Wanda Hotel Development Company Limited (SEHK:169), a HKDHK$6.67B mid-cap, is a real estate company operating in an industry which remains the single largest sector globally, and has continued to play a key role in investor portfolios. Real estate analysts are forecasting for the entire industry, a relatively muted growth of 0.32% in the upcoming year , and an optimistic near-term growth of 21.36% over the next couple of years. However, this rate came in below the growth rate of the Hong Kong stock market as a whole. Today, I’ll take you through the real estate sector outlook, and also determine whether Wanda Hotel Development is a laggard or leader relative to its real estate sector peers. See our latest analysis for Wanda Hotel Development

What’s the catalyst for Wanda Hotel Development’s sector growth?

Over the past couple of years, as yields for high quality real estate investments have become under pressure, investors have swung towards more niche and diversified buildings such as medical offices, student housing and data storage facilities. In the previous year, the industry saw growth in the twenties, beating the Hong Kong market growth of 11.29%. Wanda Hotel Development lags the pack with its negative growth rate of -48.41% over the past year, which indicates the company will be growing at a slower pace than its real estate peers. As the company trails the rest of the industry in terms of growth, Wanda Hotel Development may also be a cheaper stock relative to its peers.

Is Wanda Hotel Development and the sector relatively cheap?

The real estate industry is trading at a PE ratio of 7x, lower than the rest of the Hong Kong stock market PE of 14x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 10.60% on equities compared to the market’s 10.00%. Since Wanda Hotel Development’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Wanda Hotel Development’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? Wanda Hotel Development has been a real estate industry laggard in the past year. If your initial investment thesis is around the growth prospects of Wanda Hotel Development, there are other real estate companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Wanda Hotel Development fits into your wider portfolio and the opportunity cost of holding onto the stock.