In This Article:
Hong Leong Asia Ltd. (SGX:H22), is not the largest company out there, but it received a lot of attention from a substantial price increase on the SGX over the last few months. The recent share price gains has brought the company back closer to its yearly peak. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Hong Leong Asia’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Hong Leong Asia
What's The Opportunity In Hong Leong Asia?
Great news for investors – Hong Leong Asia is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.52x is currently well-below the industry average of 10.37x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Hong Leong Asia’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Hong Leong Asia?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Hong Leong Asia, it is expected to deliver a relatively unexciting earnings growth of 6.8%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since H22 is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on H22 for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy H22. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.