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. In here, let’s look at three such stocks: Maxi-Cash Financial Services Corp Ltd (SGX: 5UF), GSH Corporation Ltd (SGX: BDX), and Jardine Cycle & Carriage Ltd (SGX: C07).
Source: Google Finance; SGX Stock Facts
Maxi-Cash, which is a subsidiary of Aspial Corporation (SGX: A30), has two main businesses: Pawnbroking; and the retail and trading of pre-owned jewellery, watches, and branded bags. The company has a network of 41 pawnshops and retail stores in in Singapore which are located near transport hubs such as bus interchanges and MRT stations.
Maxi-Cash’s business has performed reasonably well in the last five years (from 2012 to 2016) with its revenue and earnings per share up by a total of 63% and 90%, respectively.
But, the company’s performance in the first nine months of 2017 has been mixed. Although revenue came in 19% higher (compared to a year ago) at S$139.0 million, its earnings per share declined by 18% to 1.22 cents.
In its earnings release, Maxi-Cash said that its pawnbroking and retail businesses “continue [to] operate under [a] very competitive environment, rising operating costs, and a rising gold price.” But, the company has recently started a new secured lending business, and it “expects its secured lending business to contribute positively to its earnings as the funds are being deployed.”
Next up we have GSH, a property developer that operates in Southeast Asia. Some of the company’s portfolio includes:
1. Properties under development in the Malaysian cities of Kuala Lumpur and Kota Kinabalu.
2. Two five-star hotels in Kota Kinabalu.
3. GSH Plaza in Singapore, a commercial property that is located in the central business district.
4. A 30% stake in Henan Zhongyuan Group, one of the largest food logistics and warehousing operators in China. It has over 350,000 square metres of lettable area comprising cold storage facilities, food warehousing, and retail spaces.
In the third quarter of 2017, GSH saw its revenue fall sharply by 26.1% to S$20.97 million. Its profit attributable to shareholders did a lot better, however, as it soared from just S$103,000 a year ago, to S$2.05 million.
The company’s latest outlook was given in its 2017 first quarter earnings release. It said the following on its property business:
“In light of the current volatile economic environment in the region, 2017 will continue to be challenging. However, we are observing improved sentiments in certain niche markets.”
As for its hospitality business, GSH “continue[s] to see a positive outlook in the hospitality industry in Malaysia.”
Lastly, there is Jardine Cycle & Carriage, a bona-fide conglomerate. In 2016, 71% of its underlying profit came from the Indonesia-listed Astra.
Astra operates in Indonesia and itself has seven different business segments: Automotive; Financial Services; Heavy Equipment & Mining; Agribusiness; Infrastructure & Logistics; Information Technology; and Property. Still with me?
The complexity with Jardine Cycle & Carriage will continue to grow due to the company’s recent acquisition of a 10% stake in Vinamilk, Vietnam largest milk producer. Some analysts have even speculated that Jardine Cycle & Carriage may further increase its stake in Vinamilk to 20%.
In the first nine months of 2017, Jardine Cycle & Carriage reported an 11% year-on-year increase in revenue to US$12.96 billion, and a strong 14% jump in underlying earnings per share to US$1.49. Here’s a succinct statement from Jardine Cycle & Carriage’s chairman, Ben Keswick, on the conglomerate’s outlook:
“The outlook for the rest of the year is expected to remain positive as Astra’s results will continue to benefit from increased commodity prices, although there are concerns over greater competition in the car market as well as increased provisioning in certain of its financing activities. The Group’s Direct Motor Interests and Other Interests will continue to face market challenges.”
A Foolish conclusion
It’s worth noting that not every company with a stock price near a 52-week low is a legitimate bargain. A declining stock price can decline yet further if the underlying business performance continues to weaken.
Nothing we’ve seen here about Maxi-Cash, GSH, and Jardine Cycle & Carriage should be taken as the final word on their investing merits. The information presented in this piece should be viewed only as a useful starting point for further research.
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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.