As global markets experience heightened volatility and economic uncertainties, the Hong Kong market has not been immune to these broader trends. Despite challenges, small-cap stocks in Hong Kong present unique opportunities for investors, especially when insider activity signals potential undervaluation. Identifying a good stock in this environment often involves looking at companies with strong fundamentals that are trading below their intrinsic value. Insider buying can be a positive indicator of confidence from those closest to the company’s operations and future prospects.
Top 10 Undervalued Small Caps With Insider Buying In Hong Kong
Overview: Comba Telecom Systems Holdings is a company that provides operator telecommunication services and wireless telecommunications network system equipment and services, with a market cap of HK$1.93 billion.
Operations: Revenue is primarily derived from Wireless Telecommunications Network System Equipment and Services, with additional income from Operator Telecommunication Services. For the period ending June 30, 2023, the gross profit margin was 28.63%. Operating expenses include significant allocations to Sales & Marketing and R&D. Net income for this period was HK$212.03 million, resulting in a net income margin of 3.24%.
PE: -11.8x
Comba Telecom Systems Holdings, a small cap in Hong Kong, has faced significant challenges recently. The company expects a loss of up to HK$160 million for the first half of 2024 due to delayed network projects and lower income from equity investments. Despite this, insider confidence is evident with recent share purchases by executives. Additionally, they decided against declaring an interim dividend for the period ending June 30, 2024. This mixed performance highlights both potential risks and opportunities for investors considering undervalued small caps in the region.
Overview: EEKA Fashion Holdings specializes in the retailing and wholesaling of ladies' wear, with a market cap of CN¥19.34 billion.
Operations: The company generates revenue primarily from retailing and wholesaling ladies' wear, with recent quarterly revenue at CN¥6877.78 million. The gross profit margin has shown an upward trend, reaching 75.80% in the latest quarter ending June 2024. Operating expenses are significant, mainly driven by sales and marketing costs amounting to CN¥3160.72 million and general & administrative expenses of CN¥1421.40 million for the same period. Net income for this period was CN¥671.61 million, resulting in a net income margin of 9.76%.
PE: 8.5x
EEKA Fashion Holdings recently reported half-year earnings with sales at CNY 3.31 billion, slightly down from last year's CNY 3.34 billion, and net income dropping to CNY 278.66 million from CNY 445.23 million a year ago. Despite this, insider confidence is evident as Ming Jin purchased 600,000 shares in July for approximately US$5.19 million, reflecting a belief in the company's potential amid its current valuation challenges and reliance on external borrowing for funding.
Overview: IGG is a company focused on the development and operation of online games, with a market cap of HK$6.45 billion.
Operations: The company generates revenue primarily from the development and operation of online games, with a gross profit margin reaching 77.58% as of the latest period. Operating expenses are significant, dominated by sales and marketing costs, followed by research and development expenses.
PE: 5.3x
IGG has shown promising signs of being undervalued among Hong Kong's small caps. Recent earnings for the first half of 2024 revealed a turnaround with net income reaching HK$330.95 million, compared to a net loss of HK$359.8 million the previous year. Additionally, insider confidence is evident as CFO Jessie Shen acquired 549,000 shares valued at approximately HK$1.77 million, increasing their holdings by 13%. The company also declared an interim dividend of HK$0.085 per share, payable on September 27, 2024.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include SEHK:2342 SEHK:3709 and SEHK:799.
