020 earnings. Based on annualised earnings per share, Singapore Post is trading at a 23.6x price-earnings ratio and sports a dividend yield of 3.8%.
2. Singapore Press Holdings Limited
Singapore Press Holdings Limited (SGX: T39), or SPH, is a leading media organisation. Its core business involves the publishing of newspapers, magazines and books in both print and digital editions. SPH also owns around 70% of SPH REIT (SGX: SK6U), whose portfolio comprises four retail malls in Singapore and Australia. SPH’s share price recently closed at S$1.98, close to its one-year low of S$1.93.
In SPH’s latest Q3 2019/2020 earnings, the group reported a slight 1.6% year-on-year decline in operating revenue to S$246.1 million. Core operating profit, however, plunged by 36.6% year-on-year to S$29.2 million.
3. Keppel Corporation Limited
Keppel Corporation Limited (SGX: BN4) is a conglomerate that specialises in offshore and marine, property, infrastructure and asset management. It is also one of the two largest oil rig builders in the world, the other being Sembcorp Marine Ltd (SGX: S51). The group’s last traded share price was S$6.04, close to its one-year low of S$5.71.
Keppel reported a rise of 17% year-on-year in revenue for Q2 2019 but saw operating and net profit tumbling by 43% and 39% year-on-year, respectively. This was mainly due to lower contributions from en-bloc sales of property projects in Q2 2018, but the offshore and marine division performed better by returning to profitability.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.