Amidst a general slowdown in the Hong Kong market, with the Hang Seng Index experiencing a 1.5% decline last week, investors are keenly watching for opportunities that may arise from this downturn. In such times, identifying stocks that are considered undervalued could provide potential avenues for value investment, especially when broader market trends suggest cautious trading behavior.
Top 10 Undervalued Stocks Based On Cash Flows In Hong Kong
Name
Current Price
Fair Value (Est)
Discount (Est)
China Resources Mixc Lifestyle Services (SEHK:1209)
Overview: Q Technology (Group) Company Limited is an investment holding company specializing in the design, research and development, manufacturing, and sale of camera and fingerprint recognition modules across Mainland China, Hong Kong, India, and other international markets, with a market capitalization of approximately HK$4.87 billion.
Operations: The company generates revenue primarily through the sale of camera modules and fingerprint recognition modules, totaling CN￥11.57 billion and CN￥0.78 billion respectively.
Estimated Discount To Fair Value: 44.3%
Q Technology (Group) is currently trading at HK$4.11, significantly below the estimated fair value of HK$7.38, indicating a substantial undervaluation based on cash flows. Despite this, challenges persist with a slight decline in profit margins year-over-year and low forecasted Return on Equity at 8.8%. However, the company's earnings are expected to grow by 33% annually over the next three years, outpacing both its revenue growth and the broader Hong Kong market's growth rates. Recent sales data show robust volume in camera and fingerprint recognition modules, underscoring strong operational activities.
Overview: Melco International Development Limited is an investment holding company operating in the leisure and entertainment sectors in Macau, the Philippines, and Cyprus, with a market capitalization of approximately HK$8.12 billion.
Operations: The company generates revenue primarily from its casino and hospitality segment, amounting to HK$29.55 billion.
Estimated Discount To Fair Value: 48.4%
Melco International Development is currently priced at HK$5.37, well below the calculated fair value of HK$10.4, reflecting a significant undervaluation based on discounted cash flows. The company's revenue growth rate at 11.7% annually is projected to surpass the Hong Kong market average of 7.7%. Additionally, earnings are expected to increase by a very large margin annually over the next three years, with an anticipated high Return on Equity of 34.8% in three years' time.
Overview: Kingdee International Software Group Company Limited operates primarily in the enterprise resource planning sector and has a market capitalization of approximately HK$27.07 billion.
Operations: The company's revenue is generated primarily from two segments: Cloud Service Business, which contributes CN￥4.50 billion, and ERP Business and Others at CN￥1.17 billion.
Estimated Discount To Fair Value: 13.5%
Kingdee International Software Group, trading at HK$7.55, is perceived as undervalued with its price 13.5% below the estimated fair value of HK$8.73 based on discounted cash flows. Recent share repurchases could enhance shareholder value by potentially increasing earnings per share and net asset value. Despite a revenue growth forecast slower than the market at 14.3% annually compared to the market's 20%, earnings are expected to grow significantly by 46.54% annually over the next three years, although its future Return on Equity is projected to be low at 6.2%.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.