Investing legend Peter Lynch, is well-known for investing in dull, depressing or disagreeable businesses such as funeral home operators and waste management firms. Such companies do not provide excitement, and therefore, could be severely mispriced by the stock market.
In Singapore, there are a number of such “boring” companies that could be great investments. Let’s look at three of them.
800 Super Holdings Limited (SGX: 5TG)is a provider of waste management, cleaning and conservancy, and horticultural services to the public and private sectors in Singapore. It is a licenced Public Waste Collector, appointed by Singapore’s National Environment Agency (NEA).
Recently, 800 Super’s share price got whacked after posting a disappointing set of financial results. For the fiscal year ended 30 June 2018, revenue fell 3.7% to S$151.1 million while net profit plunged 46.7% to S$9.1 million.
Following the earnings announcement in late August, 800 Super’s share price fell from S$1 to a low of S$0.60 in short order. Some investors might feel that the steep decline in the company’s share price was unwarranted. Future growth for the company could come from its sludge treatment facility at Tuas South, which is expected to be fully operational by December 2018. 800 Super’s new waste-to-energy plant started operations in February this year, and could generate new revenue streams and cost savings for the company once it ramps up fully.
At its share price of S$0.775 on Friday, 800 Super has a price-to-earnings (PE) ratio of 16 and a dividend yield of 1.3%.
Advancer Global Ltd (SGX: 43Q) is a workforce solutions and services provider in Singapore. It has three business divisions: employment services; building management services; and security services.
For the six months ended 30 June 2018, Advancer Global’s revenue rose 2.7% to S$32.8 million, but its net profit fell by 29.6% to S$1.6 million. The security services division saw revenue growth largely because of higher service income from new security projects and aggregate service fees charged from on-going security projects. A fall in the number of foreign domestic workers placed out to Singapore households, and the termination of some cleaning service contracts provided some offset.
In its earnings release, Advancer Global described its growth prospects:
“[T]he Group is exploring to develop and expand its employment business in Japan, in view of its strategic alliance with Fullcast Holdings Co. Ltd., a listed company in Japan who through its subsidiaries provides a range of human resource services to companies in Japan. These plans (if crystallised), will create additional sources of earnings and growth for the Group in the long term.”
At Friday’s share price of S$0.23, Advancer Global has a PE ratio of 17 and a dividend yield of 2.6%.
VICOM Limited (SGX: V01) provides technical testing and inspection services mainly in Singapore. It owns seven vehicle testing centres here and is a market leader with a 74.5% market share.For the second quarter ended 30 June 2018, VICOM’s top line rose 2.4% to S$24.7 million due to higher business volumes. Net profit tracked up as well, climbing 2.9% from S$6.1 million to S$6.2 million.
VICOM could see some headwinds in the sector it operates in though. In its 2018 second-quarter earnings update, it said:
“The recent fall in Certificate of Entitlement (COE) prices to their lowest levels in nearly a decade has resulted in the premature deregistration of cars with higher COEs before the 10-year mark. This is expected to affect the demand for the vehicle testing business. The non-vehicle testing business continues to face intense competition but is expected to remain stable.”
However, income investors might like VICOM as it provides a high dividend yield of around 6% at its current share price of S$6.08. Its market leadership position in Singapore’s vehicular testing industry should ensure it continues to be a cash cow.
$Advancer Global(43Q.SI) $800 Super(5TG.SI) $VICOM(V01.SI)
3 “Boring” Singapore-Listed Companies That Could Be Potential Winners
Boring businesses can be great stocks.