As global markets react to China's robust stimulus measures and the U.S. stock indices reach record highs, small-cap stocks have shown mixed performance, with the Russell 2000 Index slightly down for the week. Despite this volatility, opportunities remain for discerning investors who can identify undervalued small-cap companies with strong insider buying signals. When evaluating potential investments in this environment, it's crucial to consider companies that not only show signs of being undervalued but also demonstrate confidence from insiders through their buying activities.
Overview: Hang Lung Group is a property investment and development company with operations primarily focused on property leasing in Hong Kong and Mainland China, boasting a market cap of HK$24.30 billion.
Operations: The company generates revenue primarily from property sales in Hong Kong and property leasing in both Hong Kong and Mainland China. For the period ending 2023-09-30, it reported a gross profit margin of 71.85% on a revenue of HK$10.94 billion, with net income at HK$2.89 billion.
PE: 7.6x
Hang Lung Group, a smaller company in the market, has seen its net profit margin drop from 27.2% to 16.9% over the past year and earnings have been declining by 12.2% annually over five years. Despite these challenges, insider confidence is evident with Wenbwo Chan purchasing 200,000 shares for HK$1.93 million recently. For H1 2024, sales increased to HK$6.38 billion from HK$5.53 billion last year, though net income fell to HK$888 million from HK$1.68 billion previously.
Overview: China Lesso Group Holdings is a leading manufacturer and distributor of plastic and rubber products with operations primarily in China, boasting a market cap of CN¥42.50 billion.
Operations: The company's revenue primarily comes from the Plastics & Rubber segment, amounting to CN¥29.13 billion. The gross profit margin has fluctuated, reaching 28.79% as of June 30, 2023. Operating expenses and non-operating expenses are significant cost components impacting net income margins, which were recorded at 6.58% for the same period.
PE: 6.9x
China Lesso Group Holdings, a small-cap stock, recently reported a decline in earnings for the first half of 2024, with sales dropping to CNY 13.56 billion from CNY 15.30 billion and net income falling to CNY 1.04 billion from CNY 1.49 billion year-over-year. Despite this, insider confidence remains strong; Luen Hei Wong purchased four million shares valued at over US$10 million between April and June 2024. The company's high debt level is offset by its forecasted annual earnings growth of over 10%.
Overview: Gemdale Properties and Investment focuses on property development and property investment and management, with a market cap of approximately CN¥4.39 billion.
Operations: The company generates revenue primarily from Property Development (CN¥17.26 billion) and Property Investment and Management (CN¥1.23 billion). The gross profit margin has shown considerable variation, with recent figures at 10.57% as of December 31, 2023. Operating expenses have been rising, reaching CN¥677.456 million by June 30, 2024. Net income margins have fluctuated significantly over the periods reviewed, showing a negative trend in the latest data points.
PE: -2.6x
Gemdale Properties and Investment has recently faced financial challenges, reporting a net loss of CNY 2.18 billion for the half year ending June 30, 2024, compared to a net income of CNY 562 million the previous year. Despite this, insider confidence is evident with Non-Executive Director Lian Huat Loh purchasing 10 million shares valued at approximately US$2.6 million in August 2024. The company's aggregate contracted sales from January to August totaled RMB 12.43 billion across an area of roughly 944,400 square meters.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include SEHK:10 SEHK:2128 and SEHK:535.
