When trouble crops up, it is natural for investors to react in panic and confusion.
As a result, shares may get sold down sharply when a company reports poor earnings.
However, all is not lost.
If the problems are merely temporary and can resolve themselves in due course, then the business, along with the stock, should see an eventual recovery.
The key is to assess the business to determine if it has good long-term potential.
Investors also need to look at the track record of the company and its competitive moat.
Remember that beaten-down stocks could present great opportunities to scoop up shares on the cheap.
Here are four Singapore stocks that saw their share prices shrivel over time but may be positioned for a rebound.
DFI Retail Group (SGX: D01)
DFI Retail is a pan-Asian retailer that operates around 10,600 outlets around the region comprising supermarkets, hypermarkets, convenience stores, and health and beauty outlets.
The group’s share price has come under pressure, falling by 68.5% over the past five years to US$2.92.
For 2022, DFI saw its revenue stay flat year on year at US$9.2 billion.
However, underlying net profit plunged by 72% year on year to US$29 million.
In line with the poor showing, DFI Retail slashed its 2022 dividend by 68% year on year to US$0.03 from US$0.095 a year ago.
Despite the weak results, the group reported a substantial improvement in underlying profitability for the second half of 2022 while its ongoing transformation efforts have yielded improvements.
For the first quarter of 2023 (1Q 2023), the group’s subsidiaries saw an improvement in operating profit driven by a recovery in health and beauty and convenience divisions.
Underlying profitability for its associates also improved.
Management remains optimistic for 2023 as the reopening of Hong Kong and recovery in Southeast Asian markets have driven better performance that looks set to continue.
The group will continue to invest in its digital capabilities but warned that inflation remains high and that consumer confidence could still be impacted by economic uncertainties.
Grand Venture Technology (SGX: JLB)
Grand Venture Technology, or GVT, is a services provider for the manufacture of complex precision machining, sheet metal components, and mechatronics modules.
The group’s customers hail from the semiconductor, electronics, aerospace, and life sciences sectors, among others.
The company saw its share price fall by 57% in 2022 as the semiconductor industry saw demand decline suddenly and sharply.
Year-to-date, though, GVT’s share price has rebounded by 21.6% and may have more room to go.
For 1Q 2023, GVT reported revenue of S$26.9 million, a 17% year-on-year fall from the S$32.4 million reported a year ago.
Net profit plunged by 58.3% year on year to S$1.5 million.
Management expects the remainder of 2023 to be much better, with industry leaders such as Applied Materials (NASDAQ: AMAT) and ASML Holding (NASDAQ: ASML) projecting a recovery in the second half.
For the aerospace division, key aircraft makers have built up a substantial order book that will benefit GVT.
Q&M Dental (SGX: QC7)
Q&M Dental is a dental healthcare group with a network of 107 dental clinics in Singapore, 44 dental clinics in Malaysia and a dental supplies and equipment distribution business as of 31 December 2022.
The group hires 270 experienced dentists and operates five medical clinics in Singapore.
The dental group’s share price has slid by 30.4% in the past year and closed at S$0.32.
For 2022, total revenue dipped by 12% year on year to S$181.2 million.
The decrease came about because of a 55% year on year plunge in revenue from its medical laboratory segment due to lower COVID-19 tests administered.
As a result, net profit fell to S$11.3 million from S$30.5 million a year ago, a decline of 63% year on year.
Q&M Dental, however, still generated a free cash flow of S$22.6 million last year.
2023 should see a normalisation of revenue for its diagnostics division with COVID-19 revenue falling off.
Investors should note that its core healthcare business saw a 2% year on year rise in revenue for 2022 along with a 7% year-on-year increase in core net profit.
With plans to continue expanding its network of dental clinics, the group looks positioned to do well in 2023.
SATS Ltd (SGX: S58)
SATS is a provider of gateway services and food solutions for the airline industry.
In the past year, SATS’ share price has fallen nearly 30% to S$2.68.
For its fiscal 2023 (FY2023) ending 31 March, revenue jumped by 49.4% year on year to S$1.7 billion.
However, the group reported an operating loss of S$48 million along with a core net loss of S$26.7 million.
These results were affected by merger and acquisition expenses relating to SATS’ S$1.6 billion acquisition of Worldwide Flight Services first announced in September last year.
FY2023 saw a more than year on year doubling of flights handled to 230,400 with passengers handled soaring more than fivefold year on year to 52.6 million.
With air travel recovering strongly and Singapore Airlines Limited (SGX: C6L) at a monthly record of 90.6% in June, SATS should enjoy a healthy increase in its financials.
The inclusion of its new acquisition into the numbers this year should also give the business a strong top-line boost.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
