Banyan Tree Holdings Limited (SGX:B58), a hotels, restaurants and leisure company based in Singapore, received a lot of attention from a substantial price movement on the SGX in the over the last few months, increasing to SGD0.68 at one point, and dropping to the lows of SGD0.54. 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 B58’s current trading price of SGD0.55 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 B58’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for Banyan Tree Holdings
What is B58 worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1% below my intrinsic value, which means if you buy B58 today, you’d be paying a fair price for it. And if you believe B58’s true value is SGD0.55, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because B58’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, B58’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from B58?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 B58 future expectations. Though in the case of B58, it is expected to deliver a negative earnings growth of -4.56%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? B58 seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on B58, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on B58 for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on B58 should the price fluctuate below its true value.