All three companies in this article have struggled with various ailments that have now conspired to drop their share price to its lowest point in 52 weeks. The situation could be salvageable for Mermaid Marine Australia Limited (ASX: MRM), although WHITEHAVEN COAL LIMITED (ASX: WHC) and Myer Holdings Ltd (ASX: MYR) could struggle to deliver growth to shareholders over the coming years.
Mermaid Marine – last traded at $2.18
Last year’s profit drop of 29% and the acquisition of Singaporean competitor Jaya have seen investor sentiment for Mermaid Marine sour considerably. The stock is down nearly 50% from its recent highs of $4.10, and this is the one stock in this article that could be a turnaround story. A number of new 12-18-month oil and gas contracts combined with earnings from the acquisition should improve earnings next year, and if the expected gas boom materialises on the east coast there will be even more opportunities for a turnaround. Trading at a price/book ratio of 1.3, Mermaid Marine looks to be roughly as low as it will go in the absence of further bad news.
Myer – last traded at $2.19
After a spike to $2.75 in anticipation of a David Jones Limited (ASX: DJS) merger, Myer is once again back to its previous humdrum price. Headwinds in consumer discretionary spending as well as increased costs from new store openings will cramp Myer’s earnings for the foreseeable future, while investors should expect continued competition from the online space.
Furthermore, early signs from Myer’s online offer indicate that only those who already shop at Myer are using the online site. I also don’t expect retail spending to improve anytime soon with the ‘tough love’ budget coming up, so we should see Myer languishing for quite some time. Wait for now, and when the time comes to add a retail stock to your portfolio, Myer will still be here.
Whitehaven Coal – last traded at $1.48
Readers will be familiar with the raft of protests at Whitehaven Coal’s operations, particularly at Maules Creek in NSW. The company is also a well-known underperformer of recent times, having lost two-thirds of its value since its peak around $6 in 2011. The latest price is also a five-year low for the company, attained after recent weakness in the coal price.
With Whitehaven ramping-up production to grow its earnings from 2015 onwards, it looks like a textbook opportunity to benefit from a beaten-up share. However in this case I doubt that the fundamentals underpinning Whitehaven’s business are sufficient to warrant an investment at this, or even any price.
I also share fellow contributor Claude Walker’s opinion of coal as one of the poorer investments on the ASX. Energy investors might consider a purchase of Silex Systems Ltd (ASX: SLX) instead, a provider of solar power and low-cost uranium enrichment technology. Silex is also trading at 52-week lows.
Don’t get caught up looking at huge price falls and thinking that a company is cheap – or get scared and think that it is time to sell either. Read annual reports and company forecasts to learn the company’s fundamentals and form your own opinion, and soon enough you’ll be picking your own turnaround winners.
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Motley Fool contributor Sean O’Neill doesn’t own shares in any company mentioned.
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