Monday, August 18, 2014

Hmmm... These Stocks Trading Below NAV

Buying stocks that go lower just because they are cheaper, not a very sound strategy. But hey, it's definitely better than buying stocks that go higher just because they are going higher. Distance to the ground is definitely less.

However, if you couple cheap stocks together with some screens based on some "risk" factors, you can weed out your lot so that you throw out the trash and can find the gems.

So, here are my picks of what looks tasty to pick up based on recent weak price action:

Hock Lian Seng
Low Keng Huat
New Toyo
Noel Gifts (very illiquid)
PEC
SATS
Second Chance
Sing Inv & Fin
Sing Shipping
Stamford Land
Super Group
UOB Kay Hian
Wing Tai

Anyway, all these stocks have had horrible price action in the 1-2 weeks. Can they get lower? Of course they can.

I am not buying any stocks now, though if I had enough capital to deploy, I would love to pick up 1 of each lot and just sit back and relax!

Some of these counters are really not talked about in the local scene, which is why I quite like them. Of course, I haven't looked at what is under the hood and analyzed it closely, but they all have rather straight forward businesses that seem likely to last in the long run. They are all dividend stocks too, by the way. If I am not wrong, they all yield at least 3%. Probably more likely like 4+%.

My personal favourite picks from the list? I like the ones trading at discounts to NAV.

Wing Tai - 50%
Sing Inv & Fin - 40%
PEC is about - 35%
New Toyo - 20%
Noel - 15%

Hock Lian Seng, Low Keng Huat and Stamford Land just under NAV.

Why are these stocks trading under NAV? Well, I don't know. But if you told me that I could buy over a business for less than what it owns, meaning I essentially get all the business functions, experience and expertise for free? I would probably look a bit more carefully to make sure this isn't one of those deals "too good to be true". If it all checks out, I would definitely consider buying them! Of course, with what little capital I have and through SCB, since there is no minimum commission!

Any thoughts on any companies on my list? Any "toxic" news that might be causing their prices to be depressed?

4 comments:

  1. I'd be more willing to put money in Wing Tai and Sing Inv & Fin since their core asset is property and cash respectively (in case anything goes wrong). Wing tai is affected by the sector bad news probably. Not sure why Sing Inv & Fin trading at 40% discount though. DYODD

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    Replies
    1. Hi Anon,

      Thanks for your comment!

      Yes, Wing Tai and Sing Inv & Fin looks very very compelling to me.

      Wing Tai is selling at 50% discount to NAV. On top of that, their cash & equivalents are 20% of their NAV.

      Sing Inv & Fin has cash making up 65% of it's NAV. However, since it is a financial stock, so I don't really know how it is affected by accounting.

      Yes, DYODD!

      MH

      Delete
  2. Hi,
    For Kay Hian, I am monitoring closely. Recent company performance is not good, I guess it is due to fierce competition in local brokerage, e.g. SCB, Phillip, Fund supermart etc...

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    Replies
    1. Hi Anon,

      It is sitting just a bit above NAV, as it has been the past 5 years, after doing some research. Before looking in deeper, I thought it might be quite attractively priced. Now it seems just fair valued.

      I never hear anyone talk about Kay Hian ever, either as a broker or the stock itself. Just my gut feeling and business sense telling me that it is going to face tough competition ahead, so I don't feel the margin of safety is there yet for me.

      Delete

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