Companies, such as Ellipsiz, trading at a market price below their true values are considered to be undervalued. Investors can determine how much a company is worth based on how much money they are expected to make in the future, or compared to the value of their peers. The list I’ve put together below are of stocks that compare favourably on all criteria, which potentially makes them good investments if you believe the price should eventually reflect the stock’s actual value.
Ellipsiz Ltd (SGX:BIX)
Ellipsiz Ltd, an investment holding company, provides probe card, and distribution and service solutions to the semiconductor and electronics manufacturing industries in Singapore, Malaysia, China, Taiwan, the United States, Japan, Europe, and internationally. Formed in 1992, and run by CEO Wen Lum, the company size now stands at 1,200 people and with the market cap of SGD SGD85.24M, it falls under the small-cap group.
BIX’s shares are now floating at around -53% below its intrinsic level of $1.09, at a price of S$0.51, based on its expected future cash flows. This difference in price and value gives us a chance to buy low. What’s even more appeal is that BIX’s PE ratio is trading at around 6.43x relative to its Semiconductor peer level of, 11.03x suggesting that relative to its comparable company group, we can buy BIX’s stock at a cheaper price today. BIX is also strong financially, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. BIX also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Dig deeper into Ellipsiz here.
Raffles United Holdings Ltd (SGX:K22)
Raffles United Holdings Ltd., an investment holding company, operates as a stockists, distributor, and retailer of bearings and seals for automotive part dealers, industrial suppliers, hardware dealers, ship chandlers, general trading companies, and original equipment manufacturers. Raffles United Holdings was established in 1956 and has a market cap of SGD SGD25.75M, putting it in the small-cap category.
K22’s shares are currently hovering at around -56% lower than its actual value of $0.25, at the market price of S$0.11, based on my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. Also, K22’s PE ratio stands at around 7.59x relative to its Trade Distributors peer level of, 20.93x indicating that relative to its peers, we can purchase K22’s shares for cheaper. K22 is also robust in terms of financial health, as near-term assets sufficiently cover liabilities in the near future as well as in the long run. Finally, its debt relative to equity is 44.77%, which has been dropping over time, signalling its capacity to reduce its debt obligations year on year. Continue research on Raffles United Holdings here.