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Ajisen (China) Holdings Limited (HKG:538), which is in the hospitality business, and is based in Hong Kong, saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$3.42 and falling to the lows of HK$2.33. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Ajisen (China) Holdings’s current trading price of HK$2.36 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ajisen (China) Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Ajisen (China) Holdings
What is Ajisen (China) Holdings worth?
Ajisen (China) Holdings appears to be overvalued by 47.88% at the moment, based on my discounted cash flow valuation. The stock is currently priced at HK$2.36 on the market compared to my intrinsic value of HK$1.6. This means that the opportunity to buy Ajisen (China) Holdings at a good price has disappeared! Another thing to keep in mind is that Ajisen (China) Holdings’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Ajisen (China) Holdings generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with a relatively muted revenue growth of 5.9% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Ajisen (China) Holdings, at least in the short term.
What this means for you:
Are you a shareholder? 538’s future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe 538 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.