The Hong Kong market has seen mixed performance recently, with the Hang Seng Index gaining 0.85% despite broader concerns about deflationary pressures in China. Amid this backdrop, identifying undervalued small-cap stocks with insider action can offer unique opportunities for investors looking to capitalize on market inefficiencies. In this article, we will explore iDreamSky Technology Holdings and two other promising small-cap stocks in Hong Kong that have caught the attention of insiders.
Top 10 Undervalued Small Caps With Insider Buying In Hong Kong
Overview: iDreamSky Technology Holdings is a company that primarily focuses on game and information services, including SaaS and other related services, with a market cap of CN¥3.86 billion.
Operations: iDreamSky Technology Holdings generates revenue primarily from Game and Information Services, including SaaS and other related services. The company's gross profit margin has fluctuated, reaching 0.35141% as of December 31, 2023.
PE: -7.7x
iDreamSky Technology Holdings recently completed a follow-on equity offering worth HK$257.68 million, issuing 119.85 million shares at HK$2.15 each. This move follows insider confidence shown by Xiangyu Chen, who purchased 1,080,000 shares for approximately HK$2.97 million in mid-2024, increasing their stake by 0.42%. Despite past shareholder dilution and reliance on higher-risk external borrowing for funding, earnings are forecast to grow annually by over 100%, indicating potential future growth opportunities for this small-cap stock in Hong Kong's market.
Overview: Lee & Man Paper Manufacturing is involved in the production of pulp, tissue paper, and packaging paper with a market cap of HK$22.34 billion.
Operations: The company generates revenue primarily from Packaging Paper and Tissue Paper, with Packaging Paper contributing the largest share. Over recent periods, the company's net profit margin has shown a declining trend, reaching 0.05957% in Q2 2024. Operating expenses consistently include significant allocations for general and administrative activities as well as sales and marketing efforts.
PE: 6.7x
Lee & Man Paper Manufacturing, a smaller player in Hong Kong's market, recently declared an interim dividend of HK$0.062 per share for the six months ending June 2024. Their half-year earnings report showed sales of HK$12.51 billion and net income of HK$805.69 million, both up from the previous year. Basic earnings per share rose to HK$0.1769 from HK$0.0715 last year, indicating strong performance despite higher-risk external borrowing as their sole funding source since they have no customer deposits.
Overview: Wasion Holdings specializes in advanced metering infrastructure and distribution operations, with a market capitalization of approximately CN¥3.76 billion.
Operations: The company's revenue streams include Advanced Distribution Operations (CN¥2.48 billion), Power Advanced Metering Infrastructure (CN¥2.67 billion), and Communication and Fluid Advanced Metering Infrastructure (CN¥2.21 billion). The gross profit margin has shown variability, reaching 35.59% recently, reflecting the difference between revenue and COGS over time. Operating expenses such as R&D, sales & marketing, and general & administrative costs are significant factors impacting net income margins, which have fluctuated around 7%.
PE: 11.6x
Wasion Holdings has recently secured significant smart meter contracts in Hungary, Singapore, and Malaysia, totaling approximately HKD 386.22 million (EUR 31.62 million + USD 15.16 million). These deals highlight the company's growing international presence and client recognition in the smart grid industry. Insider confidence is evident as Founder & Executive Chairman Wei Ji purchased 500,000 shares for HKD 3.17 million between May and July 2024, reflecting a positive outlook on future growth prospects with earnings expected to grow by 25.8% annually despite higher-risk external borrowing funding sources.
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:1119 SEHK:2314 and SEHK:3393.
