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Hour Glass and Hi-P International are stocks on my list that are potentially undervalued. This means their current share prices are trading well-below what the companies are actually worth. There’s a few ways you can determine how much a company is actually worth. The most popular methods include discounting the company’s cash flows it is expected to create in the future, or comparing its price to its peers or the value of its assets. The discrepancy between the price and value means investors have an opportunity to buy shares at a discount. Below are the stocks I believe are undervalued on all criteria, based on their latest financial data.
The Hour Glass Limited (SGX:AGS)
The Hour Glass Limited, an investment holding company, retails and distributes watches, jewelry, and other luxury products in South East Asia, Australia, and North East Asia. Hour Glass was formed in 1979 and with the company’s market cap sitting at SGD SGD454.73M, it falls under the small-cap stocks category.
AGS’s stock is now floating at around -54% below its true level of $1.41, at the market price of S$0.65, based on its expected future cash flows. The divergence signals an opportunity to buy AGS shares at a low price. Additionally, AGS’s PE ratio is currently around 9.13x relative to its Specialty Retail peer level of, 10.8x meaning that relative to its peers, you can buy AGS’s shares at a cheaper price. AGS is also strong financially, with current assets covering liabilities in the near term and over the long run. Finally, its debt relative to equity is 9.56%, which has been dropping for the last couple of years signalling its capability to reduce its debt obligations year on year. More detail on Hour Glass here.
Hi-P International Limited (SGX:H17)
Hi-P International Limited operates as an integrated contract manufacturer serving the telecommunications, consumer electronics, computing and peripherals, lifestyle, and medical and industrial devices industries. The company was established in 1980 and with the company’s market capitalisation at SGD SGD1.01B, we can put it in the small-cap category.
H17’s stock is now trading at -41% lower than its intrinsic value of $2.15, at the market price of S$1.26, based on my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. What’s even more appeal is that H17’s PE ratio is trading at 8.25x against its its Electronic peer level of, 9.06x indicating that relative to its peers, we can buy H17’s stock at a cheaper price today. H17 is also a financially healthy company, with current assets covering liabilities in the near term and over the long run.