In This Article:
Mermaid Maritime Public Company Limited (SGX:DU4), an energy company based in Thailand, saw a double-digit share price rise of over 10% in the past couple of months on the SGX. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Mermaid Maritime’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for Mermaid Maritime
What’s the opportunity in Mermaid Maritime?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 8.88% below my intrinsic value, which means if you buy Mermaid Maritime today, you’d be paying a reasonable price for it. And if you believe the company’s true value is SGD0.15, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Mermaid Maritime’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Mermaid Maritime?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of Mermaid Maritime, it is expected to deliver a negative earnings growth of -4.40%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Currently, DU4 appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on DU4 for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on DU4 should the price fluctuate below its true value.