By Say Cheong //
May 31, 2022

The recent massacre in the stocks market worldwide must have been painful for many investors. Even famous hedge funds such as Melvin Capital has closed down during this bearish market.

For the uninitiated, Melvin Capital is the hedge fund that was ‘played’ by retail investors who short-squeezed his ‘GameStop’ position – leading to billions of losses for him.

On the other hand, there are still bright spots in the market, especially in the downstream and commodity space.

Here are 3 such cheap stocks going up trend that you should take note of.

Cheap Stock #1 – Global Palm Resources

Global Palm Resources Holdings Limited is an Indonesia-based oil palm producer. The Group is primarily involved in the sales of fresh fruit bunch and in the cultivation, harvesting and processing of oil palm fruit into Crude Palm Oil and Palm Kernel for sale.

Global Palm Resource’s plantations and mill are strategically located in West Kalimantan, East Kalimantan and Central Sulawesi, Indonesia, where the climatic conditions are highly suitable for oil palm cultivation.

Since its founding in 1991, the Group’s total land bank (including plasma) has grown to 43,349 hectares (“ha”), of which about 37.0% is under cultivation.

As at 31 December 2021, approximately 88.2% of the Group’s oil palms are in mature production stage.

As of its latest annual report, Global Palm reported 2Q21 net profit of Rp 99.96b (negative profit for previous year) and 91% y-o-y increase (103% h-o-h) in revenue. Annual gross margin came in at 33.8%, vs 16.7% in 2020.

The company notched its 52 weeks high of $0.23 on 18th May. The positive sentiments are likely due to the boisterous commodities market in recent months.

The recent removal of palm oil export ban in Indonesia also helped a lot when it caused a ruckus to the local plantations just a few months back.

Global Palm last closed at $0.22, which valued the company at a P/E ratio of 7.92x and a 7.67% dividend yield.

Cheap Stock #2 – Jiutian Chemical

Jiutian Chemical Group Limited was listed on the mainboard of the Singapore Exchange Securities Trading Limited on 4 May 2006, and transferred to the Catalist of SGX-ST in 2016.

The firm manufactures a variety of chemicals that are used as feedstock for a wide range of applications.

A large part of the chemicals produced is dimethylformamide (DMF), a key ingredient used in consumer goods, pharmaceutical, agrochemical products and in the electronics sectors.

As of its latest 1st Qtr results, Jiutian’s net profit for the first quarter to March rose 123% year on year to RMB 201.4 million on higher revenue and higher gross margin.

Gross profit margin also increased to 35% (+3.5 ppt QoQ), mainly attributable to the increase in commodities prices and good cost control at the factories.

The positive sentiments are mainly due to 2 factors:

  • Strong commodities market that are bolstering the company’s top and bottom line
  • Astute marketing which has allowed them to increase their sales thereby capturing more volumes.

Jiutian Chemical last closed at $0.11 at the time of writing. This values the company at a low P/E ratio of 2.4x and a dividend yield of 7.91%.

Cheap Stock #3 – SHS Holdings Ltd

Established in 1971, SHS Holdings has evolved into a diversified group with three main businesses involving:

  1. Engineering & Construction that comprises structural steel & facade and modular construction,
  2. Corrosion Prevention
  3. Energy-related businesses

As of its annual report, SHS’s revenue increased slightly by 57% to $55.2 million. The net losses of the company narrowed to -$3 million as compared to -$18 million in 2020.

This is due to the clinching of important contracts in the solar businesses, which is a budding market across the world.

The company notched its 52 weeks high of $0.157 on 20th May. The company’s presence in the energy-related space may have helped it to increase its top line drastically.

Investors are likely to have caught on to this point and betting that it can turn its book around.

SHS last traded at $0.157, which valued the company at a P/B ratio of 0.79x. The company did not distribute dividends in 2021.

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