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The technology sector is generally characterised as full of innovation, competition and growth. It is also known to be highly cyclical and volatile since companies tend to find it difficult to create sustainable competitive advantage and generally rely on discretionary income from consumers. Captii and Avi-Tech Electronics are tech companies that are currently trading below what they’re actually worth. Smart investors can make money from this discrepancy by buying these shares, because they believe the current market prices will eventually move towards their true value. And those that want more exposure to the economic cycle should consider the following list of potentially undervalued cyclical stocks.
Captii Limited (SGX:AWV)
Captii Limited, an investment holding company, operates in the technology and telecommunication businesses in South East Asia, South Asia, the Middle East, Africa, and internationally. Founded in 1998, and run by CEO Wan Kuan Ann, the company employs 168 people and with the market cap of SGD SGD17.26M, it falls under the small-cap stocks category.
AWV’s stock is now floating at around -56% below its real value of $1.22, at a price of S$0.54, based on its expected future cash flows. signalling an opportunity to buy the stock at a low price. Moreover, AWV’s PE ratio stands at around 14.8x while its Communications peer level trades at, 24.35x implying that relative to its competitors, AWV’s shares can be purchased for a lower price. AWV is also robust in terms of financial health, with near-term assets able to cover upcoming and long-term liabilities. AWV also has no debt on its balance sheet, which gives it headroom to grow and financial flexibility. Dig deeper into Captii here.
Avi-Tech Electronics Limited (SGX:BKY)
Avi-Tech Electronics Limited provides burn-in and manufacturing services for the semiconductor, electronics, and life sciences industries. Founded in 1981, and currently headed by CEO , the company size now stands at 180 people and with the market cap of SGD SGD76.97M, it falls under the small-cap category.
BKY’s stock is currently floating at around -23% beneath its value of $0.58, at the market price of S$0.45, according to my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. In terms of relative valuation, BKY’s PE ratio is trading at 10.76x relative to its index peer level of, 13.49x suggesting that relative to its comparable company group, we can buy BKY’s stock at a cheaper price today. BKY is also in great financial shape, as current assets can cover liabilities in the near term and over the long run. BKY also has a miniscule amount of debt on its balance sheet, which gives it headroom to grow and financial flexibility. More detail on Avi-Tech Electronics here.