These three shares have all made appearances in my regular “ASX stocks hitting 52-week lows” articles lately, but buyers have been slow to jump on the opportunities. Local beverage bottler Coca Cola Amatil Ltd (ASX: CCL) has suffered weaker earnings thanks to heavy competition in the supermarket sector and write-downs at subsidiary fruit canner SPC Ardmona. The Reject Shop Ltd (ASX: TRS) has suffered from nothing other than improved earnings that weren’t as good as the market expected, while Mermaid Marine Australia Limited (ASX: MRM) is recovering from a 29% drop in profit last year.
Coca Cola Amatil Ltd – down 24% for the year at $9.65.
SPC Ardmona’s woes have been well documented in the media, and compounded by heavy competition between supermarkets that has eroded Coca Cola’s margins and reduced earnings by about 15%. Management is conducting a strategic review of every aspect of the business – a great idea, as reviews usually lead to improved performance through increased productivity, reduced costs, or better arrangements with sellers and suppliers. Coca Cola is re-entering the Australian craft beer market after a long absence, and initial expansions into Indonesia look quite promising.
Coca Cola has recovered its share price slightly in recent weeks, although it is still not far off five-year lows. I expect it to take around two years to start delivering solid returns to shareholders, but current low prices are unlikely to be repeated.
The Reject Shop Ltd – down 38% for the year at $10
Reject Shop’s fall from grace has been a little more dramatic, dropping over 40% virtually overnight in January and sliding further since then. While this likely ruined the day of a number of investors, it provides an outstanding opportunity for you and me. The results were a 17.7% growth in revenue, flat comparable store sales, and a 15.9% decline in net profit (due to the costs of opening new stores). While the flat store sales are not ideal, management is continually identifying ways to improve the business, one of which may be to close or relocate underperforming stores.
In anybody’s books, a 38% decrease in share price on the back of those results represents a considerable discount and I expect Reject Shop to recover considerably over time.
Mermaid Marine Australia Limited – down 34% for the year at $2.07
Disappointing results from last year sent Mermaid Marine tumbling downhill, but its acquisition of Singaporean competitor Jaya and the developing gas businesses on the eastern seaboard look likely to turn its fortunes around.
Not quite an outright “buy” just yet, I will be watching Mermaid Marine closely to see if its latest acquisition sees its fortunes improve. Gas exports begin on the east coast from 2015 as well which could provide the extra push needed to get MRM back on track.
So there you have it, three of the best potential opportunities on the ASX at the moment – it’s no coincidence I own two of them. They’re far from the only great buys though, check out the link at the top of the article for more ideas, or better yet, read The Motley Fool’s free report: