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The real estate sector performs relatively in-line with the wider economy. Prosperous periods bring about high growth and inflation, leading to strong returns in real estate investments. Currently, Goodland Group and SingHaiyi Group are real estate companies I’ve identified as potentially undervalued, meaning their share price is below what these companies are actually worth. Smart investors can make money from this discrepancy by buying these shares, because they believe the current market prices will eventually move towards their true value. And those that want more exposure to the economic cycle should consider the following list of potentially undervalued cyclical stocks.
Goodland Group Limited (SGX:5PC)
Goodland Group Limited, an investment holding company, engages in real estate development activities in Singapore and Malaysia. Goodland Group was started in 1993 and has a market cap of SGD SGD104.60M, putting it in the small-cap group.
5PC’s shares are now floating at around -87% less than its value of $2.23, at a price of S$0.29, based on its expected future cash flows. The divergence signals an opportunity to buy 5PC shares at a low price. Furthermore, 5PC’s PE ratio is around 5.87x against its its Real Estate peer level of, 10.08x indicating that relative to its competitors, we can buy 5PC’s stock at a cheaper price today. 5PC is also in good financial health, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. Finally, its debt relative to equity is 35.85%, which has been reducing over the past couple of years showing 5PC’s capability to pay down its debt. More detail on Goodland Group here.
SingHaiyi Group Ltd. (SGX:5H0)
SingHaiyi Group Ltd., an investment holding company, develops, owns, and manages real estate properties in Singapore, Malaysia, and the United States. The company was established in 1988 and has a market cap of SGD SGD434.85M, putting it in the small-cap stocks category.
5H0’s stock is now hovering at around -91% less than its actual level of $1.16, at a price tag of S$0.10, according to my discounted cash flow model. The difference between value and price signals a potential opportunity to buy 5H0 shares at a discount. In addition to this, 5H0’s PE ratio is around 6.05x while its Real Estate peer level trades at, 10.08x meaning that relative to its competitors, you can buy 5H0’s shares at a cheaper price. 5H0 is also a financially robust company, as current assets can cover liabilities in the near term and over the long run. It’s debt-to-equity ratio of 28.84% has been dropping over the past couple of years revealing 5H0’s capability to pay down its debt. Continue research on SingHaiyi Group here.