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Performance in the real estate sector generally tracks the economic cycle. During periods of high growth and inflation, real estate investments usually post strong returns. However, during an economic bust, these investments tend to underperform. Sinarmas Land and Oxley Holdings are real estate stocks on my list that are potentially undervalued, which 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 cyclical 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.
Sinarmas Land Limited (SGX:A26)
Sinarmas Land Limited, an investment holding company, develops and leases properties in Indonesia, the United Kingdom, Malaysia, China, and Singapore. Started in 1994, and headed by CEO Muktar Widjaja, the company provides employment to 6,000 people and with the market cap of SGD SGD1.57B, it falls under the small-cap stocks category.
A26’s shares are now floating at around -79% under its intrinsic value of $1.78, at a price of S$0.37, according to my discounted cash flow model. The mismatch signals a potential chance to invest in A26 at a discounted price. In addition to this, A26’s PE ratio stands at 4.42x while its Real Estate peer level trades at, 9.77x meaning that relative to its competitors, A26’s stock can be bought at a cheaper price. A26 is also in great financial shape, with near-term assets able to cover upcoming and long-term liabilities.
Continue research on Sinarmas Land here.
Oxley Holdings Limited (SGX:5UX)
Oxley Holdings Limited, an investment holding company, engages in property investment and development, and project management activities in Singapore, the United Kingdom, Ireland, Cambodia, Malaysia, Indonesia, China, Japan, Myanmar, Australia, and Cyprus. Oxley Holdings was established in 2010 and with the market cap of SGD SGD1.98B, it falls under the small-cap stocks category.
5UX’s shares are now hovering at around -36% beneath its actual level of $0.77, at the market price of S$0.49, based on my discounted cash flow model. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. Also, 5UX’s PE ratio stands at around 9.29x while its Real Estate peer level trades at, 9.77x indicating that relative to its competitors, we can invest in 5UX at a lower price. 5UX is also in great financial shape, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. The stock’s debt-to-equity ratio of 209.16% has been reducing over the past couple of years signifying its capacity to reduce its debt obligations year on year. Interested in Oxley Holdings? Find out more here.