3 Undervalued Gems That You Can Add to Your Watchlist

·4-min read
3 Undervalued Gems That You Can Add to Your Watchlist

It’s been nearly 15 months since the Singapore stock market hit its pandemic low.

Since then, many companies have seen their share prices rebound sharply.

If you didn’t manage to buy during March last year, there’s no need to fret.

There’s still a handful of companies that remain undervalued using traditional valuation metrics.

Some could be below the radar, while others have seen their businesses improve tremendously while the share price may not have caught up yet.

As the saying goes — there are always opportunities in the stock market if you look hard enough.

Here are three undervalued stocks that you may consider adding to your investment watchlist.

Valuetronics Holdings Limited (SGX: BN2)

Valuetronics is an electronic manufacturing service provider that deals with the design and development of products for its clients.

The group is involved in two key sectors — consumer electronics, and industrial and commercial electronic products.

The company’s manufacturing facilities are located in both China and Vietnam.

Valuetronics has put up a creditable performance despite the US-China trade tensions and disruptions in supply chains arising from the pandemic.

For its fiscal year ended 31 March 2021 (FY2021), revenue dipped by 3.1% year on year to HK$2.3 billion.

Gross profit, however, eked out a 6.5% year on year gain as gross margin improved because of product mix.

Net profit inched up 4.5% year on year to HK$187.1 million.

The group maintains a sturdy balance sheet with HK$1.1 billion in cash with zero debt.

Valuetronics increased its final dividend to HK$0.16 from HK$0.14 last year. For the full year FY2021, dividends added up to HK$0.21, up from HK$0.20 in the previous fiscal year.

At a share price of S$0.60, Valuetronics is trading at a price-earnings ratio of just 8.2 times.

Kimly Ltd (SGX: 1D0)

Kimly Ltd is one of the largest traditional coffee shop operators in Singapore. 

The group also operates a network of 83 food outlets and 137 food stalls, along with two restaurants and eight patisserie shops.

Although Kimly’s share price recently hit a 52-week high of S$0.38, its forward valuation remains affordable at just 10.4 times earnings.

The coffee shop giant had just announced a sparkling set of results for its fiscal 2021 first half (1H2021).

Revenue increased by 14.2% year on year to S$122.6 million.

Net profit doubled year on year from S$10.5 million to S$21.7 million.

Cash flow from operating activities also doubled year on year from S$23.1 million a year ago to S$46.6 million in its latest report.

Kimly also doubled its interim dividend from S$0.0028 to S$0.0056.

The group is actively acquiring new businesses to increase its revenue streams.

In April, Kimly acquired 60% of a cleaning solutions provider, Klovex Holdings, helping the group to expand into cleaning services as the pandemic has elevated the demand for hygiene.

And a month later in May, the group acquired a 75% stake in the Tenderfresh business for S$54 million.

Tenderfresh specialises in roasted spring chickens and chicken wings and manages 14 concepts and 41 outlets.

Fraser and Neave Limited (SGX: F99)

Fraser and Neave Limited, or F&N, is a food and beverage giant that manufacturers a range of beverages from milk and juices to tea and carbonated drinks.

The group has a portfolio of famous brands such as Magnolia, Seasons, 100-Plus and Nutri Soy.

F&N’s business has held up well during the pandemic as demand continues to remain strong for its variety of beverages.

For 1H2021, revenue inched up 2% year on year to S$988.6 million.

Net profit jumped by 16.1% year on year to S$83.4 million.

The group generated around S$1450 million in free cash flow for the first six months of its fiscal year 2021.

Despite having a resilient business and a strong portfolio of brands, F&N trades at just around 12.6 times its forward earnings.

Moving forward, the group has introduced new products to capture more consumer demand.

The beverage producer recently introduced a new range of sparkling drinks that have the healthier choice logo and come in flavours such as apple barley and honey lemon.

In line with the shift towards healthier beverages, F&N also released a sugar-free version of its Sarsi drink.

On the acquisition front, the group recently acquired a 55.5% interest in the Sri Nona group in Malaysia for RM 60 million.

Sri Nona manufactures and distributes rice cakes, condiments, beverages and desserts and will help to complement F&N’s brands and open up a new revenue stream for the group.

We found a stock with 83% YOY growth and a 70% payout ratio. If we’re right, you can expect this stock to remain strong for the rest of 2021. All the details you need about this stock is inside our FREE report, 8 Singapore Stocks for Your Retirement Portfolio. Click here to download the report today.

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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

The post 3 Undervalued Gems That You Can Add to Your Watchlist appeared first on The Smart Investor.

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