31 March 2017 [Motley] These Are Some of The Cheapest Stocks in Singapore Currently
I have a habit of looking at how cheap or expensive the stock market is at the start of every month. One way I do so is to determine the number of net-net stocks there are in Singapore’s market.
A net-net stock is a stock with a market capitalisation that is lower than its net current asset value. The net current asset value is a simple financial number that can be calculated with the following formula:
Net current asset value = Total current assets minus total liabilities
Theoretically, a net-net stock is a fantastic bargain. That’s because investors can get a discount on the company’s current assets (assets such as cash and inventory) net of all its liabilities. Moreover, the company’s fixed assets (assets such as properties, factories, and equipment etc.) are thrown into the fray for free.
The logic follows that if a large number of net-net stocks can be found in Singapore’s market, then stocks would likely be really cheap at that point in time.
Now, I had stressed the word “theoretically” earlier because net-net stocks are often companies that are in serious trouble and/or have horrible business economics. This means that investors in them are also at risk of seeing their capital evaporate if things continue heading south.
That’s one reason why diversification is important. The legendary Benjamin Graham, who liked to invest in net-net stocks when he was investing professionally, tried to mitigate risks by diversifying widely amongst net-net stocks.
I thought it would be interesting and useful to share a list of some of the net-net stocks that popped up when I did my latest exercise of assessing the state of the market.
I decided to come up with three lists: 1) the 10 net-net stocks that have the lowest market-cap-to-net-current-asset-value ratio; 2) the 10 net-net stocks with the largest market caps, and 3) the 10 largest net-net stocks that have positive net income over the last 12 months as well as more cash than debt on their balance sheets.
Here are the 10 stocks in the first list: Universal Resource and Services Ltd (SGX: BGO), China Haida Ltd (SGX: C92), China Taisan Tech Group Holdings Ltd (SGX: AZW), Ace Achieve Infocom Limited (SGX: A75), Full Apex (Holdings) Ltd (SGX: BTY), Matex International Ltd (SGX: M15), China Sports International Limited (SGX: FQ8), C&G Environmental Protection Holdings Ltd (SGX: D79), Nam Cheong Ltd (SGX: N4E), and Cacola Furniture International Limited (SGX: D2U).
Source: S&P Global Market Intelligence
Here are the 10 stocks in the second list: Noble Group Limited (SGX: N21), UOB-Kay Hian Holdings Limited (SGX: U10), Hong Leong Asia Ltd (SGX: H22), Kingboard Copper Foil Holdings Limited (SGX: K14), Hanwell Holdings Ltd (SGX: DM0), Baker Technology Ltd (SGX: BTP), Sing Holdings Limited (SGX: 5IC), Cortina Holdings Limited (SGX: C41), Hengxin Technology Ltd (SGX: I85), and Tiong Seng Holdings Limited (SGX: BFI)
Source: S&P Global Market Intelligence
And finally, here are the stocks in the third list: Noble, Kingboard Copper Foil, Hanwell, Hengxin, Nobel Deisgn (SGX: 547), Memtech International (SGX: BOL), Nam Lee (SGX: G0I), Asia Enterprise (SGX: A55), CDW Holding (SGX: BXE), and mDR Limited (SGX: A27).
Source: S&P Global Market Intelligence
I have to be clear that I’m not recommending that investors buy or sell any of the stocks seen here. My purpose here is simply to share the identities of some of Singapore’s cheapest stocks right now. Make of them what you will.
This is a refreshing Post, which we don’t normally get from members in the Club. And I encourage you and other members to share these available information which are often available on subscription only.
I have this observation that many people who track the various markets tend to always give advice, but stay away from sharing what they actually do with their portfolio.
BTW, I like the mention of HL Asia in your list 2 of net net stocks.
Terence Seah
Terence Seah
Hi Bobby thanks for sharing your list. Just for interest have you bought any of them.
I notice there are no blue chips in your list. Care to share
I see some china based stocks in the list. Do you think it is wise to invest in china
stocks after all the bad publicity.
DYODD. I may have traded some of the stocks in the list. Basically I am a 99% trader. The blue chips are not cheap any more, but some stocks like ComfortDelgro which is moving back up steadily or Singpost have been sold down, Once again, DYODD. Don’t just jump in and buy although I would venture that blue chips bought at depressed situational price will surely recover.
Hi Peter,
I shared the same opinion and highly concerned in investing or buying China stocks. Although Bobby Yee recommend this China stocks based on paper he does not seems to own this shares and he is a 99% trader . I myself is very disappointed and got bad experiences with some of this China stocks and also thought that it is very risky to hold those Chinese stocks. In the past many of the China stocks give inaccurate account of the company assets and liabilities. There are cases of this Chinese company giving ridiculous excuse that their information including account books etc were stolen and lost in the process and the directors evade responsibilities for the company big losses. I would strongly advise that we should avoid any of this China stocks. In my experience , I also noted that many of the Singapore stock market counters are rather small and can be easily cornered and manipulated. Please do take all this into consideration if anyone really like to trade in the Singapore market and take the risk. Other counters beside blue chips especially those government backed counters which are quite stable and strong we can also look at REITs or Real Estate Investment Trust. REIT can be great investments for a variety of reasons, namely REITs offer high dividend yield, diverse exposure to real estate and also favourable tax treatment. One of my favourite REIT is Parkway Life, one of Asia’s largest listed health care REITS. It invests in income producing real estate and real estate -related assets used primarily for healthcare and healthcare-related purposes.
Bobby Bok
hi Bobby Bok thanks for your support.
Hi Bobby Yee thanks for your explanation. It is important to declare when recommending stocks that you are a some sort of “day trader”.
For me this is not my cup of tea. At my age I prefer to invest on high grade stocks which gives a decent dividend (compared to FD rates) and potential to grow.
if you buy high grade stocks like st engg, capland,and the banks last Feb2016 and hold until now you would have made some money with the dividends.
Reits is good for dividend yield.
For me Warren Buffet is someone I like to emulate
thks
Peter Lim