Xiamen International Port Co Ltd (HKG:3378), a infrastructure company based in China, saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$1.45 and falling to the lows of HK$1.3. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Xiamen International Port’s current trading price of HK$1.31 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Xiamen International Port’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Xiamen International Port
What is Xiamen International Port worth?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.2x is currently trading slightly below its industry peers’ ratio of 8.78x, which means if you buy Xiamen International Port today, you’d be paying a fair price for it. And if you believe Xiamen International Port should be trading in this range, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Xiamen International Port’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from Xiamen International Port?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted revenue growth of 5.35% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Xiamen International Port, at least in the short term.
What this means for you:
Are you a shareholder? 3378’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 3378? Will you have enough conviction to buy should the price fluctuates below the true value?