Stocks recently deemed undervalued include SBS Transit and Lum Chang Holdings, as they trade at a market price below their true valuations. There’s a few ways you can value a company. The most popular methods include discounting the company’s cash flows it is expected to create in the future, or comparing its price to its peers or the value of its assets. Analysing the most recent financial data, I’ve created a list of companies that compare favourably in all criteria, making them potentially good investments.
SBS Transit Ltd (SGX:S61)
SBS Transit Ltd provides bus and rail public transport services primarily in Singapore. Formed in 1992, and currently lead by Juay Kiat Gan, the company size now stands at 9,882 people and with the market cap of SGD SGD777.71M, it falls under the small-cap stocks category.
S61’s stock is now floating at around -45% less than its actual level of $4.52, at a price of $2.5, based on its expected future cash flows. This difference in price and value gives us a chance to buy low. Also, S61’s PE ratio is around 18.4x while its transportation peer level trades at 21.4x, implying that relative to other stocks in the industry, you can buy S61 for a cheaper price. S61 is also a financially robust company, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. It’s debt-to-equity ratio of 49% has been declining over the past couple of years revealing S61’s ability to pay down its debt.
Lum Chang Holdings Limited (SGX:L19)
Lum Chang Holdings Limited, an investment holding company, engages in the construction, project management, and property development and investment activities in Singapore, Malaysia, and the United Kingdom. Lum Chang Holdings was started in 1982 and with the company’s market capitalisation at SGD SGD143.18M, we can put it in the small-cap group.
L19’s shares are currently trading at -38% lower than its actual value of $0.6, at a price of $0.37, based on my discounted cash flow model. The difference between value and price signals a potential opportunity to buy L19 shares at a discount. What’s even more appeal is that L19’s PE ratio stands at around 6.9x against its its construction peer level of 10.3x, implying that relative to its peers, you can buy L19’s shares at a cheaper price. L19 is also in good financial health, as short-term assets amply cover upcoming and long-term liabilities.
Brook Crompton Holdings Ltd. (SGX:AWC)
Brook Crompton Holdings Ltd., an investment holding company, distributes electric motors. Brook Crompton Holdings was formed in 1947 and has a market cap of SGD SGD25.00M, putting it in the small-cap group.