Tuesday, October 27, 2009

My 2 stock picks based on Fundamental Analysis (FA)

Though I am an advocate of Technical Analysis (TA), I do believe in buying undervalued stocks for the long term. I did some stock picking using POEMs' Dataline and,DBS Vickers' Clarity.

Using their software to sieve out stocks. These are the 2 stocks that I chanced upon.

1. United Engineers :

They are a construction firm that also provides other value added services to the construction job. One of their sample project is the Park Central at Ang Mo Kio. I am looking at this due to its gross undervalued share price. And the potential of more HDB housings popping up at Punggol and Seng Kang!

These are some ratio that I took note of based on their price of $1.74 :
  • Market Capitalization : SGD 400.9 million
  • Gross Profit Margin: 22.6%
  • Price to Book ratio: 0.5
  • Price of 1 stock / Amount of cash company is currently holding per share: 0.5
  • Dividend : 3.46%
2. Rickmers Maritime :

Its a shipping firm in essence. I am looking at this, because the Baltic Dry Index has been on the rise recently, but there has been no movement in shipping stocks. The Baltic Dry Index is actually a leading indicator of economy activity, as it measure international shipping prices of various dry bulk cargo daily!

SOO..if its increasing, it means economic activity should be picking up. With greater demand for ships, and the fact that you cannot build more ships overnight, the shipping industry will make more $$. On the other hand, if the economy does not pick up, it will mean that they will suffer great losses. Moreover, Rickmes Maritime is having a ship's contract due in the next 4 years, though most of its other ships have long term contracts ( A key risk in my opinion)

These are some ratio that I took note of based on their price of $0.385:
  • Market Capitalization : SGD 158 million
  • Price to Book ratio: 0.33
  • Price of 1 stock / Amount of cash company is currently holding per share: 0.1
  • Dividend : 27.88%
Any comments?


Anonymous said...

Rickmers been dropping like crazy because of potential loan default..

Pls do read up more...

ntuchartist said...

Actually I did reading up on the different shipping stocks too. Seems like all the shipping companies are all facing similar problems of potential loan defaults.And almost ALL of them have not recovered much from the low, most lagging behind the STI. So in my opinion, they are consider relatively 'undervalued' stocks and Rickmers being the most extremely 'undervalued' relative to the sector.

But it is very true, if the economy is still weak,there is a very high chance of such shipping companies to lose money.So the risk is very real.

However, I have a few reasons to look into these stocks for the long term.

1. Price to book value is at 0.33. This is extremely low. Which means even if they use their assets to pay off the loan, the remaining worth of the stock price will still be higher than the price that you will be paying now for the stock.

2. The Baltic dry index is rising. This will in turn reduce the chances of the company defaulting too.

3. This is like value investing. If you have faith in the world's economy in recovering, I would say this is a good buy for the long term. It will be a little late to buy in once the stock starts running, as seen in many of the stocks now.

Care to comment?

JW said...


I refer you to my blog post


It appears that the stock market is nearing the end of the rally, with my expectations being at 2790.

The stock market preceed the economy by an average of 5.6 months, and hence it will always be too late to judge stocks by looking at the state of health of the economy.


Sounds like an excellent company outstanding.