If you read about previous posts, you would know the value stocks are not easy to find. So I am here to help. 🙂
The first one: Hong Fok
Hong Fok is no stranger to many locals and businessmen. It is the developer of The Concourse and Concourse Skyline located on beach road. It also has hotels, commercial and residential properties both in Singapore and Hong Kong.
Let’s examine the details financially.
- If you follow SGX there are tonnes of info you can gather and derive rather quickly the CNAV1 value:
- Share price: 66 cents (as of 24 Jul 2020)
- The “text-book” tangible book value or pure NAV is given by SGX as $2.92
- The conservative valuation CNAV1 placed its value at $2.63
- This asserts the attractiveness of the counter, at whopping 75% discount!
- Profitability via PE ratio:
- P/E ratio of 4.125x is acceptable with EPS of 16cents.
- Operational efficiency via cash generating from operations:
- positive cash flow generated in all last 3 years 2019, 2018, 2017
- Financial leverage via total debt to equity ratio:
- 0.39 is much lower than most firms in real estate sector
- Other non-quantitative factors:
- decent experienced management team (average 30 years tenure)
- insider activities buying company’s share in recent months
- highly aligned insiders interest with public investors with individual insiders collectively owning 22.2% of total shares.
Let’s talk about risks. Granted, no stock is without risk. That said, you would need to take calculated risks. What’s not to like about this counter is that it is small cap and you won’t find too much analysts interests, thus, the counter can be quite volatile. But that is part and parcel of undervalued stocks in the first place. Too much attention, the counter would have seen surge in interest across individual investors and institutional investors already.
Volume is pretty low unless at major event such as another bottom marked by significant macroeconomic disruptor.
This is definitely a counter i will invest in given its robust financial standings. Being one of the oldest (incorporated in 1967) companies in Singapore, it has tied through many storms and the strong foundation over the years plus experienced executive team should help weather the pandemic which apparently has tarnished hospitality sector. The geopolitical situation has somewhat impacted performance in Hong Kong. This counter is definitely worth watching especially after more optimism is pumped back into the global sentiments with improving macroeconomic scenarios in months to come.